North American Construction Group Ltd. · TSX:NOA
North American Construction — Q3 2022 Earnings Presentation
27 slides from North American Construction's earnings presentation, Oct 27, 2022
Slide 1: 2022 Q3 Earnings Presentation
2022 Q3 EARNINGS PRESENTATION October 27, 2022
Slide 2: Forward-looking statements & Non-GAAP financial measures
Forward-looking statements & Non-GAAP financial measures This presentation contains forward-looking information which reflects the current plans and This presentation presents certain non-GAAP financial measures because management EARNINGS Q3 2022 expectations of North American Construction Group Lt
Slide 3: Everyone Gets Home Safe
Everyone Gets Home Safe Total Recordable Injury Rate 0.50 Maintaining focus on health & safety through initiatives: EARNINGS Q3 2022 • Winter Operating Hazards Training Awareness Program for winter operations; 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Q3 2022 • Introduction of inspection sco
Slide 4: Q3 Accomplishments
Q3 Accomplishments Highest Q3 equipment utilization in NACG history EARNINGS Q3 2022 • Sourcing of heavy equipment technicians driving gains Nuna completed largest scopes ever in a 3-month period • Strong demand for equipment in northern Canada & Ontario Resolved equipment & unit rates in oil sands
Slide 5: Maintenance Headcount
Maintenance Headcount 6x increase since 2017 • ~50 headcount added in Q3 2022 400 EARNINGS Q3 2022 primarily in heavy equipment technician and apprentice roles 350 • Apprenticeship program creating a pipeline to address persistent shortages 300 • Direct service providers provide 250 supplementary si
Slide 6: Equipment Utilization
Equipment Utilization 1 80% EARNINGS Q3 2022 62% 60% 59% 55% 52% 40% 43% 40% 31% 26% 20% 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2015 2016 2
Slide 7: ML Northern Services Ltd.
ML Northern Services Ltd. • Estimated $15 million purchase price includes ~20 mobile fuel, lube, & steaming trucks EARNINGS Q3 2022 • Final price to be determined in Q4; expected to be fully paid back within three years on lower operating costs • ML Northern is a low-cost safe operator with a strong
Slide 8: Managing Operating Margins
Managing Operating Margins Canadian oil sands region – Updated equipment & unit rates EARNINGS Q3 2022 • Collaborative approach resolved in September with template in place moving forward for timely outcomes • Go-forward rates restore margin potential to original project bid targets • Resolution con
Slide 9: 2022 Q3 Financial Overview
2022 Q3 FINANCIAL OVERVIEW
Slide 10: 2022 Q3 Performance
2022 Q3 Performance $270m $60m 62% 14.7% EARNINGS Q3 2022 Combined Adjusted EBITDA1 Equipment utilization Combined gross revenue1 profit margin1 $70 Adjusted EBITDA1 • Record quarterly combined revenue1 of $270 million brings trailing twelve metric $60 $60 over $950 million • Highest ever third quar
Slide 11: Combined Results
Combined Results (figures in millio ns o f Canadian do llars, except per share amo unts) 2022 Q3 2021 Q3 Q3 2022 YTD Q3 2021 YTD EARNINGS Q3 2022 Wholly-owned entities $192 $166 $536 $473 Share of amounts from investments $78 $43 $198 $104 TOTAL COMBINED REVENUE 1 $270 $209 $734 $577 Combined gross
Slide 12: Adjusted EBITDA and EPS
Adjusted EBITDA1 and EPS (figures in millio ns o f Canadian do llars, except per share amo unts) 2022 Q3 2021 Q3 Q3 2022 YTD Q3 2021 YTD EARNINGS Q3 2022 1,3 Adjusted EBITDA $60 21.7% $48 22.7% $159 21.5% $151 26.2% 1,3 Adjusted EBIT $31 11.1% $24 11.5% $68 9.2% $68 11.7% 1 Adjusted EPS $0.65 $0.50
Slide 13: Cash Provided by Operating Activities
Cash Provided by Operating Activities (figures in millio ns o f Canadian do llars unless o therwise stated) 2022 Q3 2021 Q3 Q3 2022 YTD Q3 2021 YTD EARNINGS Q3 2022 Cash provided by operations prior to change in working capital 1 $40) $32 $118) $120) Net changes in non-cash working capital (9) 1 (27
Slide 14: Balance Sheet
Balance Sheet (figures in millio ns o f Canadian do llars unless o therwise stated) September 30, 2022 December 31, 2021 December 31, 2020 EARNINGS Q3 2022 Cash $23 $17 $43 Total capital liquidity 1 162 233 178 Property, plant & equipment 645 641 632 Total assets 917 869 839 Senior debt 1,2 $272 1.7
Slide 15: Looking Ahead
LOOKING AHEAD
Slide 16: Priorities for 2023
Priorities for 2023 EARNINGS Q3 2022 1 2 Drive safety performance Leverage technology & & expectations focused operational initiatives to on front-line supervision effect improved equipment & green-hand training utilization & lower costs 3 4 • Win regional tender opportunity Attract, develop & retai
Slide 17: Bid Pipeline
Bid Pipeline ESTIMATED PROJECT COMMENCEMENT TIMING EARNINGS Q3 2022 Q4 2022 Q1 2023 Q2 2023+ Preferred opportunities & extensions Projects in the active tender phase Projects in the pre- tender phase Diversified resources & geography • Bid pipeline1 contains ~$4.5 billion of specific scopes of work
Slide 18: Contractual Backlog
Contractual Backlog1 at $1.5 billion Over half of backlog1 tied to established Indigenous partnerships EARNINGS Q3 2022 55% of backlog1 through customers in mining, 45% of backlog1 through major oil sands producers resource & civil construction industries continues to provide line of sight for core
Slide 19: Enhanced 2022 Outlook
Enhanced 2022 Outlook Outlook reflects updated equipment & unit rates • Inclusive of HET vacancies trending lower and higher Key financial measures PREVIOUS CURRENT equipment utilization EARNINGS Q3 2022 Adjusted EBITDA1 $200 - $230 $220 - $235 Sustaining capital1 based on Sustaining capital 1 $90 -
Slide 20: 2023 Outlook
2023 Outlook Adjusted EBITDA1 $235m - $260m • Targeted organic growth of +10% on existing contracts EARNINGS Q3 2022 • Backlog1 provides line of sight to >$1.0 billion of combined revenue1 • Range primarily based on increased equipment utilization • Fargo-Moorhead project & 2022 growth spending also
Slide 21: Supplemental Information
SUPPLEMENTAL INFORMATION 2022 Q3 EARNINGS PRESENTATION
Slide 22: Company Overview
Company Overview EARNINGS Q3 2022 Premier provider of mining and heavy construction services • Established reputation with over 65 years in business • Long-term contracts awarded based on safe cost-effective operations Mobile fleet of ~900 heavy equipment assets • Fully backed by support equipment &
Slide 23: Diversified Business
Diversified Business Adjusted EBIT 1 Breakdown EARNINGS Q3 2022 Objective to continue grow both business areas while maintaining 50-50 distribution • Project awards and acquisitions have established a clear path to maintain diversification 20% Mine management • Current backlog1 split evenly between
Slide 24: Long Term Contracts
Long Term Contracts Owner Contract1,2 EARNINGS Q3 2022 Base Mine – Millennium Suncor Energy MUA 2023 2040 & North Steepbank Services Inc. with term MUC 2023 2059 Fort Hills Mine Fort Hills Energy LP with term Mildred Lake & MSA 2023 2046 Syncrude Canada Aurora mines with term MSA 2027 2060 Kearl Min
Slide 25: Heavy Equipment Fleet
Heavy Equipment Fleet • As at September 30, 2022, ~900 mobile heavy equipment assets EARNINGS Q3 2022 provide operational flexibility • Managed on an individual asset basis and deployed with sole objective of maximum operating utilization • ~300 assets operated within the Nuna Group of Companies • N
Slide 26: Equipment Operating Hours
Equipment Operating Hours EARNINGS Q3 2022 500,000 Nuna fleet 400,000 NACG fleet 300,000 200,000 100,000 - Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2018 2019 2020 2021 2022 26
Slide 27: Revenue & Margins
Revenue & Margins We have the backlog1, bid pipeline & low-cost culture for both continued revenue growth & margin improvement • Momentum regained from pre-pandemic operating performance and improved commodity market • EARNINGS Q3 2022 Projected revenue growth range based on improving equipment util
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