North American Construction Group Ltd. · TSX:NOA
North American Construction — Q4 2022 Earnings Presentation
31 slides from North American Construction's earnings presentation, Feb 16, 2023
Slide 1: 2022 Q4 Earnings Presentation
2022 Q4 EARNINGS PRESENTATION February 16, 2023
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 Q4 2022 expectations of North American Construction Group Lt
Slide 3: Everyone Gets Home Safe
Everyone Gets Home Safe 4.8 4.9 4.2 3.4 3.4 3.1 2.7 Standalone Q4 total recordable rate of 0.30 & trending in 2.3 EARNINGS Q4 2022 2.1 the right direction despite a difficult start to the year 1.6 Maintaining focus on health & safety through initiatives • Utilization of drone technology to improve h
Slide 4: 2022 Operational Successes
2022 Operational Successes ➢ Steady improvements in equipment utilization to post highest EARNINGS Q4 2022 ever fourth quarter rate of 75% ➢ Expanded critical maintenance headcount by over 10% despite pervasive shortages in availability of skilled tradespeople ➢ Managed severe inflationary pressures
Slide 5: 2022 Financial Highlights
2022 Financial Highlights Combined Adjusted EARNINGS Q4 2022 revenue 1 EBITDA1 $1.1B $245M 30% on 2021 18% on 2021 Adjusted Free cash EPS 1 flow1 $2.41 $70M 17% on 2021 4% on 2021 5 1 See Slide 2 or 2022 Annual Report for Non-GAAP Financial Measures
Slide 6: Five Year Perspective
Five Year Perspective EARNINGS Q4 2022 Adjusted EBITDA1 ($m) Adjusted EPS1 $250 +19% CAGR2 $245 $3.00 2.4x increase $2.50 $2.41 $200 $2.00 $150 $1.50 $102 $100 $1.00 $1.00 $50 $0.50 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 2022 financial performance validates path set in late 2018 1 See Sli
Slide 7: Equipment Utilization
Equipment Utilization1 EARNINGS Q4 2022 80% 75% 71% 64% 65% 60% 54% 45% 57% 41% 40% 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 Q4 2015 2016 2017 2018 2019 2020 2021 2022 Upward trend correlated with maintenance headcount 1 NACG fleet only, dat
Slide 8: Utilizing and Investing in Technology
Utilizing and Investing in Technology EARNINGS Q4 2022 Telematics hardware now installed on 375 pieces of heavy equipment • Specific to Q4, approximately 110,000 machine hours monitored Acheson control center operational and showing meaningful results • 395 alerts identified during the year resultin
Slide 9: 2022 Q4 Financial Overview
2022 Q4 FINANCIAL OVERVIEW
Slide 10: 2022 Q4 Performance
2022 Q4 Performance $320M $86M 75% $68M EARNINGS Q4 2022 Combined revenue1 Adjusted EBITDA1 Equipment utilization2 Free cash flow1 • Record quarterly combined revenue1 $100 Adjusted EBITDA1 bringing annual total to over $1 billion $90 $86 • Adjusted EBITDA1 of $86 million $80 exceeded previous recor
Slide 11: Combined Results
Combined Results (figures in millio ns o f Canadian do llars, except per share amo unts) 2022 Q4 2021 Q4 2022 2021 EARNINGS Q4 2022 Wholly-owned entities $233 $181 $770 $654 Share of amounts from investments $87 $54 $285 $158 TOTAL COMBINED REVENUE 1 $320 $235 $1,054 $812 Combined gross profit1 $57
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 Q4 2021 Q4 2022 2021 EARNINGS Q4 2022 Adjusted EBITDA1,3 $86 26.8% $56 24.0% $245 23.3% $207 25.5% 1,3 Adjusted EBIT $46 14.3% $25 10.7% $114 10.8% $93 11.4% 1 Adjusted EPS $1.10 $0.59 $2.41 $2.06 G
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 Q4 2021 Q4 2022 2021 Cash provided by operations prior to change in working capital 1 $64 $45 $183) $165 EARNINGS Q4 2022 Net changes in non-cash working capital 14 21 (13) 1 Cash provide
Slide 14: Balance Sheet
Balance Sheet (figures in millio ns o f Canadian do llars unless o therwise stated) December 31, 2022 December 31, 2021 December 31, 2020 EARNINGS Q4 2022 Cash $69 $17 $43 Total capital liquidity 1 212 233 178 Property, plant & equipment 646 641 632 Total assets 980 869 839 Senior debt 1,2 $266 1.5x
Slide 15: Return on Capital & Equity
Return on Capital & Equity Invested Capital & Adjusted EBIT 1 $114 EARNINGS Q4 2022 $1,000 $93 $71 $81 $100 $662 $500 $50 $- $- 2018 2019 2020 2021 2022 Invested capital (left axis) Adjusted EBIT Return on Invested Capital1 Return on Equity 1 13.0% 26.1% 22.8% 22.1% 22.6% 10.8% 9.7% 10.0% 16.8% 8.3%
Slide 16: 2023 Outlook
2023 OUTLOOK
Slide 17: Priorities for 2023
Priorities for 2023 EARNINGS Q4 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 18: Bid Pipeline
Bid Pipeline ESTIMATED PROJECT COMMENCEMENT TIMING EARNINGS Q4 2022 H1 2023 H2 2023 2024 2025+ 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 wor
Slide 19: Contractual Backlog
Contractual Backlog1 at $1.3 billion Over half of backlog1 contracted to established Indigenous partnerships EARNINGS Q4 2022 55% of backlog1 through customers in diversified 45% of backlog1 through major oil sands producers mining, resource & civil construction industries continues to provide line
Slide 20: 2023 Outlook targets
2022 Q4 performance modestly increased financial Enhanced 2023 Outlook targets for 2023 • Range based on continued & consistent increases in Key financial measures PREVIOUS CURRENT equipment utilization EARNINGS Q3 2022 Adjusted EBITDA1 $235 - $260 $240 - $260 • Leverages backlog1 and well- maintain
Slide 21: Disciplined Capital Allocation
Disciplined Capital Allocation Net Debt Leverage 1,2 3.6x EARNINGS Q4 2022 2.4x 2.2x Debt Repayment Acquisitions 1.8x 1.5x Continuing to evaluate Lowering leverage smaller bolt on acquisitions continues to be a prudent as well as larger use of capital 2018 2019 2020 2021 2022 transformative targets
Slide 22: Valuing Common Shares
Valuing Common Shares 10-year NCIB purchase track record Share Purchased & Cancelled (m) EARNINGS Q4 2022 2.7 2.6 +15 $7.90 2.2 million average price per share 1.8 1.8 shares purchased 1.3 1.2 1.1 Purchased & cancelled +40% of shares outstanding at 0.5 the start of 2013 - 2013 2014 2015 2016 2017 20
Slide 23: 2023 Sustainability Report
2023 Sustainability Report EARNINGS Q4 2022 • Committed to reducing scope 1 emissions intensity by 10% by 2025 and be net zero by 2050 • Integral part of core business process to provide safe and healthy working conditions for all employees and subcontractors. Strong management systems in place. • R
Slide 24: Supplemental Information
SUPPLEMENTAL INFORMATION 2022 Q4 EARNINGS PRESENTATION
Slide 25: Company Overview
Company Overview Premier provider of mining and heavy construction services • Established reputation with over 65 years in business EARNINGS Q4 2022 • Long-term contracts awarded based on safe cost-effective operations Mobile fleet of ~900 heavy equipment assets • Fully backed by support equipment &
Slide 26: 2022 Performance
2022 Performance ACTUAL STATED TARGETS RESULTS Oct 2021 Oct 2022 EARNINGS Q4 2022 Adjusted EBITDA1 $215 – $245 $220 – $235 $245m Sustaining capital1 $110 – $120 $105 – $110 $113m Adjusted EPS1 $2.15 – $2.55 $1.90 – $2.10 $2.41/share Free cash flow1 $95 – $115 $65 – $75 $70m Deleverage1 $5 – $15 $13m
Slide 27: Diversified Business
Diversified Business Adjusted EBIT 1 Breakdown EARNINGS Q4 2022 Objective to continue to 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 betwe
Slide 28: Revenue & Margins
Revenue & Margins We have the backlog1, bid pipeline & low-cost culture for both continued revenue growth & margin improvement EARNINGS Q4 2022 • Momentum regained from pre-pandemic operating performance and improved commodity market • Projected revenue growth range based on improving equipment util
Slide 29: Long Term Contracts
Long Term Contracts Owner Contract1,2 EARNINGS Q4 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 30: Heavy Equipment Fleet
Heavy Equipment Fleet • As at December 31, 2022, ~900 mobile heavy equipment assets EARNINGS Q4 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 • Ne
Slide 31: Maintenance Headcount
Maintenance Headcount Maintained step-change achieved in Q3 EARNINGS Q4 2022 450 • Stable headcount increasing fleet availability and utilization 400 • Apprenticeship program addressing persistent shortages 350 • Direct service providers & third- 300 party vendors provide required supplementary main
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