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 www.nacg.ca/about-us/sustainability. 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. Liquidity 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 31,2024       December 31,2023   Cash   $ 80,095     $