Earnings call transcript: North American Energy Partners Q1 2025 sees stock lift

North American Energy Partners Inc. (NOA) reported its first-quarter 2025 earnings, revealing a significant disparity between actual and forecasted earnings per share (EPS). The company posted an EPS of $0.21, falling short of the anticipated $0.83. Despite this, revenue surpassed expectations, coming in at $340.83 million against a forecast of $304.09 million. In response, NOA’s stock rose 2.19% in after-hours trading, closing at $16.78, reflecting investor optimism despite the EPS miss. According to InvestingPro analysis, the company maintains a healthy financial position with a "GOOD" overall health score of 2.8 out of 5, suggesting resilient fundamentals despite the earnings miss.

Key Takeaways

• Revenue exceeded forecasts by $36.74 million, indicating strong sales performance.
• The stock price increased by 2.19%, suggesting positive investor sentiment.
• The company expanded its heavy equipment fleet in Australia by 10%.
• NOA reported a record trailing twelve-month combined revenue of $1.5 billion.

Company Performance

North American Energy Partners experienced a robust first quarter, with revenue increasing 18% year-over-year to $392 million. The company achieved a record trailing twelve-month revenue of $1.5 billion, showcasing its strong market position. Key operational advancements, such as a 10% expansion of its heavy equipment fleet in Australia and a 68% equipment utilization rate in oil sands, contributed to this performance. InvestingPro data reveals the company’s impressive 20.85% revenue growth over the last twelve months, with a sustainable 32.32% gross profit margin, indicating efficient cost management.

Financial Highlights

• Revenue: $392 million, up 18% year-over-year
• EPS: $0.21, compared to a forecast of $0.83
• EBITDA: $100 million with a 25.5% margin
• Net debt: $867 million
• Return on Invested Capital (ROIC): 10.6%

Earnings vs. Forecast

North American Energy’s EPS of $0.21 fell short of the $0.83 forecast, marking a significant miss. However, the company outperformed revenue expectations by generating $340.83 million, a 12% increase over the forecast. The EPS miss contrasts with the company’s historical trend of meeting or exceeding earnings estimates, raising questions about potential operational challenges.

Market Reaction

Following the earnings announcement, NOA’s stock rose by 2.19% in after-hours trading, closing at $16.78. This increase suggests that investors were encouraged by the company’s revenue performance and operational updates, despite the EPS shortfall. The stock’s movement brings it closer to its 52-week high of $22.08, indicating strong market confidence. InvestingPro analysis suggests the stock is currently undervalued, trading at an attractive EV/EBITDA multiple of 4.24x. The company has also maintained dividend payments for 12 consecutive years, with a current yield of ~2%. For deeper insights into NOA’s valuation and 8 additional exclusive ProTips, visit the comprehensive Pro Research Report.

Outlook & Guidance

Looking ahead, North American Energy expects its backlog to reach $4 billion by mid-year. The company aims to increase its infrastructure business to 25% of its overall operations within three years. Despite weather-related impacts in Q1, NOA remains confident in achieving its annual guidance, with expectations of busy construction activity in Q3. With an Altman Z-Score of 4.54 indicating strong financial stability and analysts forecasting EPS of $2.75 for FY2025, the company appears well-positioned for growth.

Executive Commentary

Joe Lambert, President and CEO, remarked, "Q1 weather dragged down our start of the year, but we see great opportunities, improved financial performance, and continued shareholder-friendly investments going forward." Lambert emphasized the company’s commitment to delivering on its promises, stating, "Our job is to deliver results that we say we’re gonna get."

Risks and Challenges

• Weather-related disruptions could continue to impact operations.
• High net debt levels may pose financial risks.
• Market saturation and competition in Western Australia could limit growth.
• Fluctuations in commodity prices may affect profitability.
• Supply chain challenges could hinder equipment utilization targets.

Q&A

During the earnings call, analysts queried the impact of weather on gross profit margins, estimated at 5-7% in Australia. Executives assured that Q2 EBITDA would mirror Q1’s performance, with the first half of the year representing 45% of annual EBITDA. The company expressed confidence in meeting its guidance range, despite early-year setbacks.

Full transcript - North American Energy Partners Inc (NOA) Q1 2025:

Jennifer, Conference Call Moderator, North American Construction Group: Good morning, ladies and gentlemen. Welcome to the North American Construction Group Conference Call regarding the First Quarter Ended 03/31/2025. At this time, participants are in a listen only mode. Following management’s prepared remarks, there will be an opportunity for analysts and 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 the participant’s permission. The company wishes to confirm that today’s comments contain forward looking information, and the 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 discussion and analysis, which is available on SEDAR and EDGAR as well as on the company’s website at nacg.ca. I’ll now turn the conference over to Joe Lambert, President and CEO.

Please go ahead.

Joe Lambert, President and CEO, North American Construction Group: Thanks, Jennifer. Good morning, everyone, and thanks for joining our call today. I’m going to start with a brief overview of our Q1 twenty twenty five operational performance before I hand it over to Jason for the financials, and then I’ll conclude with the operational priorities, a review of our growth opportunities in Australia and the infrastructure markets, our expanding bid pipeline, our backlog, and our outlook for the remainder of 2025 before taking your questions. On slide three, our Q1 trailing twelve month total recordable rate of 0.34 improves upon our Q4 results and remains better than our industry leading target frequency of 0.5. We continue to advance our systems and training with key focus on human and organizational performance principles, commonly called HOP, and look to continue the trend with our ultimate goal of getting everyone home safe.

On slide four, we highlight some of the major achievements of Q1. While we struggled to overcome the weather impacts to our business, we were able to achieve some meaningful accomplishments. We expanded our heavy equipment fleet in Australia by over 10%, boosting capacity to meet growing demand. In Canada’s oil sands, we achieved an impressive 68% equipment utilization rate in the quarter, with February peaking at 70%, reflecting our focus on operational efficiency. Early stage development in heavy civil infrastructure work began at a major copper mine in New South Wales, positioning us for long term value in the critical minerals sector.

The Fargo project continued to advance, surpassing 65% completion, with final construction now underway in Q2. Financially, we reached a new milestone with trailing twelve month combined revenue hitting a record 1,500,000,000.0 Our disciplined management approach kept administrative costs at 3.9%, meeting our internal targets. Additionally, our parts and components supply and services agreement with Finning delivered a full quarter of impact, effectively combining our in house capabilities with their expertise to drive improving cost and equipment utilization. Moving on to slide five, you can see that the Q1 utilization of 68% was the same in both Canada and Australia. Our Canadian fleet improved to our best quarterly utilization since the winter of twenty twenty two-twenty twenty three.

And while we expect Canadian utilization to drop modestly in Q2, we also fully expect it to then trend back up, approaching our 75% target by year end. Australia took a major hit in Q1 due to rain impacts, but we remain confident in our ability to hit our target range of 85% in late Q2 to early Q3. With that, I’ll hand it over to Jason for the Q1 financials.

Jason, CFO, North American Construction Group: Thanks, Joe, and good morning, everyone. Starting on slide seven, the headline EBITDA number of $100,000,000 and a correlated 25.5% margin were both negatively impacted by the weather in Australia and Canada, which Joe mentioned and will be reviewed in the next slide. We included a comment here about our steady growth since the second quarter of twenty twenty four, which was our weakest revenue quarter post the MacKiller acquisition. We generated $330,000,000 of combined revenue in that quarter after absorbing a 25% reduction in Canada from the first quarter. Since that time, our combined revenue has been steadily climbing and the $392,000,000 of revenue this quarter represents an overall increase of 18%.

But importantly, when just looking at Australia and Canada, represents a 25% increase in just three quarters. And when looking one level further, the Canadian operations posted an encouraging top line of $178,000,000 this quarter, which is impressively 45% higher than the second quarter of twenty twenty four. Moving to slide eight and our combined revenue and gross profit. McKellar Group and DGI Trading, which we combined as Heavy Equipment Australia in our results, were up $24,000,000 on a quarter which was impacted by heavy rains in February and March, and during which McKellar posted equipment utilization of 68%, their lowest mark since acquisition. The reason for the quarter over quarter increase is due to the 25% increase in fleet capacity since March of last year, with 10% of that increase coming since year end.

This top line positive variance was further bolstered by higher revenue in the Oil Sands region and as previously mentioned, was importantly and significantly up from the fourth quarter. Our share of revenue generated in the first quarter by joint ventures was consistent with last year as higher scopes in the Fargo Moorhead project were mostly offset by lower scopes within the Nuna Group of Companies as well as the discontinuation of the Brake Supply joint venture. Before getting into the weather, our reported combined gross profit margin of 13.2% was impacted by unusually high early component failures in Canada, which we have adjusted for in the adjusted EBITDA margins. Excluding these abnormally high component failures, which we have addressed through the reorganization of our component supply approach, overall combined gross profit was approximately 14% and Canada’s gross profit margin was approximately 8%. As mentioned, the weather significantly impacted gross margins with the dual impacts of lower top line revenue not covering overheads and the increased costs incurred during idle time.

In Australia, the consistent rain resulted in poor utilization as equipment remained parked for significant amounts of time, particularly at the Carmichael mine, and this was compounded by increased costs incurred for site cleanup and dewatering activities. In Canada, February was the month that had the most serious impact on operations, with the extreme cold requiring both equipment to be idled for extended periods of time, as well as the incurrence of costs to keep personnel and equipment warm. All told, it is estimated based on historical precedent that the weather impacted gross margins by between 57% in the quarter. Moving to slide nine, Q1 EBITDA essentially matched last year as the revenue increase was fully offset by operational challenges. As mentioned, the 25.5% margin we achieved reflected the weather we were required to operate through.

This margin level is not indicative of where we see our business operating at, with cumulative EBITDA margin since the McKellar acquisition at 29%, which covers over $2,000,000,000 in revenue and an eventful eighteen month time frame. Included in EBITDA is general and administrative expenses of $11,100,000 in the quarter and equivalent to 3.3% of reported revenue, which is below the 4% target we’ve set for ourselves. Going from EBITDA to EBIT, we expensed depreciation equivalent to 16% of combined revenue, which is much higher than the 14% posted in twenty twenty four Q4 and reflects the high idle hours incurred in Canada, particularly in February. Again, this 16% is much higher than our expected run rate moving forward, given we’ve been at approximately 14% since the McKellar acquisition in twenty twenty three Q4, and we fully expect 2025 to finish in that range. Adjusted earnings per share for the quarter of $0.52 reflects the steady EBITDA performance, but was significantly impacted by the $11,000,000 of increased depreciation, which is equivalent to zero three zero dollars per share.

Interest and taxes were generally consistent with last year, and the average cash interest rate for Q4 was 6%. Moving to slide 10, I’ll briefly summarize our cash flow. Net cash provided by operations prior to working capital of $76,000,000 was generated by the business, reflecting EBITDA performance net of cash interest paid. Free cash flow usage was impacted by our front loaded capital maintenance programs as well as a $25,000,000 draw on working capital accounts. Moving to slide 11, net debt levels ended the quarter at $867,000,000 an increase of $11,000,000 in the quarter as the free cash flow usage and growth spending required debt financing, but was mostly offset by the $73,000,000 of debentures that were converted into shares during the quarter.

Net debt and senior secured debt leverage ended at 2.2 times and 1.8 times. Of note, and subsequent to quarter end, we issued $225,000,000 of 7.75% senior unsecured notes, which had no impact on net debt leverage ratio, but decreases pro form a senior debt leverage to 1.3 times. ROIC of 10.6% as at March 31 decreased more than a percentage point in the quarter as the high depreciation and capital spending in the quarter, with normalized levels having resulted in an approximate 12% ROIC. As we get the full trailing 12 benefit of the increased Australian fleet and with the Fargo project achieving certain financial milestones, we expect to see a trend back to our company target of 15%. With that, I’ll pass the call back

Joe Lambert, President and CEO, North American Construction Group: to Joe. Thanks, Jason. On Slide 13, we highlight our 2025 priorities. These priorities remain unchanged. Safety is our social license to operate and our moral obligation to our employees and will forever be our highest priority.

Equipment is our largest, most controllable cost and high utilization drives return on capital and financial performance. Geographic and commodity diversification is both our growth engine and opportunity to engage underutilized assets and increase the stability and consistency of our business. Customer satisfaction, especially with our Queensland and Alberta markets, in which we have worked continuously for many decades, is what drives our expectations for 100% renewal rates in those markets and opportunities to increase scope with expected increasing client production forecasts. As we have grown, we have also relied on expanded and upgraded systems to increase our management information, cost monitoring, and ability to enter new markets such as unit rate work in Australia, which we have had recent success with our win and smooth start up of the copper mine in New South Wales. Lastly, we continue to look to improve and expand our internal maintenance skills, both to improve our internal costs and also to expand our revenue streams through external customers.

As I have stated previously, we believe our in house component rebuilds, whole machine rebuilds, telematics and strategic partnerships with OEM dealer will provide increasing opportunity for external maintenance sales. I don’t have a slide specifically on tariffs, but this is as good a place as any to clarify. We have had two vendors identify increases in costs due to tariffs. One is a U. S.

Engine manufacturer who had advised of a 3% to 4% increase due to tariffs, which isn’t far beyond normal expected annual increases. The other is a U. S.-based tire manufacturer for our ultra class truck tires, which has a 25% tariff increase in pricing. While researching other suppliers, there are limited ultra class tire manufacturers. Overall, we expect the tariffs to potentially raise our internal costs less than one half of 1% over the next year or so, should the tariffs remain in place.

We continue to monitor the potential impact of US tariffs, but at this point believe it’s negligible. On slide 14, we highlight the growing civil infrastructure spend in our key markets of The US, Canada and Australia. Ageing infrastructure, energy transition, climate resiliency and tariff threats pushing nations to seek more resource independence are all driving what we believe is a vastly growing opportunity in the civil infrastructure markets. We see the desired speed for development also lowering the risk for contractors. The growing opportunity in lower risk is why we believe we can build our infrastructure business to about 25% of our overall business in the next three years.

We have a new executive member starting with us in a couple of months, and she will be leading our infrastructure business in what we see as an exciting area for growth. Stay tuned as we provide more information and analysis on this expanding infrastructure market over the summer. On slide 15, we highlight what we believe is our biggest organic growth opportunity going forward, and that is our continued expansion in Australia. The Australian contractor marketplace is massive and growing. Western Australia in particular is 50 of the active mines in the entire country, and we have less than a 1% share of that market.

We have just started to see initial tender packages and budgetary proposals coming out of Western Australia and believe we will begin to receive RFPs in late Q2 or early Q3 for 2026 project starts. Slide 16 highlights a strong bid pipeline of $15,000,000,000 with a massive increase of around $4,000,000,000 in our upcoming infrastructure opportunities. The addition of a major equipment operator labor supply tender in oil sands, continued strong activity in diversified resources in Canada and a couple of major opportunities for early renewal, extensions and expansions with our existing Queensland clients in Australia. We have had a 100% success rate in renewals with our Queensland clients and look to continue that trend. Moving to slide 17.

With the Q1 typical quarterly backlog consumption, our pro form a backlog now sits at $3,200,000,000 and is a decrease of about $300,000,000 from our year end 2024 backlog. With the previously mentioned activity level in our bid pipeline, we expect our backlog to hit a record $4,000,000,000 mid year this year and demonstrate increasing geographic and resource diversification. On slide 18, we have provided our outlook for 2025 with unchanged key metrics from year end. We believe we can make up for the Q1 weather impacts in both Australia and Canada over the course of the year and expect the summer construction activity in North America will be busy, particularly in Q3. We also expect that the growth assets we have added into our Australian operations will be fully operational by the beginning of Q3, providing what will be another busy second half of our year.

Lastly, regarding capital allocation going forward, we have been active in our NCIB having purchased and canceled 250,000 shares since inception to quarter end, demonstrating our commitment to shareholder focused allocation. We have increased liquidity with our high yield raise, which gives us confidence to continue investing in our NCIB and provides us funds should we need to settle our remaining convertible debt with cash, which is now a current liability. The high yield also provides additional funding should we need letters of credit for future infrastructure bids or fund other high return investment opportunities. Q1 weather dragged down our start of the year, but we see great opportunities, improved financial performance and continued shareholder friendly investments going forward. With that, I’ll open up for any questions you may have.

Jennifer, Conference Call Moderator, North American Construction Group: Thank you. Ladies and gentlemen, we will now begin the question and answer session. You will hear a prompt that your hand has been raised. And should you wish to cancel your request, please press star followed by the two. If you’re using a speakerphone, please lift the handset before pressing any case.

One moment, please, for your first question. Your first question comes from the line of Adam Thalhimer from Thompson Davis. Please go ahead.

Adam Thalhimer, Analyst, Thompson Davis: Hey, good morning guys.

Joe Lambert, President and CEO, North American Construction Group: Good morning, Adam.

Adam Thalhimer, Analyst, Thompson Davis: Can you help us a little bit thinking about seasonality for the rest of the year? I’m curious how you guys think Q2 might trend versus Q1 from a top line or an EBITDA perspective?

Jason, CFO, North American Construction Group: Yeah, I can take that one Adam. We actually see top line and EBITDA being quite consistent with Q1. The oil sands is seasonally slower. It’s less of an impact in our more diversified business, but we see utilization in US cents coming down a little bit. But with lower depreciation, we see on the EPS side a nice increase in Q2.

So top line and EBITDA consistent with Q1.

Adam Thalhimer, Analyst, Thompson Davis: Great. And then, Joe, can you just expand you talked about a new hire on the infrastructure side and just maybe what you’re seeing for large infrastructure bidding in The US and Canada.

Joe Lambert, President and CEO, North American Construction Group: Yeah. I mean, predominantly what we’re looking at recently has been a big increase in P3s in The US. The ones we’re looking at are there’s a couple of dozen actually. It’s all around energy transition and climate resiliency. So there’s quite a few pumped hydro projects.

We’re seeing quite a few dam construction levy raises around flooding. We see a lot of water retention in the Western US. And so, you know, we’ve really just got into the business development side of this, which is the big ads you’re seeing. Those are all P3 projects, about half of them are the US Corvette engineers. And yeah, we’ve got what we think is a great leader for that business and our overall business development starting here at the July.

So, we think those are great opportunities. We also see them as lower risk in the form of contracts that are coming out. So, most of the stuff you’ll see on our bid chart is actually from the P3 conference in Dallas in The US. And that’s really what’s driving that part of the business.

Adam Thalhimer, Analyst, Thompson Davis: And is that in your $4,000,000,000 backlog expectation by mid year or would that be

Joe Lambert, President and CEO, North American Construction Group: No. That wouldn’t be in this year at all. It’s they’re they’re longer lead times. They they’d be more in the 2027 kind of range on average. And, you know, if you look at that bid chart, the two that are furthest to the right on the bid pipeline are both flood protection jobs from the Corps of Engineers.

There is some potential for some earlier, but that’s kind of the timeframe we’re looking at is around 2027 for most of these to kick off.

Adam Thalhimer, Analyst, Thompson Davis: Perfect. I’ll turn it over. Thanks, guys.

Joe Lambert, President and CEO, North American Construction Group: Thank you, Adam.

Jennifer, Conference Call Moderator, North American Construction Group: Thank you. And your next question comes from the line of Jen Gibson from BMO Capital Markets. Please go ahead.

Jen Gibson, Analyst, BMO Capital Markets: Morning, guys. Thanks for taking my question. Just first, I wonder if you could quantify the the financial impact of the the rainy weather in Australia in in q one.

Jason, CFO, North American Construction Group: Yeah, we we put it at about five to 7% of gross profit margin, in Australia. Was your question just on Australia, John?

Chris Thomason, Analyst, CIBC: Yeah. I

Jen Gibson, Analyst, BMO Capital Markets: guess it’s what a normalized quarter would have been, you know, absent the severe weather impact.

Jason, CFO, North American Construction Group: Yeah. So, you know, we’re kind of in the $10,000,000 range in Australia. You know, they’re normally at about 25% gross profit margin. They came in at 16 or 17%. So, you know, that kind of order of magnitude.

Jen Gibson, Analyst, BMO Capital Markets: Okay, great. And then second one for me, just your oil sands work you know, continues to improve. I guess what’s what’s changed here? Is it the new contract structures or just a bit of a pickup from some work that was delayed last year?

Joe Lambert, President and CEO, North American Construction Group: I I you know, it’s very similar top line, I think. We’re We’re getting a bit more efficient in the operations there. Obviously, Q1, we had a big hit on the cold weather. When it gets extremely cold, like in that minus 25 or colder, you just got to leave equipment running because if you turn it off, it’s very difficult to get them started again. Other than that, I think we’re seeing very strong demand.

Q2 is usually our weakest quarter in oil sands, and we think we’re going to finish strong there and look forward to the projections for next year. We think with production continuing to increase in oil sands and material movements will follow, and we see modest growth potential year on year in the oil sands as well.

Jen Gibson, Analyst, BMO Capital Markets: Okay. Great. Congrats on the the solid quarter in light of some tough operating conditions. I’ll turn

Chris Thomason, Analyst, CIBC: it back.

Jason, CFO, North American Construction Group: Thanks, Joe.

Jennifer, Conference Call Moderator, North American Construction Group: Thank you. And your next question comes from the line of Remy Paudia. Please go ahead.

Remy Paudia, Analyst: Hey. Good morning, guys. Hope you’re having a good day.

Jason, CFO, North American Construction Group: Good morning, Remy.

Remy Paudia, Analyst: Joe and Jason and the whole team, thanks for your time. I was coming through the financials and saw that the subcontractor services increased a good bit, looks like, from 59,600,000.0 ballpark to 75,600,000.0 comparing twenty twenty four Q1 to twenty twenty five Q1. How would you comment on that? What was the reason for the increase?

Jason, CFO, North American Construction Group: Yeah, so that’s all Australia driven and we’re doing some new work in Australia that requires subcontractor services, particularly at that copper mine in Australia, as well as the rainy weather required some services to be brought into sites that we coded as subcontractors. About $18,000,000 of that increase is McKellar related and it is a kind of a run rate that we would expect to see. We do enjoy a margin on that subcontractor work, so it’s all kind of part of the different scopes year over year.

Remy Paudia, Analyst: Okay, got it. And then my second question is, I think that you guys are doing an excellent job as far as management is concerned, but how do you respond to any investors who might be losing confidence in management’s ability to execute based on, I guess, repeated issues related to climate and weather?

Joe Lambert, President and CEO, North American Construction Group: I, you know, I I think our our job is to to deliver results that we say we’re gonna get. And so, yeah, Q1 was a bit down due to weather and we need to deliver into the yearly guidance and that’s our expectation. I think any market is just expecting you to, if you put up a number, that you hit it or beat it. And that’s our internal expectations as well.

Remy Paudia, Analyst: Excellent. Thank you guys so much. Hope you have a good day.

Joe Lambert, President and CEO, North American Construction Group: Thank you, Raymond.

Jennifer, Conference Call Moderator, North American Construction Group: Thank you. And your next question comes from the line of Chris Thomason from CIBC. Please go ahead.

Chris Thomason, Analyst, CIBC: Hey. Good morning, guys.

Joe Lambert, President and CEO, North American Construction Group: Good morning, Chris.

Chris Thomason, Analyst, CIBC: Last quarter, you put out a bit of guidance on the quarterly cadence of EBITDA. You kind of framed it as percentage of your guidance per quarter. Just wondering if you could reiterate that for us going forward.

Jason, CFO, North American Construction Group: Chris, just as mentioned in the previous call, think we didn’t put that in Joe’s shareholder letter this quarter, but we do see Q2 looking a lot like Q1 on the EBITDA perspective. I think as far as first half, second half, the way we see it is on the EBITDA anyway that about 55% being in the second half of the year with 45% in the first half. That’s kind of the cadence we’re seeing right now. Q3 will a little bit up on Q4. But yeah, you’re getting into the ones and two percentages at that point.

Chris Thomason, Analyst, CIBC: Okay. And then just with respect to the guidance, when you set it back in December, these weather impacts would have been, you know, unforeseeable. And you talk about your run rate EBITDA margin being about 3% higher than what you put up in the quarter. So, you know, that implies there’s there’s potential slack in the guide. So I’m just wondering, like, given the context of that, you know, how should we be be thinking about the guide?

Even the range, like, you feeling like you’d be leading more to the lower end of the range after after the tough q one?

Joe Lambert, President and CEO, North American Construction Group: Yeah. You know, I guess it depends on how you how you look at the law of averages, Chris. I think, you know, we’re we’re expecting average weather becomes average weather. And I think that’s a reasonable expectation. You know, if you project the weather in q one through the rest of the year, I’m generally, you know, February are you know, we’re obviously not running into idle issues even if we get rain in q two and three.

We had a colder q one. Do you expect a warmer q four? The law of average would suggest so. But I don’t think we project our guidance with any kind of slack or anything else. Project the midpoint is what we think is our 50% probability number and the range where we think the volatility of that is.

So, I fully expect to deliver into the range. We have worse than average weather for the year. We’ll be in the lower end of it, probably. You know, I’ve we go by the law of averages, we forecast on average weather. And so I expect we’re going to be close to average when the year ends.

Chris Thomason, Analyst, CIBC: Got it. Okay. And then just touching on the weather, you know, looking at rainfall data in Queensland, it looked like April was still relatively high versus historic. I mean, significantly less rain compared to February and March. So I’m just wondering, like, you know, do you expect a bit of a gross margin headwind in Australia for part of Q2?

Or is, you know, the general drying trend enough that you’re not seeing those kind of impacts?

Joe Lambert, President and CEO, North American Construction Group: I’m impressive that you’re following the Australian But yeah, Chris, April started with some rain continuing into it in Australia. Again, we think by the end of the quarter and by mid year, things will average out. It was just a late rainy season in Australia and a very rainy season. They’re measuring rainfalls and feet.

That’s just pretty crazy down there. But I mean, yeah, there was a bit of disruption to the April, but we think that’ll work its way out through the year. And then we had a very warm April in oil sands, even March, we had early spring breakups. So I think Q2 looks better in the oil sands side as far as not having to deal with spring breakup in Q2 because it all kind of occurred in Q1.

Chris Thomason, Analyst, CIBC: Got it. Okay. And then just touching on the oil sands. You mentioned that there was additional work at Millennium and then lower scopes at Fort Hills. I’m just wondering if you could give us some color on what’s driving that?

Joe Lambert, President and CEO, North American Construction Group: I think that a quarter over quarter. Yeah. We’ve seen pretty consistent demand. We’ve moved some fleet between sites. They recently had some scheduled shutdowns and turnarounds on specific sites and those usually create some near term impacts and maybe some shuffling around sites.

But overall we’re seeing strong demand for our services across the Oil Sands. It’s typically a Q2 low in the Oil Sands and I think will be typical of that. And then it starts to ramp up again and peak in Q4.

Chris Thomason, Analyst, CIBC: Okay. Last question for me. Just on the NCIB. Just wondering, just given where the share price has gone over the last few months, how much flexibility you guys are willing to have with respect to your debt target? Can you lean on the NCAA be a little harder in the near term and then maybe sacrifice like 0.1 of a turn on the debt side in exchange?

Maybe just how you guys are thinking about that?

Joe Lambert, President and CEO, North American Construction Group: Yeah, I think at this pricing and what we think is the return on our what we think is our intrinsic value of, yeah, I think we could lean on a little more. It just depends on where it goes. Obviously we have a lot more liquidity with the high yield raise that we just did. We’ll look at it opportunistically and do what we think is the right investment. Right now I’d say buying our shares is the best investment we have out there.

Chris Thomason, Analyst, CIBC: Great. Okay. Thank you, guys. I’ll hand it back.

Jennifer, Conference Call Moderator, North American Construction Group: Thank you. And your next question comes from the line of Devin Schilling from Fenton Financial. Please go ahead.

Devin Schilling, Analyst, Fenton Financial: Hi, guys. Good morning.

Joe Lambert, President and CEO, North American Construction Group: Good morning, Devin.

Kevin, Analyst: I see a couple of contracts up for renewal here in 2025. Any updates on these two renewals on timing and maybe expectations on any potential scope changes?

Joe Lambert, President and CEO, North American Construction Group: Yeah, the first one, it’s in the middle row there, that’s the earlier one, is actually a negotiated early renewal. We’ve been very successful with these, Kevin, and like I said before, you can’t be any more successful, we’ve had 100% renewal rate. The second one is actually an expansion, which is on the top line there, is an expansion of an existing operation where we’re looking to potentially increase our scope. And that one we’ll know more towards the end of the year. The one in the middle, the early renewal potential we should know in the next quarter or so.

And that’s really the driver for what I said is going to be an increase to 4,000,000,000 in our backlog. So I’m highly confident in our ability and obviously a record of 100% renewal feeds that confidence.

Kevin, Analyst: Okay, that’s helpful. Believe in the past you guys mentioned a large infrastructure opportunity, I believe it was in California that you’re aiming to qualify for. Any updates on that project?

Joe Lambert, President and CEO, North American Construction Group: Yeah, we were unsuccessful in that prequal. We have added quite a few other projects. Our feedback on that was California was looking for California experience. And obviously we haven’t got a lot of experience that area. We got a lot of dam building experience but we haven’t done it in California.

So unfortunately that was a weakness in that particular tender. But from what we’ve added and the information we’ve seen now and these larger earthworks projects, picking up two dozen projects that we follow now on infrastructure earthworks, big earthworks in the next three years, of which we’ve added three, four, five that you’ll see on the bid pipeline which generate about $4,000,000,000 backlog. We want to win every bid but obviously that doesn’t happen. And yeah, we see plenty of them backfilling for the one that we just didn’t qualify for. And I think with this new exec we’re adding on and our focus in the infrastructure side and expansion, I look forward to much success in that market.

Kevin, Analyst: Okay. Yeah. No. That’s great update. I’ll jump back

Chris Thomason, Analyst, CIBC: in the queue. Thank you. Okay.

Jennifer, Conference Call Moderator, North American Construction Group: Thank you. Your next question comes from the line of Maxim Sytchev from National Bank Financial. Please go ahead.

Devin Schilling, Analyst, Fenton Financial: Hello. Good morning, gentlemen. It’s Kasim here on. Hi. It’s Kasim here on for Maxim, guys.

My question is regarding the technician count. You’ve mentioned in the past that it’s been a bottleneck. I’m just wondering for both your regions in Canada and Australia, is that still the case? And if so, how much shortfall in technician count do you think you have? And is it still a factor preventing you to reach your respective utilization targets in both regions?

Or is the gap mostly because of weather in your business?

Joe Lambert, President and CEO, North American Construction Group: I’ll start with Dan, the gap would be more of weather. Australia, we’ve got very full demand in Australian long term contracts. I think the consistency of how equipment stays on-site and the consistency of our labor workforce, especially our skilled labor and the mechanics. We’ve been very successful in attracting and retaining maintenance personnel. I think skilled trades are an issue around the world, but I think we manage it extremely well in Australia.

That’s why between that, the high demand and the weather, you’ll see that utilization target is at 85%. And we’re very confident in that. We’ve been right in that range, obviously not the last quarter, but before that. In Fort McMurray in the oil sands, when we get into that close to 70% range and above, that means we’re full on demand getting from 70% to 75% is the efficiency of our skilled labor workforce. We’ve put in systems and processes and developed things like our apprentice program over the years to address this, and now is the time to deliver.

So as you look to get from that high sixties to the mid seventies towards the year end, that’s really where you’re testing your abilities in that. And we’re confident we’ve got the systems and the processes in place now. And with the high demands there, we’ll we’ll get into that range of utilization. So, it’s not hindering us at any point right now. And as we go forward, we think we’ve got the the systems and processes as far as attracting and retaining skilled workforce in place both in Australia and in Canada.

Devin Schilling, Analyst, Fenton Financial: Thank you, guys. Yeah, that’s helpful. That’s it for me.

Joe Lambert, President and CEO, North American Construction Group: No worries.

Jennifer, Conference Call Moderator, North American Construction Group: Thank you. There are no further questions at this time. I would now hand the call back to Joe Lambert for any closing remarks.

Joe Lambert, President and CEO, North American Construction Group: Well, thanks very much, Jennifer, and thanks again, everyone, joining We look forward to providing next update upon our closing of our second quarter results.

Jennifer, Conference Call Moderator, North American Construction Group: Thank you. And this concludes today’s call. Thank you for participating. You may all disconnect.

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