North American Construction Group Ltd. (NOA) Earnings

Management highlights

- Strategic Growth Priorities * The company is at an inflection point, with strategic investments translating to measurable growth, stronger earnings visibility, and a more resilient operating profile. * Three core strategic pillars: 1) Scale into a national tier-one contractor platform in Australia; 2) Secure infrastructure awards across North America; 3) Expand mining services in Canada and the United States. * The consistent underlying model across all segments: establish a competitive position via equipment, personnel, and execution capabilities, deepen customer relationships, expand work scope, and allocate capital to projects that deliver attractive returns. - Australia Operations * Australia remains the company's primary growth engine, with a 31% compound annual revenue growth rate from H1 2024 to H1 2026; H1 2026 revenue is 14% above H2 2025. * The combined McKellar and IMC acquisition has created broader national presence, enabling pursuit of larger, more comprehensive project scopes. IMC's new eight-bay Machia workshop expands maintenance capacity to support equipment rebuilds and future larger projects. * The business has increased exposure to lower-capital intensity unit-rate work and diversified across gold, lithium, iron ore, nickel, and other critical minerals, supporting more consistent utilization and balanced growth/returns. * IMC integration is progressing well, with strong alignment on safety, culture, core values, and maintenance capabilities. As of June 30, Australian operations held $3.4 billion in contractual backlog and a $3.9 billion bid pipeline, supported by large-scale public infrastructure and major project investment in the region. - Northern Canada Infrastructure & Mining * NUNA, the company's Northern Canadian operation, holds 230 heavy equipment assets, with new capacity arriving in Q3 2026 to expand service at an established Nunavut mine site, expected to drive 20% site-level revenue growth. * The company has established footholds via a Yukon infrastructure award and three initial Ontario projects to enable future 'land and expand' growth. NUNA's unique remote operating expertise, established infrastructure, and indigenous partnerships create a durable competitive advantage for critical minerals, defense, and nation-building projects across Northern Canada, with $5 billion in regional opportunity pipeline. - Canadian Oil Sands Operations * Customer demand is shifting toward more equipment-intensive work as haul distances lengthen, creating attractive opportunities for the company. The focus is on improving earnings quality, with targeted incremental investments targeting IRRs above 40% and gross profit margins around 15%. - Overall Pipeline & Backlog * Total company-wide bid pipeline exceeds $12 billion, with $3.6 billion in active tendering, split evenly between Australia and North America. 54% of active pipeline is mining services, 46% is infrastructure, across 14 resource categories. Award timing is concentrated in H2 2026 and 2027, with additional longer-term opportunities.

Guidance

- Full year 2026 combined revenue guidance was raised to a range of $1.6 billion to $1.8 billion, with a new midpoint of $1.7 billion, which is $100 million above the prior guidance midpoint and 14% above full year 2025 revenue. - Full year 2026 adjusted EBITDA guidance is maintained at $380 million to $420 million, with a midpoint of $400 million. - Full year 2026 free cash flow guidance is maintained at $110 million to $130 million, with a midpoint of $120 million. - The raised revenue guidance is backed by stronger-than-expected H1 2026 performance, a record Q2 2026 revenue, and a record total contractual backlog of $3.8 billion as of June 30, 2026. - Expected H2 2026 operating drivers include optimal dry seasonal conditions in Queensland to support activity as IMC ramps up in Western Australia, improved oil sands utilization post-spring breakup, and a Q4 2026 revenue uplift from the Nunavut fleet expansion after a seasonally strong Q3.

Segment performance

Total combined revenue for Q2 2026 was $456 million, bringing first half 2026 total revenue to over $875 million. IMC contributed $91 million of revenue in the quarter. Excluding IMC, Australia achieved 15% organic year-over-year revenue growth, offset by a year-over-year revenue decline from the prior divestiture of ultra-class haul trucks in Canada. Australia posted a 13.6% gross profit margin. Canada delivered a combined adjusted gross margin of approximately 7% amid difficult early-quarter seasonal conditions. Total Q2 2026 EBITDA was $93 million, with adjusted earnings per share of 32 cents. Operating cash flow before working capital changes was $78 million, and free cash flow was $23 million after a $13 million positive working capital adjustment. Net debt increased $191 million to $1.1 billion following the IMC acquisition and growth capital equipment purchases. Direct adjusted G&A was $15 million, equal to 3.8% of total revenue, below the company's 5% target.

Risks & headwinds

- Forward-looking statements are inherently uncertain, and actual results may differ materially from forecasts due to unforeseen material factors. - Net debt leverage is currently 2.9x on a trailing 12-month basis, which does not yet reflect a full 12 months of IMC EBITDA contribution. - Large multi-life oil sands assets require periodic high-cost component replacements to maintain mechanical availability above 70%, requiring incremental capital investment in 2026. - Bid pipeline opportunities depend on award outcomes that are not guaranteed, and the company only pursues projects that meet its risk-adjusted return thresholds. - Seasonal operating conditions can impact near-term performance and margin results, especially in Canadian operations.

Analyst Q&A

• Q: Why was full-year revenue guidance raised but adjusted EBITDA guidance held steady, and will current higher diesel costs impact margins or push revenue to the upper end of guidance? /

  A: The revenue guidance increase reflects stronger-than-expected first-half revenue, while first-half EBITDA came in line with original expectations, so no change to the full-year EBITDA range was needed. For diesel costs, nearly all contracts have pass-through clauses for fuel, so there is no impact to either the revenue or EBITDA guidance ranges. The higher diesel costs will not pressure margins. (317 characters)

• Q: What details can you share on the July fuel services contract win, and do you see more similar opportunities ahead? How is IMC integration progressing, and what is the expected long-term margin trajectory for IMC? /

  A: This contract is the company's first third-party fuel services win, after previously only servicing its own equipment, and it is already included in the $3.8 billion Q2 backlog. It is low-capital intensity, and the company expects 1-3 additional similar contract awards as existing third-party contracts expire. IMC integration is going very well, with strong alignment on maintenance, culture, and operational approach. IMC margins are currently lower than the company's Queensland equipment rental business because it focuses on unit-rate work, but margins can improve as operational efficiency increases, since better execution directly boosts margins on unit-rate contracts. (705 characters)

• Q: Can you explain the oil sands fleet optimization strategy: what is planned for the non-targeted fleet, how much capital will be invested in 2026, and are you seeing a demand inflection in the oil sands? /

  A: The 260 targeted assets are large multi-life assets identified for active oil sands work to meet rising customer demand. The company is not rushing to sell remaining assets; many smaller underutilized assets can be reactivated for NUNA opportunities, and any unneeded assets will be sold if the right price is offered. Approximately $50 million in 2026 capital is needed to replace worn components on targeted assets to push mechanical availability above 70%, as these assets have multi-decade lives that require periodic high-cost component overhauls. The company is seeing a clear demand inflection in the oil sands, driven by higher crude prices, lengthening haul distances that require more fleet capacity, and increased customer activity. (618 characters)

• Q: Why did Australia's bid pipeline decline quarter-over-quarter, and what is the expected long-term free cash flow conversion rate after the lower-capital IMC acquisition? /

  A: The decline was driven by one large project the company was shortlisted for that went to the incumbent, but the customer has already approached the company about smaller fleet opportunities on that site, which require far less capital investment. Another IMC project was lost, but the company is shortlisted for another replacement project in Western Australia. The 30% free cash flow conversion target remains appropriate, with IMC not expected to meaningfully change the ratio. Management expects the 30% target to hold into 2027, and there is potential to increase the conversion rate next year via ongoing margin initiatives. (451 characters)