NOA - Earnings call transcript Q1 2022 | North American Construction Group Ltd.

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Operator

Good morning, ladies and gentlemen. Welcome to the North American Construction Group Earnings Call for the First Quarter ended March 31, 2022. [Operator Instructions] The company wishes to confirm that today’s comments contain forward-looking information and the actual result could differ materially from the conclusion, forecast or projection contained in 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’s discussion and analysis, which is available on SEDAR and EDGAR as well as on the company’s website at nacg.ca. the to turn now will conference Mr. over I Lambert, President CEO. and Joe

Joe Lambert

operational thanks morning, your start our XXXX And it then Good the financial Raine. taking conclude priorities for for to with before Jason over everyone, QX I to Thanks, before overview. going and and joining outlook questions. the XXXX handing I’m call our with will performance operational today. for

upfront issues, First I that the which want off, issues state you’re what of market and to much hear face alternative. skilled times high call desirable to these inflationary labor booming and market shortages you are more ensure we not commodity in we can we going during complaining about understand demand fully and than booming I high I are pressures. prices, that

since win-win frequency serve a Secondly, our believe including off long-standing and the see of events. we improving reports together still well-maintained as today, that companies, as on relationships across bitumen-rich for have relationships With business true deck through mining and that, client Slide ‘XXs. will strength get the working theme well and an remains for our a further the to X, reducing into We of end been experience, we starting I’ll geographic our our On high commodities risk margins risk, unchanged outlook diversification the these and to X.X. focusing consolidation their inflationary diversification highlight to overall of us long-term with our and in back customer times. X new utilization transparent managing where injury contracts, X, fleet. current a believe slight maintaining target Slide sand, rate, but we fleet, X inception, of potential reducing incidents we’ll investment-grade while uptick And perplexed had achieve as hire developing on and hand business remain our close programs, we green We has our prevention our a business. have training industry-leading our efforts show total continuously be to lifting and customers, in us have recordable of diversification hand we dating in business which our commodity our that allowed the as are smaller some working and

to are expect such, As grow many to all for looking diversification and we maintain areas in years to this come.

similar forward. a Our has split, plan backlog our supports going which

while our signal QX previously across is, recovery almost Moving of future. quarters specific pandemic, of issues, performance areas to highlighted shown summary, own Slides profit was consistent one trends, like slightly the a by has positive I which trending, on speak every several In points due shown to X these we on believe exception the Number the below X to our the expectations through and the measure. and of corner with slides. To would demonstrate growth positive these first X to we QX operational in the around see XX. X results market mentioned business

year-on-year quarter-on-quarter even profitable. and reliably and becoming consistent are Our results more far

to trend post quarterly to We expect remain this moving results while consistent forward. and improving continuing

to associated many highlighted improve have and opportunity, in as graphs and capacity these descriptions, we these ample Secondly, of abilities results. upon

Nuna, Alliance River Dene and and equity-accounted page results the partnerships single-digit partnerships. the really headlines. and Posting trends headline continue -- for project, NACG. list. Valley make with and Fargo-Moorhead From the our the on Third positive Group consistent our to growing Mikisew North high least to in front component our partnership grow, our doesn’t smooth with in profitable indigenous stabilizing fourth of last slides, and working the our Red out effect is to seasonality great front probably these partnerships remanufacturing obvious supply our diversification provide and on The CAGR

even us would call some boring. And

and our operations, will my I certainly the over of to summary. hit, will bit hand profitable benefit balance QX sheet a with that a Jason may ego growth. take With for of While overview financial shareholders continued stable

Jason Veenstra

Joe. Thanks,

incredibly XXXX quarter’s brief XX. was quarter review very revenue This it company Slide million, albeit QX million million much XXXX, million variety financial of narrowly Total begins XXXX. $XX combined difference. record for $XXX financial $XXX QX wide The a XXXX our beat $XXX of a the Across under circumstances. X% of mark as different was less than on the for consistent ahead metrics, another QX QX sets of to

As have driver higher technician revenue wholly otherwise Joe equipment the owned heavy shortage ongoing in achievement our for notably sands primary oil on is later, will for could what region. the the touch been a businesses

and gauge difficult our we are achieved be of services. factor The fleet which The in the this Although periods Hills of to the $XX mine, there. line that full time by exactly, site quarter alone estimate had remain all business driven to our potential reduced lines sites revenue we for demand remobilized that on very top million. was of not being when strong especially that showing a listing by broad mine those at approximately operating to And excited was again, quarter another Fort operations. comparing

prominence with late initial as XX% of the the we Micasu Northern the Fargo-Moorhead of made our sands on by progress QX success. focus is volumes experienced continued as of critical skilled by gross ventures equipment most trades. XX.X% actually XXXX, based as values, production the range record workforce beat was this index mentioned, the flood timing the aware, at short including impacted gold diversion breakup is drivers different profit but availability the key rate joint which was the workforce lagged shortage due January our published the the cases oil and driver in from March. and same firsthand in increasing on venture robust, as and combined $XX Omicron the were Revenue onset outlook of this million our project. in escalations, high XXXX the means influenced COVID-XX this QX mine and in quarter’s contract secondary margin, Several to our The quarter of is exactly of a as on is everyone early factors and spring it joint of the to Ontario the As region notably, in margin customers’ coupled impact by

of XX. the is revenue Included million administrative total revenue. across lines, Adjusted to on $XX business quarter, achievement down realistic to Slide is reflecting EBITDA The many direct, slightly in combined again XX.X%, from year a Moving EBITDA expenses, X.X% the of just million and improvements was of factors within equivalent margin mentioned. our solid were grasp. $X general but in with which last

to spending G&A from QX quarter benefited specific always, but, receipt received again, XXXX and the in Fargo-Moorhead As similar from a joint venture. a remained disciplined

part Excluding level this DGI the we forward recovery, as indicative G&A of moving was X.X% revenue, the which see with of mix. of is

well XXXX consistently of from for we earnings these effective of businesses XX.X% Going the run fleet, to by taxes. for of our as rate and our cold XX.X% use just the was depreciation quarter from When $X.XX very Both rates looking business. the very Adjusted to reflected fairly EBIT, of net compare the XX% establish our an per quarter. during, and ultra-class diversified at QX $XX.X measures fleet a depreciation our of as depreciation our fleet. quarter of was as EBITDA to and million revenue wholly equivalent which of EBIT, for measures the at equipment of and is heavy times, percentage driven important owned share in we active adjusted entire expensed the XX% reflective interest of revenue, entities

X.X% Our million overall cash and the interest $X.X rate in quarter, we a was incurred expense.

the primarily our our will interest Fargo they approximately have joint ventures, up $XXX,XXX authority. to expense incur and initial earnings, debt Additionally, we in note, equity of interest payments booked milestone leading as of through which from

our to and of we provided we being positive of capital joint our cash the busy X posted $XX Slide which season. in $XX cash free being through briefly flow working joint million. in Sustaining maintenance summarize million $XX quarter free ventures. of drew $XX million of quarter. of flow, million cash in cash to Pausing was of primarily flow business had free the a of of Working to this on million ventures. Net as by quarter paid, these another the the very capital was XX. QX cash that out the course, and The was was impact cash for our million fleet and winter this with the highlights Moving moment flow to made between dedicated nearly difference of maintenance $XX cash again the figure quarter a existing cash quarters our way point cash flow. managed difference impact produced operations the $XX by of EBIT and by interest very where capital similar on operationally, like free material I’d XXXX, a I’ll

Our with the of the why basis, X.Xx. benefit $XX $XXX in by calculated free capital I’ll continue of comments, those a range quarter Total flow back levels increased we to years million pass $XXX position Net call leverage credit impacts at performance. with the these confident Slide remain the investment to aforementioned we disciplined our I’ll facility nature liquidity debt the from trailing senior timing in XX-month to million. of And temporary understanding million XX. remains as million past. cash legacy to On as is of our ratio, due the the Joe. full strong year in of reflects end our $XX

Joe Lambert

Thanks, Jason.

XXXX. Looking following X on at for particularly I of I progress these slides, QX. Slide to but our that most XX, highlight separately to wanted be important will in slide priorities discuss areas summarizes this items the

of and of are vendor in in on to particular, laser-focused escalation foremost, increases will and the our parts and contract equipment contract to administration and regards the application OEM accuracy First continue impact price costs. be causes equipment we on and

the intended or of preserve process that impact current labor our incurred are same is will to and we our seen rates. have parts clients in the attention the volatile matching decades on equipment and this transparent have the the to price increases similar in Although and require OEMs costs most objective vendors,

to Secondly, our to continue we develop, improve fleet continue need to utilization. people to and retain maintenance skilled attract trades

and field-based on explained continue As NACG last both extensive maintenance has workforce. our expand detail the Acheson call, program and comprehensive to an to in I

As months apprentice employees last this our progress, since of programs. approximately XX% our ago, call just a over added we example have of into more couple

for around central our remanufacturing XXX completed health in with real-time a for Our monitoring allow shop program telematics few next services capacity will be and will expansion our machine growth control current and assets. room weeks and the and Hands additional connected Bench in

Valley River the project lines Fargo-Moorhead focus is ensure and ongoing Slide procured, planning on and when expect we following The I construction start start-up hiring has around status start commence we for to The our of commence detailed work well-planned XX equipment to and fleet our a activity. well, third half and progress are to the for on Red staff forward look will The smooth progressing and year project. earthworks summer. field area of is workers a design been the of efforts approaching actual of latter earthworks. quarter reports the QX construction-ready end this can providing really

on Moving Slide to XX.

see the bid preferred reclamation times success opportunities client. and be to at to Mine as is to whereas oil including areas. pipeline pre-tender in are Diamond two proceed In new here we most last tenders have top project regional massive comparison commodity we in projects can continue existing a remains an strong, we in will to phase You February, multisite extensions, sands rows a expect on the likely new time in My our the budgetary and the to the projects for these focus two and pricing. added tender presented all

sands and second removed smaller at Mine won Nuna two the in a and announced Northwest oil won. projects, $XXX the mid-March On million that Diamond Territories we reclamation estimated project row, we tender

We also in projects to a sands. added the oil RFP phase recently released in tender active

highlight a dividend quarter. the more year inclusivity our interest of sits in share X before and one emissions work all you including summer our backlog both range and this Performing XX, next confidence sustainability, our is just most across target, set. QX so in available for the and for will don’t some and efforts. at have the too all have to our resource released win $X our shares of of we partnership. would summary lastly, sectors. the We outlook with month On continue but These we to backlog, and our short progress And of key flow at on $X.X our and the the detailed sustainability undervalued. takeaways for is to or a bolt-on, diversity allocation proportionate with on ago, receive the diversification debt we we of via achieved but billion, indigenous be see continue report description demonstrating to on the capital to our exceed Slide reduction, great our packages to quick that or progress profitability progress reductions, to last have fair backlog bid But to slides free to out. squint excess diversification have anyone XXXX. opportunity website XX, replenish areas, XX we our plan growth hard we year On a believe areas allow a pipeline provided made meaningful is and XX and of turnaround continue targets I in quarter continue for share end diversification these improve Slide and believe before possibly Slides and $X doubled unchanged have this in and backlog to in to I made word our slide expect additions. purchases to opportunity work We generating provide with cash billion to key of XXXX we sustainability more roughly results our fleet M&A to and importantly, backlog billion over point

time shows explain high and my peers value continue and potential we valuation business repurchases issue we we’ll consistent NCIB this of most for XX, renewed in two final use business performance to levers shareholder-friendly pull why Slide all previously, and of we better more easing intend demonstrate to investors ways. our to top our relative share the face address stated and reinforce the With continue as to slides. with the restrictions, I to all That’s capital. As our the proposition. travel can one On see existing our my COVID-related spend our charts lower efficient to compelling

some business you is or we and have. like of next we several our of when that, is on bit across of let’s would add important diverse theme know, response to months, analogy many a current all in represent down culture. situation built But where And well have to With several As usually up markets our need NACG into environment. any areas to and heads demand you that a I execute get is the our in work. may for the response to I’ll open great questions

Operator

[Operator comes Instructions] ATB Your Monachello Tim question Capital Markets. from from first

Tim Monachello

the elaborate you about. Extensions sort if opportunity on know you the of curious just was could I’m I -- billion in and slide that’s talking little category a dollar $X Opportunities that of Preferred what bit

Joe Lambert

button mid on red The big the pipeline?

Tim Monachello

big there’s Yes, that button, red please.

Joe Lambert

Yes.

the amalgamating some all and that some all from actually few received done of a got X-year our we a lot it’s But really It’s -- contracts it’s -- of bulk say we there’s bidding and their have a when X and now. believe setting current timing on weeks work. a out we X earthworks. bit a that’s back, it them be tender of than overlap of different years program work it. the combining them but dot to different on value bigger So with -- sites is aligning on We’ve

Tim Monachello

Okay.

overlap this that because So that the in there’s contract? scope already existing you really place bid on nobody else could of have contracts this would

Joe Lambert

the us next there some committed believe years. X We volume in of already for is to that

Tim Monachello

equipment impacted results. an you technicians think give heavy QX was at around level little you your heavy how talked just you Can when us that progress And helpful. then I see potential? a equipment on that might you hit update can just capacity your about in That’s bit question supply the second and in hiring the that you a under technicians. Obviously, had Okay. was and that

Joe Lambert

But pay, bleeding of to kind pretty service a our to which isn’t huge we’re like We’ve back rates, in Tim, and that of the but much lot a everyone we’re some think direct them really And and back. in head we the ground wasn’t April, providers, numbers February, now stopped guys on that had made we’ve which also we’ve poaching. position. moves match starting of in get in pricing already. digits. us. I And -- stopped crossing count, those just individual and because hurts single the street And call gain contractors. own and It We what are adjusted wage with those

the by lot and to end hopefully growing side. going AGT we’re a this I stable think on of more the So quarter, be

Tim Monachello

me. if And is the an then Okay. I’m how you just going. last could one project on for update Fargo-Moorhead wondering give

Joe Lambert

Yes. planning It’s I is Tim, fleet said, work but the haven’t -- we’ve yet, broke we ground all and procured. design got progressing. the Like

-- last the it’s is So into dirt. quarter get QX, really we QX of prep. In the

have So our great to and to. time spent site work, we’re focus there’s big getting will guys lot continue of a looking the a and just started. do and got team on forward a it to We’ve there,

Operator

next comes Your Instructions] from Bryan Fast Raymond James. question [Operator from

Bryan Fast

you U.S.? on talk I in underway seeing Fargo-Moorhead get guess, you opportunities project, just beyond you that the project, that are about As could the

Joe Lambert

experience in jobs think relationships We come of opportunities. more earthworks strong have That stand is have PX large with and infrastructure I But to and to the we’ve with alone. out project as going partners. component of it, lot kind a and certainly, that more think got more we’re infrastructure,

really it come out. of before -- coming the for a takes of aren’t work we’ve design really those projects up, And but yet. spend well that bills everyone’s think time known packages big I that heard bit

a in would here X pipeline XX seeing be or in expect -- to our maybe more months. the it to I bid next start XX PX So

Bryan Fast

then expect in And And catch amount quarter? the impacted something you you up were the is the escalations? by could this to lag that just this play throughout Okay. rate margins out year? quantify will that do in Or

Joe Lambert

that, it probably X% somewhere the me. this don’t in is Bryan, exact I of quarter, guessing front and number in X% to there. impact guess range I was would of have the be If in a -- it

have over all think clauses we our see we of discussions. transitioning have will by escalation in as that hopefully And QX our QX. I that application back

Bryan Fast

on one. you last might guess I update here? one then just the we timing Bank around as know And that. guys anything? Appreciate water project Is Or much or there any Okay. diversion know Spring as

Joe Lambert

the Yes. divvied to decline it chose a our lot able and of We just didn’t subcontractors, to risk to minimal. bit, were on amount up of was It was fit that profile the and Bryan. we going be and earthworks work awarded prior self-perform

Operator

question next Bank from Maxim from Your comes National Financial. Sytchev

Maxim Sytchev

just telegraphing, be that, production now, think right maybe guys? terms Firstly, to the how programs wanted Or of you is with the the clients what the and about that in are if negatively should for I opportunity privilege potential start on impacting visibility the in we summer that? fact obviously, could

Joe Lambert

out. summer We’re June often July. out, as I for late come And in Max, end come starts, that’s the May I pipeline. of of highlighted one Actually, our still think can packages seeing they bid in column second as and

a overall regional four pushed tenders back focus lot don’t are bid have This major seen really of is procurement other of sense teams too of activity I a some pretty So those may steady have on these stream particular coming because taking summer in. we’ve this sites. those items tendering that of a than the

than it summer sense don’t where a a I and expect looks summer. be have other I full-on really the it to So is reasonable, of good

Maxim Sytchev

the -- and like obviously, then in just are trying things forth, and And items to all you so helpful. of to certain there I’m steel, I concerns if wanted circle That’s to inflation think And where given back hedge curious terms was -- feed Okay. Fargo. that. can about

don’t to maybe make So mitigation there? of can in sure you terms that escalate comment costs if risk strategies just

Joe Lambert

near-term escalations. project been are provided of fluctuations priced And Yes. risk a Because I project, is are there historical to this where longevity have think averages. matrix the escalations change. it on But any done of going that will anticipated in massive with don’t

this little different. -- So look and although a already year might the equipment. We’ve got

know use see escalations the of reasonable. of and area we’re And that. know was I historical think know construction don’t of wage looking construction. be with I’ve But enough when how might the it and But are think a it’s you’re bridge historical averages construction, just years we X there lot side road So O&M, construction I’d is just I averages, of a it, XX matrix to a longevity of escalation necessarily. don’t I at going risk. very seen a in about cost that and using or contract put and appropriate. X-year X-year I they risk that in, main And the if say years and more the probably

Maxim Sytchev

Okay. around last given capital allocation, sort Fair and back process can share sometimes M&A, moves thought enough. a my liquid just up buybacks liquidity. that the just obviously, in question, stock, given the we and hear And amplify the of fact terms relatively constrained it’s down comments buybacks that the of versus share

right curious in later that’s and M&A. any the guess and process in terms balance versus And a of between color Just there? of share now maybe more you both that of that’s but Joe buybacks question Jason. for do stage -- I year maybe And sort thought how

Joe Lambert

the out Yes. share churn my shares. shares we and looking ourselves our good makes that over to And that’s best turnover down of prices, done businesses still buying we’ve continue our us our can good of which capital shares deals well and and sense accretive the for base. we buyback looking churn and often. integrated find what’s and accretive. Max, our an shown standpoint, in it amount own see pretty a would share share and believe smaller at with M&A we even buying on years. buy we’re and these say, we’re kind that And risk any maintain, some We’ve in be had we far time, average there price can’t to allocation. we’re think acquisitions, low if accretive And at of vertically better I’d point fit we’re But From multipliers. and that very a our the in bolt-ons

Operator

question next Yuri Genuity. comes from Canaccord Your from Lynk

Yuri Lynk

morning. Good

bit about any on what you’re recovery you that project. And quantify mentioned talking success of Fargo-Moorhead there? You a a way that Is Was can the a it? fee?

Jason Veenstra

I between Yes, it’s $X rate rate, called $X and We line. one. Success can we that back quantum if take think in X.X% It’s Yuri. difference fine. like -- did is in million is the which that, fee G&A -- we run many it’s about about you the our million out things, because X.X%, a I G&A think, improvement our

forward. So a anticipate it’s magnitude, fee we and moving of that’s not seeing order

Yuri Lynk

recovery it? that’s And think about Is costs that just we the project? bid to a it you what how of

Joe Lambert

Yes.

you’re all price typically, significant costs you because that shortlisted stipend these like it’s jobs, we repayment in of in price there’s shortlisting. when you end you’re unsuccessful you at fee. were bidding that -- if and are success that by You’re parties on the a repayment And if this successful, your

Yuri Lynk

Okay. How customers the terms your with are you’re inflationary there? seeing of discussions that some along pressures of passing in out

Joe Lambert

increasing. they’re going They we understand fleet certainly of a have They we sure to manpower parts just make got issues, and we available who cost. us want the but help We’ve customers do. our I operate like the to price have just have HET into them, the lot same have think well.

from X on. get a site well-known. would we’re the and every the we’re well. on in they the very think do us they and we understand make operations And to do contract people kind contracts need I as it’s supporting a And lot of sure procurement as increases key of there. So see Tier And the the we to cost can get work team because to it we focus

Yuri Lynk

rising, work with prices imagine How would I the for there? parts DGI? dynamic it’s helpful does

Joe Lambert

equipment I DGI good. the on little demand the there too. be high. that have think and from mean bad it’s of I But cores some a used gone is the that say to -- -- I’d crazy, will side, shipping costs side, if overall, and Absolutely. continue on

Operator

over And the pass the excuse question. concludes for me, call. Q&A President will new have to we this call Lambert, I section of CEO and Joe -- closing a the

Joe Lambert

worries. No

Operator

question a from Dearnley from Richard new have Partners. We Longport

Richard Dearnley

Jason, the capital. explain and the the you the you comparison the mentioned a flow, into Would comparison in quarter-to-quarter free little, and color working behind cash of the of importance -- that working JV go please? capital

Jason Veenstra

Yes.

is detailed inflation quarter, in payable. very pretty In we significant capital, less were paying working the our and accounts a issue statement notes. with accounts through and financial particularly the out escalation the receivable obviously, definitely collecting costs So little

sale So both trucks being million $XX $XX that for constructed And impacted was course, and where you’ll delta, we rebuild and accounts inventory see fully have receivable of the our million then, payables program to there. and haul scheduled in of is here related QX. being several

capital -- So the $XX million negative working was really those factors.

Operator

this at there time. no question further is And

You may continue.

Joe Lambert

everyone, thanks Thanks, again, joining for today. us Raine, and

Operator

Conference concludes this XXXX Construction Group QX North the And Call. Thank American you.

now may You disconnect.

North American Construction (NOA) 30 Apr 222022 Q1 Earnings call transcript