North American Construction Group Ltd. Announces Results for the Fourth Quarter and Year Ended December 31, 2024

ACHESON, Alberta, March 19, 2025 (GLOBE NEWSWIRE) -- North American Construction Group Ltd. ("NACG") (TSX:NOA/NYSE:NOA) today announced results for the fourth quarter and year ended December 31, 2024. Unless otherwise indicated, figures are expressed in Canadian dollars with comparisons to prior periods ended December 31, 2023. Fourth Quarter 2024 Highlights: Combined revenue of $372.7 million, compared to $405.4 million in the same period last year. Reported revenue of $305.6 million, compared to $328.3 million in the same period last year, was generated by our wholly owned subsidiaries as incremental scopes and strong equipment utilization of 82% in Australia were more than offset by lower demand for our Canadian heavy equipment fleet when comparing to 2023 Q4.Our net share of revenue from equity consolidated joint ventures was $67.1 million in 2024 Q4 and compared to $77.1 million in the same period last year as the consistency in the Fargo and MNALP joint ventures were offset by lower scopes being completed within the Nuna Group of Companies.Adjusted EBITDA of $103.7 million and margin of 27.8% compared favorably to the prior period operating metrics of $101.1 million and 24.9%, respectively, as operational excellence in both Australia and Canada drove margin improvements.Combined gross profit for the quarter was $54.3 million and a margin of 14.6%. When adjusting for $10.1 million of integration costs incurred and $8.9 million of claims extinguished to secure long-term contracts, the resulting 19.7% reflects operational performance and compares favorably to 18.3% posted in the same period last year.Cash flows generated from operating activities of $97.0 million were lower than the $168.6 million generated in the prior period as higher cash generation from the strong EBITDA was offset by the temporary impact of changes to working capital in the quarter.Free cash flow generated in the quarter was $50.5 million as operational earnings were offset by routine capital maintenance and cash interest expenses with working capital and capital work in process balances generating positive cash in the quarter.Net debt was $856.2 million at December 31, 2024, a decrease of $26.3 million from September 30, 2024, as free cash flow generation and the impact of a stronger CAD/AUD exchange rate were offset by growth spending, the NCIB program, and the dividend payment .Additional highlights include: i) in November, we were awarded a $125 million heavy civil construction project primarily to construct diversion channels; ii) in December, we announced an extended and amended regional services contract, valued at $500 million, with a major producer in the oil sands region; iii) also in December, we were awarded a $100 million early works contract by a copper producer in the Australian state of New South Wales; iv) by the end of the year, we surpassed the 60% completion mark at the Fargo-Moorhead flood diversion project; and v) completed go-live activities for the ERP system in Australia during the quarter. Joe Lambert, President and CEO, stated, "Once again, I would like to thank our operations team for their safe and efficient performance this quarter. The recent contract awards in Australia and Canada speak for themselves but are a testament to the quality and reputation of our operating teams. We're off to a fast and robust start this year, and we couldn't be more excited about completing the work our customers have awarded us. We see opportunities and tailwinds in the heavy civil infrastructure and mining industries in Australia and North America and are diligently advancing efforts to win scopes based on the reputation we have in the respective regions." Consolidated Financial Highlights Three months ended Year ended December 31, December 31,(dollars in thousands, except per share amounts) 2024 2023 2024 2023 Revenue $305,590 $328,282 $1,165,787 $964,680 Cost of sales 218,834 220,672 789,056 678,528 Depreciation 44,765 41,990 166,683 131,319 Gross profit $41,991 $65,620 $210,048 $154,833 Gross profit margin 13.7% 20.0% 18.0% 16.1%General and administrative expenses (excluding stock-based compensation)(i) 13,696 18,702 47,245 41,016 Stock-based compensation expense 5,625 (496) 8,706 15,828 Operating income 22,544 45,944 153,330 96,330 Interest expense, net 14,401 14,007 59,340 36,948 Net income 4,808 17,646 44,085 63,141 Adjusted EBITDA(i) 103,714 101,136 390,258 296,963 Adjusted EBITDA margin(i)(ii) 27.8% 24.9% 27.6% 23.2% Per share information Basic net income per share $0.18 $0.66 $1.65 $2.38 Diluted net income per share $0.19 $0.58 $1.52 $2.09 Adjusted EPS(i) $1.00 $0.87 $3.73 $2.83 (i) See "Non-GAAP Financial Measures". (ii)Adjusted EBITDA margin is calculated using adjusted EBITDA over total combined revenue. Three months ended Year ended December 31, December 31,(dollars in thousands) 2024 2023 2024 2023 Consolidated Statements of Cash Flows Cash provided by operating activities $96,989 $168,569 $217,607 $278,090 Cash used in investing activities (75,764) (137,756) (274,683) (244,879)Effect of exchange rate on changes in cash 1,400 (4,532) 353 (5,994)Add back of growth and non-cash items included in the above figures: Acquisition of MacKellar(i) — 51,671 — 51,671 Acquisition costs — 5,934 — 7,095 Buyout of BNA Remanufacturing LP 4,210 — 4,210 — Growth capital additions(ii) 23,646 35,941 84,633 40,416 Capital additions financed by leases(ii) — (931) (14,157) (28,159)Free cash flow(ii) $50,481 $118,896 $17,963 $98,240 (i)Acquisition of MacKellar is the purchase price less cash acquired.(ii)See "Non-GAAP Financial Measures". Results for the Three Months Ended December 31, 2024 Revenue from wholly-owned entities was $305.6 million, down from $328.3 million in the same period last year. The quarter-over-quarter reduction reflects a reduction in overall work scopes in the Heavy Equipment - Canada segment due to a reduction in equipment utilization to 54%, compared to 65% in 2023 Q4, largely offset by improved performance in the Heavy Equipment - Australia segment. Revenue generated in that segment of $160.3 million includes a strong contribution from MacKellar of $155.4 million, up from $122.5 million in Q4 of last year, as the group commences work on new contracts and increases equipment utilization at existing sites. Eliminations in the quarter largely relate to equipment maintenance performed by the Heavy Equipment - Canada segment on MacKellar equipment. Gross profit was $42.0 million, representing 13.7% of revenue, compared to $65.6 million and a 20.0% gross margin in the same period last year. The decline was primarily driven by lower contributions from the Heavy Equipment - Canada segment. Cost of sales for the quarter totaled $218.8 million, down from $220.7 million in the prior-period, reflecting lower overall revenue levels. Gross profit in the Heavy Equipment - Canada segment was impacted by the $8.9 million customer claim extinguishment as part of a four-year $500 million contract extension executed in December 2024. Gross profit in the Heavy Equipment - Australia segment was impacted by $10.1 million of integration costs, primarily transportation of haul trucks from North America to Australia. General and administrative expenses (excluding stock-based compensation expense) were $13.7 million, or 4.5% of revenue, for the three months ended December 31, 2024, down from $18.7 million, or 5.7% of revenue, in the same period last year. The current year decrease is due to the inclusion of non-recurring MacKellar acquisition costs totaling $5.9 million in the prior year, offset by spend related to increased activity levels in the Heavy Equipment - Australia segment. Cash related interest expense of $13.7 million represents an average cost of debt of 6.7% (compared to $13.2 million and 8.8%, respectively, for the three months ended December 31, 2023). The increase in interest expense is primarily attributed to a higher balance on the Credit Facility, along with greater equipment financing—mainly from the addition of MacKellar—partially offset by the elimination of our customer supply chain financing arrangement late in Q3. Net income of $4.8 million in Q4 2024, compared to $17.6 million in the same period last year, was lower due to the lower gross profit factors discussed above, partially offset by lower general and administrative expenses and improved results from the equity joint ventures. Free cash flow in the quarter was $50.5 million, driven primarily by adjusted EBITDA of $103.7 million less sustaining capital spending of $47.7 million and cash interest paid of $13.7 million. Liquidity Including equipment financing availability and factoring in the amended Credit Facility agreement, total available capital liquidity of $275.3 million includes total liquidity of $170.6 million, $86.7 million of unused finance lease borrowing availability, and $17.9 million of unused other borrowing availability as at December 31, 2024. Liquidity is primarily provided by the terms of our $522.6 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 2027. Business Updates Strategic Focus Areas for 2025 Safety - maintain our uncompromising commitment to health and safety while elevating the standard of excellence in the field, particularly with regards to front-line leadership training;Operational excellence - put into action practical and experienced-based protocols to ensure predictable high-quality project execution in Australia;Execution - enhance equipment availability in Canada through improved fleet maintenance, equipment telematics and reliability programs, technical improvements and management systems;Integration - utilize recently implemented ERP at MacKellar Group to optimize business processes to lower overall costs and improve working capital management;Organic growth - based on strong site operating performance, leverage customer satisfaction to earn contract extensions and expansions;Diversification - pursue diversification of customers and resources through strategic partnerships, industry expertise and investment in Indigenous joint ventures; andSustainability - further develop and deliver into our environmental, social and governance goals. Outlook for 2025 The following table provides projected key measures for 2025 and actual results of 2024 and 2023. The measures for 2025 are predicated on contracts currently in place, including expected renewals and the heavy equipment fleet that we own and operate. Key measures 2023 Actual 2024 Actual 2025 OutlookCombined revenue(i) $1.3B $1.4B $1.4 - $1.6BAdjusted EBITDA(i) $297M $390M $415 - $445MSustaining capital(i) $169M $166M $180 - $200MAdjusted EPS(i) $2.83 $3.73 $3.70 - $4.00Free cash flow(i) $90M $18M $130 - $150M Capital allocation Growth spending(i) $40M $85M $65 - $75MNet debt leverage(i) 1.7x 2.2x Targeting 1.7x (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 three months and year ended December 31, 2024, tomorrow, Thursday, March 20, 2025, at 9:00 am Eastern Time (7:00 am Mountain Time). The call can be accessed by dialing: Toll free: 1-800-717-1738Conference ID: 71653 A replay will be available through April 20, 2025, by dialing: Toll Free: 1-888-660-6264Conference ID: 71653Playback Passcode: 71653 A slide deck for the webcast will be available for download the evening prior to the call and will be found on the company’s website at www.nacg.ca/presentations/ The live presentation and webcast can be accessed at: https://onlinexperiences.com/scripts/Server.nxp?LASCmd=AI:4;F:QS!10100&ShowUUID=70DEA77D-C2B3-4C4B-80EF-A1303C5C95BF A replay will be available until April 20, 2025, 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 three months and year ended December 31, 2024, for further detail on the matters discussed in this release. In addition to the MD&A, please reference the dedicated 2024 Q4 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 its 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 25 in the consolidated financial statements. Accounting pronouncements recently adopted Segment reporting The Company adopted the new standard for segment reporting that is effective for the fiscal year beginning January 1, 2024. In November 2023, the FASB issued ASU 2023-07, Segment Reporting: Improvements to Reportable Segment Disclosures. This accounting standard update was issued to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The Company has updated its disclosures to reflect the additional requirements. Recent accounting pronouncements not yet adopted Joint venture formations In August 2023, the FASB issued ASU 2023-05, Business Combinations - Joint Venture Formations. This accounting standard update was issued to create new requirements for valuing contributions made to a joint venture upon formation. This standard is effective January 1, 2025, with early adoption permitted. We are assessing the impact the adoption of this standard may have on its consolidated financial statements. Income taxes In December 2023, the FASB issued ASU 2023-09, Income Taxes: Improvements to Income Tax Disclosures. This accounting standard update was issued to increase transparency by improving income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This standard is effective for the fiscal year beginning January 1, 2025, with early adoption permitted. We are assessing the impact the adoption of this standard may have on its consolidated financial statements. Stock compensation In March 2024, the FASB issued ASU 2024-01, Compensation - Stock Compensation. This accounting standard update was issued to reduce complexity in determining if profit interest awards are subject to Topic 718 and to reduce diversity in practice. This standard is effective for annual statements for the fiscal year beginning January 1, 2025. The Company is assessing the impact the adoption of this standard may have on its consolidated financial statements. Debt with conversion options In November 2024, the FASB issued ASU 2024-04, Debt - Debt with Conversion and Other Options. This accounting standard update was issued to improve the relevance and consistency in application of the induced conversion guidance in Subtopic 470-20. This standard is effective for annual statements for the fiscal year beginning January 1, 2026. The Company is assessing the impact the adoption of this standard may have on its consolidated financial statements. Expense disaggregation In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures. This accounting standard update was issued to require public entities to disclose additional information about specific expense categories in the notes to financial statements. This standard is effective for annual statements for the fiscal year beginning January 1, 2027. We are assessing the impact the adoption of this standard may have on its consolidated 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 and include guidance with respect to financial metrics provided in our outlook for 2025. 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 and year ended December 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 www.sec.gov or on the CSA website at www.sedarplus.ca and on our company website at www.nacg.ca. Non-GAAP Financial Measures This press release presents certain non-GAAP financial measures, non-GAAP ratios, and supplementary financial measures that may be useful to investors in analyzing our business performance, leverage, and liquidity. 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. A "non-GAAP ratio" is a ratio, fraction, percentage or similar expression that has a non-GAAP financial measure as one or more of its components. Non-GAAP financial measures and ratios do not have standardized meanings under GAAP and therefore may not be comparable to similar measures presented by other issuers. They should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. A "supplementary financial measure" is a financial measure disclosed, or intended to be disclosed, on a periodic basis to depict historical or future financial performance, financial position or cash flows that does not fall within the definition of a non-GAAP financial measure or non-GAAP ratio. The non-GAAP financial measures and ratios we present include, "adjusted EBIT", "adjusted EBITDA", "adjusted EBITDA margin" "adjusted EPS", "adjusted net earnings", "backlog", "capital additions", "capital expenditures, net", "capital inventory", "capital work in progress", "cash liquidity", "cash related interest expense", "cash provided by operating activities prior to change in working capital", "combined backlog", "combined gross profit", "combined gross profit margin", "equity investment depreciation and amortization", "equity investment EBIT", "equity method investment backlog", "free cash flow", "general and administrative expenses (excluding stock-based compensation)", "growth capital", "growth spending", "invested capital", "margin", "net debt", "net debt leverage", "share of affiliate and joint venture capital additions", "sustaining capital", "total capital liquidity", "total combined revenue", and "total debt". We also use supplementary financial measures such as "gross profit margin" and "total net working capital (excluding cash and current portion of long-term debt)" in our MD&A. Each non-GAAP financial measure used in this press release is defined under "Financial Measures" in our Management's Discussion and Analysis filed on EDGAR on the SEC website at www.sec.gov or on the CSA website at www.sedarplus.ca and on our company website at www.nacg.ca. Reconciliation of total reported revenue to total combined revenue Three months ended Year ended December 31, December 31,(dollars in thousands) 2024 2023(ii) 2024 2023(ii) Revenue from wholly-owned entities per financial statements $305,590 $328,282 $1,165,787 $964,680 Share of revenue from investments in affiliates and joint ventures 134,348 169,662 517,137 686,299 Elimination of joint venture subcontract revenue (67,200) (92,522) (267,595) (369,891)Total combined revenue(i) $372,738 $405,422 $1,415,329 $1,281,088 (i) See "Non-GAAP Financial Measures".(ii)The prior year amounts are adjusted to reflect a change in presentation. See "Accounting Estimates, Pronouncements and Measures". Reconciliation of reported gross profit to combined gross profit Three months ended Year ended December 31, December 31,(dollars in thousands) 2024 2023(ii) 2024 2023(ii)Gross profit from wholly-owned entities per financial statements $41,991 $65,620 $210,048 $154,833Share of gross profit from investments in affiliates and joint ventures 12,283 8,670 49,455 49,638Combined gross profit(i) $54,274 $74,290 $259,503 $204,471 (i) See "Non-GAAP Financial Measures".(ii)The prior year amounts are adjusted to reflect a change in presentation. See "Accounting Estimates, Pronouncements and Measures". Reconciliation of net income to adjusted net earnings, adjusted EBIT and adjusted EBITDA Three months ended Year ended December 31, December 31,(dollars in thousands) 2024 2023 2024 2023 Net income $4,808 $17,646 $44,085 $63,141 Adjustments: Stock-based compensation expense (benefit) 5,625 (496) 8,706 15,828 Loss on disposal of property, plant and equipment 126 1,470 767 1,659 Write-down on assets held for sale — — 4,181 — Change in fair value of contingent obligation from adjustments to estimates 9,464 — 36,049 — (Gain) loss on derivative financial instruments (4,797) 916 (3,952) (6,063)Equity investment (gain) loss on derivative financial instruments (201) (713) 2,633 (1,362)Equity investment restructuring costs — — 4,517 — Loss on equity investment customer bankruptcy claim settlement — — — 759 Loss on extinguishment of customer claim 8,866 — 8,866 — Post-acquisition asset relocation and integration costs 10,111 — 10,111 — Acquisition costs — 5,934 — 7,095 Tax effect of the above items (7,197) (1,589) (16,169) (5,829)Adjusted net earnings(i) $26,805 $23,168 $99,794 $75,228 Adjustments: Tax effect of the above items 7,197 1,589 16,169 5,829 Interest expense, net 14,401 14,007 59,340 36,948 Equity investment EBIT(i)(iii) 5,076 1,622 12,228 24,929 Equity earnings in affiliates and joint ventures(iii) (5,754) (2,236) (15,299) (25,199)Change in fair value of contingent obligations 4,797 4,681 17,157 4,681 Income tax expense (375) 10,930 15,950 22,822 Adjusted EBIT(i) $52,147 $53,761 $205,339 $145,238 Adjustments: Depreciation and amortization 45,093 42,277 167,937 132,516 Write-down on assets held for sale — — (4,181) — Equity investment depreciation and amortization(i) 6,474 5,098 21,163 19,209 Adjusted EBITDA(i) $103,714 $101,136 $390,258 $296,963 Adjusted EBITDA margin(i)(ii) 27.8% 24.9% 27.6% 23.2% (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 presentation. See "Accounting Estimates, Pronouncements and Measures". Reconciliation of equity earnings in affiliates and joint ventures to equity investment EBIT Three months ended Year ended December 31, December 31,(dollars in thousands) 2024 2023(ii) 2024 2023(ii) Equity earnings in affiliates and joint ventures $5,754 $2,236 $15,299 $25,199 Adjustments: Gain on disposal of property, plant and equipment (237) (22) (595) (57)Interest expense (income), net 460 (268) (877) (1,183)Income tax (recovery) expense (901) (324) (1,599) 970 Equity investment EBIT(i) $5,076 $1,622 $12,228 $24,929 (i) See "Non-GAAP Financial Measures"(ii)The prior year amounts are adjusted to reflect a change in presentation. 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 Australia, Canada, and the U.S. For over 70 years, NACG has provided services to the mining, resource and infrastructure construction markets. For further information contact: Jason Veenstra, CPA, CAChief Financial OfficerNorth American Construction Group Ltd.(780) 960.7171ir@nacg.cawww.nacg.ca Consolidated Balance SheetsAs at December 31 (Expressed in thousands of Canadian Dollars) 2024 2023 Assets Current assets Cash $77,875 $88,614 Accounts receivable 166,070 97,855 Contract assets 4,135 35,027 Inventories 74,081 64,962 Prepaid expenses and deposits 7,676 7,402 Assets held for sale 683 1,340 330,520 295,200 Property, plant and equipment 1,246,584 1,142,946 Operating lease right-of-use assets 12,722 12,782 Investments in affiliates and joint ventures 84,692 81,435 Intangible assets 9,901 6,971 Other assets 9,845 7,144 Total assets $1,694,264 $1,546,478 Liabilities and shareholders' equity Current liabilities Accounts payable $110,750 $146,190 Accrued liabilities 77,908 72,225 Contract liabilities 1,944 59 Current portion of long-term debt 84,194 81,306 Current portion of contingent obligations 39,290 22,501 Current portion of operating lease liabilities 1,771 1,742 315,857 324,023 Long-term debt 719,399 611,313 Contingent obligations 88,576 93,356 Operating lease liabilities 11,441 11,307 Other long-term obligations 44,711 41,001 Deferred tax liabilities 125,378 108,824 1,305,362 1,189,824 Shareholders' equity Common shares (authorized – unlimited number of voting common shares; issued and outstanding – December 31, 2024 - 27,704,450 (December 31, 2023 – 27,827,282)) 228,961 229,455 Treasury shares (December 31, 2024 - 1,000,328 (December 31, 2023 - 1,090,187)) (15,913) (16,165)Additional paid-in capital 20,819 20,739 Retained earnings 156,125 123,032 Accumulated other comprehensive loss (1,090) (407)Shareholders' equity 388,902 356,654 Total liabilities and shareholders' equity $1,694,264 $1,546,478 Consolidated Statements of Operations andComprehensive IncomeFor the years ended December 31(Expressed in thousands of Canadian Dollars, except per share amounts) 2024 2023(i) Revenue $1,165,787 $964,680 Cost of sales 789,056 678,528 Depreciation 166,683 131,319 Gross profit 210,048 154,833 General and administrative expenses 55,951 56,844 Loss on disposal of property, plant and equipment 767 1,659 Operating income 153,330 96,330 Equity earnings in affiliates and joint ventures (15,299) (25,199)Interest expense, net 59,340 36,948 Change in fair value of contingent obligations 53,206 4,681 Gain on derivative financial instruments (3,952) (6,063)Income before income taxes 60,035 85,963 Current income tax (benefit) expense (3,280) 6,841 Deferred income tax expense 19,230 15,981 Net income 44,085 63,141 Other comprehensive income Unrealized foreign currency translation loss 683 713 Comprehensive income $43,402 $62,428 Per share information Basic net income per share $1.65 $2.38 Diluted net income per share $1.52 $2.09 (i)The prior year amounts are adjusted to reflect a change in presentation. See "Accounting Estimates, Pronouncements and Measures".

North American Construction Group Ltd. Announces Results for the Fourth Quarter and Year Ended December 31, 2024

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