Q1 2024 North American Construction Group Ltd Earnings Call

Yeah.

Operator: Good morning, ladies and gentlemen. Welcome to the North American Construction Group conference call regarding the first quarter ended March 31, 2024. At this time, all participants are in a listen-only mode. Following management's prepared remarks, there will be an opportunity for analysts, shareholders, and bondholders to ask questions. The media may monitor this call in a listen-only mode.

Okay.

Speaker Change: Good morning, ladies and gentlemen, welcome to the North American Construction Group Conference call regarding the first quarter ended March 31 2024 at.

Speaker Change: At this time all participants are in a listen only mode. Following management's prepared remarks, there will be an opportunity for analysts shareholders and bondholders to ask questions. The medium even monitor this call in a listen only mode. They are feature called any member of management, but they are asked not to quote remarks.

Operator: They are free to quote any member of management, but they are asked not to quote remarks from any other participant without the participant's permission. The company wishes to confirm that today's comments contain forward-looking information and that actual results could differ materially from the conclusions, forecast, or projection contained in that 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.

Speaker Change: Any other participant without that participants permission the company wishes to confirm that today's comments contain forward looking information and that actual results could differ materially from conclusion forecast or projection contained in that forward looking information certain material factors or assumptions were applied in.

Speaker Change: Trolling, confucians 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 <unk>.

Operator: Additional information about those material factors is contained in the company's most recent management discussion and analysis, which is available on SEDAR and EDGAR, as well as on the company's website at nacg.ca. I will now turn the conference over to Joel Lambert, President and CEO.

Speaker Change: A C G thoughts he eight I will now turn the conference over to Joel Lambert President and CEO.

Joseph C. Lambert: Thanks, Enrico. Good morning, everyone, and thanks for joining our call today. I'm going to start with a few slides showing our Q1 operational performance before handing it over to Jason for the financial overview. And then I will conclude with our 2024 operational priorities, bid pipeline, backlog, outlook for 2024, and finish up with our capital allocation plans before taking your questions.

Joseph C. Lambert: Thank you Enrico.

Joseph C. Lambert: Morning, everyone and thanks for joining our call today I'm.

Joseph C. Lambert: I'm going to start with a few slides showing our Q1 operational performance before handing it over to Jason for the financial overview, and then I'll conclude with our 2024 operational priorities bid pipeline backlog outlook for 2024 and finish up with our capital allocation plans before taking your questions.

Joseph C. Lambert: Yeah.

On slide three.

Joseph C. Lambert: Our Q1 safety performance remains well below our industry-leading target frequency of 0.5, and we have reduced our life-saving rules violations by 50% from Q1 last year. These statistics now include our Australian incidents and workouts. We currently are focusing our safety efforts on frontline leadership training, improving our peer-to-peer recognition program, and increasing leadership visibility in the field. On slide four.

Joseph C. Lambert: Our Q1 safety performance remains well below our industry, leading targeted frequency of 0.5, and we have reduced our lifesaving rules violations by 50% from Q1 last year.

Joseph C. Lambert: Statistics now include our Australian incidents and work hours.

Joseph C. Lambert: We currently are focusing our safety efforts on frontline leadership training, improving our peer to peer recognition program and increasing leadership visibility in the field.

On slide four.

Joseph C. Lambert: We highlight some of the major achievements of Q1. Our recently acquired Australian business continues to deliver strong and consistent results, even after some heavy rain impacted the summer months, and the backlog down under increased significantly with the award of a $500 million five-year contract extension with our long-term metallurgical coal-producing client. With our integration team now resident in Australia and our Australia bid pipeline showing continued strong demand, we remain confident that the Australian market will play a dominant role in maximizing our fleet fleet utilization and return on assets.

Joseph C. Lambert: We highlight some of the major achievements of Q1.

Joseph C. Lambert: Our recently acquired Australian business continues to deliver strong and consistent results even after some heavy rain impacted summer months and the backlog down under increased significantly with the award of a $500 million five year contract extension with our long term metallurgical coal producing client.

Joseph C. Lambert: With our integration team now resident in our Australia bid pipeline showing continued strong demand we remain confident that the Australia market will play a dominant role in maximizing our fleet fleet utilization and return on assets.

Joseph C. Lambert: The first equipment transfers to Australia have reached their shores, and we're excited about the long-term opportunities we see in the Australian market. Our Fargo-Moorhead flood diversion project smoothly ramped up in Q1, in advance of its first big summer construction season, and we remain confident in our overall project plan.

Joseph C. Lambert: The first the equipment transfers to Australia have reached there sure and we're excited about the long term opportunities we see in the Australia market.

Joseph C. Lambert: Our Fargo Moorhead flood diversion project smoothly ramped up in Q1 in advance of its first big summer construction season, and we remain confident in our overall project plan.

Joseph C. Lambert: Our telematics system continues to provide maintenance savings, achieving a record quarterly saving of almost $2 million in Q1, and we're evaluating some Australian assets for an initial rollout of telematics in Q3. And last but not least, we were awarded a three-year contract in oil sands, which generated about $225 million in 2024. We show fleet utilization by region. Australian utilization remains strong, with Q1 ending on a March high note after a few high rainfall-impacted summer months.

Joseph C. Lambert: Our telematics system continues to provide maintenance savings achieving a record quarterly savings of almost $2 million in Q1, and we're evaluating some Australian assets for an initial rollout of telematics in Q3.

Joseph C. Lambert: And last but not least we were awarded a three year contract in oil sands, which generated about $225 million in 2020 for backlog.

Joseph C. Lambert: On slide five.

Joseph C. Lambert: We show fleet utilization by region.

Joseph C. Lambert: Training utilization remains strong with Q1 ending on a March I note. After a few high rainfall impacted summer months.

Joseph C. Lambert: In Canada, our utilization suffered from mobilization fleets between oil sand sites in February and lower volumes of winter reclamation work. However, we remain on trend and confident in our ability to hit our Canadian target range of over 75% by the end of this year, and we'll also be looking to similarly increase our Australian fleet to over 85% during this same period. I'm sure some may believe our Canadian utilization targets are a stretch after coming off that February low.

Joseph C. Lambert: Canada, our utilization suffered from mobilization fleets between oil sands sites in February and lower volumes of winter reclamation work.

Joseph C. Lambert: We remain on track and confident in our ability to hit our Canadian target range of over 75% by the end of this year and we'll also be looking to similarly increase our Australian fleet to over 85% during the same period.

Joseph C. Lambert: I'm sure some may believe our Canadian utilization targets, our stretch after coming off that February low. However, if you consider the units we expect the transfer and some sales of smaller assets combined with improving mechanical availability and no further anticipated fleet mobilizations are mass still suggests we are.

Joseph C. Lambert: However, if you consider the units we expect to transfer and some sales of smaller assets combined with improving mechanical availability and no further anticipated fleet mobilizations, our math still suggests we're capable of exceeding our target before year end. With that, I'll hand over to Jason for the Q1 financials.

Jason: Capable of exceeding our targeted before year end.

Joseph C. Lambert: With that I'll hand over to Jason for the Q1 financials.

Jason William Veenstra: Thanks, Joe. Good morning, everyone.

Jason: Thanks, Joe and good morning, everyone.

Jason William Veenstra: Getting right into it, starting on slide seven, the headlined EBITDA number of $93 million and a correlated 27% margin were driven by a successful second quarter from Australia since the change of control on October 1, 2023. Our margin, in particular, along with the combined gross profit margin of 18%, illustrates a strong operational quarter. All business units contributed to this margin with the exception of Nuna, which posted an EBITDA margin of less than 10% in the quarter when factoring out the one-time costs that were incurred as part of the restructuring during the quarter.

Jason: Getting right into it starting on slide seven the headline EBITDA number of $93 million.

Jason William Veenstra: And a correlated 27% margin were driven by a successful second quarter from Australia since the change of control October one 2023.

Jason William Veenstra: Our margin in particular, along with a combined gross profit margin of 18% illustrates a strong operational quarter.

Jason William Veenstra: All business units contributed to this margin with the exception of Neenah, which posted EBITDA margin of less than 10% in the quarter when factoring out the one time costs that were incurred as part of the restructuring during the quarter.

Jason William Veenstra: The EBITDA margin illustrates project execution risk in the joint venture and as a metric indicative of why a change was needed. Restructuring efforts were completed during the quarter, and the projects in northern B.C. and the Northwest Territories were finalized.

Jason William Veenstra: The EBITA margin illustrates project execution risk inventory.

Jason William Veenstra: In the joint venture and as a metric indicative of why a change was needed restructuring efforts were completed during the quarter and the projects in northern B C. In the northwest territories were finalized.

Jason William Veenstra: Restructuring expenses incurred and added back for adjusted earnings purposes relate to severance costs and one-time expenses required to complete legacy projects. Moving to slide eight and our combined revenue and gross profit, McKellar provided a step change in the quarter over quarter variance.

Jason William Veenstra: Restructuring expenses incurred and added back for adjusted earnings purposes.

Jason William Veenstra: Late to severance costs, and one time expenses required to complete legacy projects.

Jason William Veenstra: Moving to slide eight and our combined revenue and gross profit.

Jason William Veenstra: We will have for two more quarters.

Jason William Veenstra: <unk> provided a step change in the quarter over quarter variance on.

Jason William Veenstra: On a total basis, we are up $53 million quarter over quarter. McKellar and DGI, which we combined in Australia in our results, were up $128 million, almost identical to the Q4 variant, which could have been higher if the rainfall in January and February had been less severe. This rainfall impact can be seen in Australia's equipment utilization, which got back to 80% in March after being in the mid-70s for the first two months of the year. However, this positive variance was offset by lower equipment utilization in the oil sands region.

Jason William Veenstra: On a total basis, we were up $53 million quarter over quarter.

Jason William Veenstra: Mckellar and D G I, which we combine in Australia, and our results were up $128 million almost identical to the Q4 variance.

Jason William Veenstra: Which could have been higher if the rainfall in January and February had been less severe.

Jason William Veenstra: Rainfall impact can be seen in Australia, the equipment utilization.

Jason William Veenstra: Which got back to 80% in March after being in the mid Seventy's for the first two months of the year.

Jason William Veenstra: This positive variance was offset by the lower equipment utilization and the oil Sands region.

Jason William Veenstra: Our share of revenue generated in the quarter by joint ventures was a net $29 million lower than Q1 2023. The Fargo-Moorhead project had a steady operational quarter, was up $10 million, and achieved project metrics and milestones required of the project schedule. More than offsetting this positive, though, was the variance impact of the completion of the construction project at the gold mine in Northern Ontario in Q3 2023, which led to lower quarterly-over-quarter revenues within the Nuna Group of Companies.

Jason William Veenstra: Our share of revenue generated in the quarter by joint ventures was a net $29 million lower than Q1 2023.

Jason William Veenstra: The Fargo Moorhead project had a steady operational quarter was up $10 million.

Jason William Veenstra: And achieve project metrics and milestones required of the project schedule.

Jason William Veenstra: More than offsetting this positive though was the variance impact of the completion of the construction project at the gold mine in Northern Ontario in Q3, 2023, which led to lower quarter over quarter revenues within the Neuner group of companies.

Jason William Veenstra: Combined gross profit margin of 18%, despite another challenging quarter posted by Nuna, reflects the strength of a diversified business. Gross profit margins benefited both from the operations in Australia, which were higher than 20% in the quarter, and as usual course, and from MLNorthern, whose fleet lowers our internal costs as well as generates strong margins from services provided to external customers. Moving to slide nine, record Q1 adjusted EBITDA was consistent with and reflective of the revenue commentary.

Jason William Veenstra: Combined gross profit margin of 18%, despite another challenging quarter posted by noon.

Jason William Veenstra: Flex the strength of a diversified business.

Jason William Veenstra: Gross profit margins benefited both from the operations in Australia, which were higher than 20% in the quarter and as normal course.

Jason William Veenstra: And for many of them are there, whose fleet lowers our internal cost as well as generate strong margins from services provided to external customers.

Jason William Veenstra: Moving to slide nine record Q1, adjusted EBITDA was consistent with and reflective of.

Jason William Veenstra: The revenue commentary.

Jason William Veenstra: The 27% margin we achieved reflects an effective operating quarter and, with the positive 2023 trend from the Q4 and Q3 margins of 25% and 22%, respectively, is indicative of where we see our business trending and operating at, included in EBITDA. General Administrative Expenses were $11.1 million in the quarter, equivalent to 3.8% of revenue, which remained under the 4% threshold we've set for ourselves. Going from EBITDA to EBIT, we expensed depreciation equivalent to 14% of combined revenue, which reflected the depreciation rate of our entire business, including the equipment fleet at the Fargo-Moorhead project.

Jason William Veenstra: The 27% margin, we achieved reflects an effective operating quarter and with the positive 2023 trend from the Q4, and Q3 margins of 25% and 22% respectively.

Jason William Veenstra: Is indicative of where we see our business trending and operating at.

Jason William Veenstra: Included in EBITDA Gen.

Jason William Veenstra: General and administrative expenses were $11 1 million in the quarter equivalent to three 8% of revenue, which remain under the 4% threshold, we have set for ourselves.

Jason William Veenstra: Going from EBITDA to EBIT, we expense depreciation equivalent to 14% of combined revenue, which reflected the depreciation rate of our entire business, including the equipment fleet at the Fargo Moorhead project.

Jason William Veenstra: When looking at just the wholly owned entities and our heavy equipment in Canada and Australia, the depreciation percentage for the quarter was 14.8% of revenue and reflected the addition of the Australian fleet, as well as first quarter operations in the oil sands, which require higher idle time due to the cold weather. Adjusted earnings per share for the quarter of $0.78 was $0.18 down from Q1 2023 as the impacts of higher interest are factored in.

Jason William Veenstra: When looking at just the wholly owned entities in our heavy equipment in Canada, Australia, the depreciation percentage for the quarter was 14, 8% of revenue and reflected the addition of the Australian fleet as well as first quarter operations in the oil sands, which require higher idle time due to the cold weather.

Jason William Veenstra: Adjusted earnings per share for the quarter of 78 cents was 18 <unk> down from Q1 2023 as the impacts of higher interest are factored in.

Jason William Veenstra: The average interest rate for Q1 was over 9% in the quarter, the highest rate we've paid in a long time, and remains a compelling indicator for us as we look to pay down debt in the back half of 2024. Moving to slide 10.

Jason William Veenstra: The average interest rate for Q1 was over 9% in the quarter.

Jason William Veenstra: Highest rate we've paid in a long time and remains a compelling indicator for us as we look to pay down debt in the back half of 2024.

Jason William Veenstra: Moving to slide 10.

Jason William Veenstra: Net cash provided by operations prior to working capital was $74 million, and this cash was generated by the business reflecting EBITDA performance net of cash interest paid. Free cash flow usage of $36 million was driven by the $62 million draw on working capital accounts and $60 million spent on our front-loaded sustaining capital maintenance and replacement program. Moving to slide 11, our PPE of $1.2 billion is up $470 million from the Prima Keller September 30, 2023 balance on the $430 million worth of assets we purchased in 2023 and $20 million of growth assets purchased this quarter in Queensland and Western Australia.

Jason William Veenstra: Net cash provided by operations prior to working capital was $74 million and generated by the business, reflecting EBITDA performance net of cash interest paid free.

Jason William Veenstra: Free cash flow usage of $36 million.

Jason William Veenstra: It was driven by the $62 million draw on working capital accounts and $60 million spent on our front loaded sustaining capital maintenance and replacement programs.

Jason William Veenstra: Moving to slide 11, our PV of $1 2 billion.

Jason William Veenstra: Is up $470 million from the pre Mckellar September 32023 balance on the $430 million worth of assets, we purchased in 2023 and $20 million of growth assets purchased this quarter in Queensland and Western Australia.

Jason William Veenstra: Net debt levels ended the quarter at $781 million, an increase of $58 million in the quarter due to the $36 million of free cash flow usage, as well as the investment in growth assets. Net debt and senior secure debt leverage ended at 2.0 times and 1.6 times, respectively, and are considered reasonable levels six months after a transformative, fully debt-funded acquisition. With that, I'll pass the call back to Joe.

Jason William Veenstra: Net debt levels ended the quarter at $781 million, an increase of $58 million in the quarter due to the $36 million of free cash flow usage as well as the investment in growth assets.

Jason William Veenstra: Net debt and senior secured debt leverage ended at 2.0 times and one six times, respectively and are considered reasonable level six months after a transformative fully debt funded acquisition.

Jason William Veenstra: With that I'll pass the call back to Joe.

Joe: Thanks, Jason.

Joseph C. Lambert: Looking at slide 13. This slide summarizes our priorities for the year. This slide isn't changed, so I'll just hit the hyperlink.

Joe: Looking at slide 13.

Joe: This slide summarizes our priorities for the year. This slide is unchanged. So I'll just hit the high points. The Mckellar integration continues to progress smoothly and as I mentioned in my letter to shareholders. We're thrilled with the Australian market in general and see great opportunities for growth and continued efficiency improvements with our stronger systems and processes in place.

Joseph C. Lambert: The McKellar integration continues to progress smoothly. As I mentioned in my letter to shareholders, we're thrilled with the Australian market in general and see great opportunities for growth and continued efficiency improvements with our stronger systems and processes. Under the second point, we highlight our ongoing efforts to win strategic projects for our business. As we look to sustain and grow our infrastructure business, we will need to win infrastructure work, and with a strong fit potential U.S. infrastructure in the bid pipeline, we have initiated a partnership with a known international construction company and set this year's priority to qualify for one major infrastructure project.

Joseph C. Lambert: <unk>.

Joseph C. Lambert: Under the second point, we highlight our ongoing efforts to win strategic projects for our business.

Joseph C. Lambert: As we look to sustain and grow our infrastructure business, we will need to win the infrastructure work and with a strong fit potential U S infrastructure in the bid pipeline, we have initiated a partnership with a known international construction company and set this year's priority to qualify on one major infrastructure project.

Joseph C. Lambert: The second part of this priority is to win a meaningful project that uses our smaller mining assets that are currently underutilized in our oil sands business. We have several active tenders that would utilize these smaller drill rigs, and we expect to win one of these projects this year.

Joseph C. Lambert: The second part of this priority is to win a meaningful project that uses our smaller mining assets that are currently underutilized in our oil sands business. We have several active tenders that would utilize these smaller headsets and we expect to win one of these projects this year.

Joseph C. Lambert: Item 3 prioritizes continued expansion of our operational and maintenance expertise. We will prioritize new technologies such as our telematic system and continue to in-house and vertically integrate our maintenance services and supply, including a near-term focus on identifying and sharing best practices between our Canadian and Australian businesses. We believe this prioritization and focus will continue to lower costs and improve equipment utilization, resulting in increased competitiveness and the likelihood of winning the tenders mentioned in the previous item.

Joseph C. Lambert: Item three prioritizes continued expansion of our operational and maintenance expertise.

Joseph C. Lambert: We will prioritize new technologies, such as our telematics system and continued to enhance and vertically integrate our maintenance services and supply, including near term focus on identifying and sharing best practices between our Canadian and Australian businesses.

Joseph C. Lambert: We believe this prioritization and focus will continue to lower costs and improve equipment utilization, resulting in an increased competitiveness and likelihood of winning the tenders mentioned in the previous item too.

Joseph C. Lambert: The final area prioritizes returning NUNA-backed operational excellence and setting it up for growth and consistent performance. This work commenced earlier this year, and I am confident in the changes made that NUNA will be back on its feet in time for its big summer projects and growing a much stronger and stable foundation before the end of the year. Moving on to slide 14.

Joseph C. Lambert: The final area prioritizes, returning <unk> back to operational excellence and setting it up for growth and consistent performance. This work commenced earlier this year and I am confident the changes made at noon, who will be back on its feet in time for their big summer projects and growing up a much stronger and stable foundation before the end of the year.

Joseph C. Lambert: Moving on to slide 14.

Joseph C. Lambert: Our bid pipeline has grown significantly, with over $500 million in additional projects under $10 billion. While we anticipate strong demand in the oil sands to continue for many years, the diversified opportunities in Australia and the strong demand for heavy equipment also present avenues for further diversification and improved return on assets. There are a handful of these bids that are integral to our business. Two projects in the oil sands, one consisting of typical summer civil works that should be awarded imminently and a big stream diversion project, which we expect to submit in Q2 with award in late Q3, are important projects for improving near-term utilization of our smaller mining assets.

Joseph C. Lambert: Our bid pipeline has grown significantly with over $500 million in additional projects under tender.

Joseph C. Lambert: While we anticipate strong demand in the oil sands do continue for many years the diversified opportunities in Australia and the strong demand for heavy equipment also present avenues for further diversification improved an improved return on assets.

Joseph C. Lambert: There's a handful of these bids that are integral to our business.

Joseph C. Lambert: Two projects in oil sands consisting of.

Joseph C. Lambert: One consisting of typical summer civil works that should be awarded imminently and a big stream diversion project, which we expect to submit in Q2 with award in late Q3 are important projects for improving near term utilization on a smaller mining assets.

Joseph C. Lambert: Longer-term opportunities to fully utilize these smaller mining assets have been tenured in multi-year projects in a Quebec iron ore mine and a South Australian magnetite mine. Larger mining assets, which remain in high demand and utilization but are in general uncommitted beyond 2024, have been tendered into opportunities for five-year commitments in New South Wales and Queensland COLA. We are excited about these opportunities, and a couple of wins would provide meaningful insight and stability into our projections for 2024 and beyond.

Joseph C. Lambert: Longer term opportunity to fully utilize the smaller mining assets have been tendered in multi year projects and a Quebec iron ore mine in South Australia magnetite mines.

Joseph C. Lambert: Our larger mining assets, which remain in high demand and utilization, but are in general uncommitted beyond 2024.

Joseph C. Lambert: I've been tendered into opportunities for five year commitments in new South Wales, and Queensland coal operations.

Joseph C. Lambert: We are excited about these opportunities and a couple wins would provide meaningful insight instability into our projections for 2024 and beyond.

Joseph C. Lambert: On slide 15, our backlog stands at three points at $3 billion. This includes the recent award of a major metallurgical coal mine in Queensland and the regional oil sands contract balanced by our typical quarterly drawdown from executed. This backlog enhances our confidence and predictability, particularly in our Australian operation. Slide 16 reiterates our outlook for 2024, and it's unchanged from our last presentation in March. Lastly, slide 17 focuses on capital allocation. With continued high interest rates, we expect to use our projected free cash flow of $160 to $185 million for deleveraging while maintaining an open mind for more favorable risk return opportunities that may arise. We continually analyze all options to ensure that our capital allocation decisions are both opportunistic and aligned with our long-term strategic goals. With that, I'll open up for any questions you may have.

Joseph C. Lambert: On slide 15.

Joseph C. Lambert: Our backlog stands at three point at $3 billion. This includes the recent award of a major metallurgical coal mine in Queensland, and the regional oil sands contract balanced by our typical quarterly drawdown from executed work.

Joseph C. Lambert: This backlog enhances our confidence and predictability, particularly in our Australian operations.

Joseph C. Lambert: Slide 16 reiterate reiterate our outlook for 2024 and is unchanged from our last presentation in March.

Joseph C. Lambert: Lastly, slide 17 focuses on capital allocation.

Joseph C. Lambert: We continue to high interest rate, we expect to use our projected free cash flow of $160 million to $185 million for deleveraging, while maintaining an open mind for more favorable risk return opportunities that may arise, we continually analyze all options to ensure that our capital allocation decisions are both opportunistic.

Joseph C. Lambert: And aligned with our long term strategic goals.

Speaker Change: With that I'll open up for any questions you may have.

Joseph C. Lambert: Okay.

Operator: Thank you. To ask a question, please press star 1 on your touchstone phone. If you wish to withdraw your question, you can press star 2. Once you have completed your questions and would like to return to the queue, please press star 1. After a brief pause, we will begin the Q&A section. Your first question comes from the line of Tim Monachello from TV Capital Markets. Your line is now open.

Speaker Change: Thank you so asking a question. Please press star one on your Touchstone phone if you wish to withdraw your question you can press star two.

Operator: Once you have completed your questions I would like to return to the queue. Please press star one.

Tim Monachello: After a brief pause we will begin the Q&A section.

Operator: Your first question comes from the line of Glenn <unk> from Keybanc capital markets. Your line is now open.

Unknown Attendee: We're in tune; we're in tune.

Tim Monachello: Hey, good morning, everyone.

Tim Monachello: Our agenda for Tim.

Tim Monachello: I just wanted to touch on the commentary around transferring assets and potentially selling some of the underutilized ones. Can you say how many assets you would view as structurally underutilized in the Canadian market that might be up for transfer?

Tim Monachello: I just wanted to touch on the.

Tim Monachello: The commentary around.

Tim Monachello: Transferring assets and potentially selling some of the underutilized ones can you say, how many assets you would view as contractually underutilized in the Canadian market that might be up for transfer.

Tim Monachello: Of course, yeah.

Joseph C. Lambert: We'd be looking at about 100 of them, Tim, some of them that aren't committed to next year and some of them that aren't being used right now. So there are some smaller ones we expect to get engaged in this summer's work, like I mentioned. And we see opportunities next year in a few different areas.

Tim Monachello: We'd be looking at about a 110 and some of them that aren't committed into next year and some of them that are arent being used right now so.

Joseph C. Lambert: There is some smaller ones, we expect to get engaged in this summer work like I mentioned in and we see opportunities next year in a few different areas.

Joseph C. Lambert: So those kind of five major projects that are under tender now, we think would would get the utilization of that fleet if we wanted a couple of those into the high ranges we expect to be in. But it's about 100 units, I'd say more weighted towards the smaller end of the fleet. So there's, It's disproportionate to where the smaller units are a bigger chunk of that hundred.

Joseph C. Lambert: Those kind of five major projects that are under tender now we think wood.

Joseph C. Lambert: We'd get the utilization of that fleet, if we want a couple of those.

Joseph C. Lambert: Into the high ranges, we expect to be in.

Joseph C. Lambert: It's about a 100 units.

Joseph C. Lambert: I'd say more weighted towards the smaller end.

Joseph C. Lambert: Of the fleets of theirs.

Joseph C. Lambert: It's disproportionate to where the the smaller units are a bigger chunk of that 100.

Joseph C. Lambert: Okay.

Unknown Attendee: And with that, that wouldn't include the 20 that you've already transferred or are currently transferring. Yeah, that would be part of it. Okay, the 80s are additional units that you're looking at.

Joseph C. Lambert: And with that.

Joseph C. Lambert: That wouldnt include the 20 that you're already transferred or are currently transferring.

Speaker Change: Yeah that would be part of it.

Speaker Change: Okay. The 18th we Additionally, I'd say, yes.

Joseph C. Lambert: Yeah, we expect the ones we sent will actually get some utilization in late Q3. Yeah, I was encouraged. Yeah, great. I was encouraged to see that those were going to work with concrete. Are those going to existing sites or new sites in Australia?

Unknown Attendee: Yes, we expect the ones, we sent will actually get some utilization in late Q3.

Joseph C. Lambert: Yeah I was just encouraged yeah, great I was encouraged to see that those were going to work.

Joseph C. Lambert: What countries are those going.

Joseph C. Lambert: Are those going to.

Joseph C. Lambert: Existing types or insights in Australia.

Unknown Attendee: They're pretty much supporting existing sanctuaries. Okay, there were just opportunities. You know, they're not all going to one spot. There are three here, four there, where there were opportunities where we didn't have a fleet, either Western Plan I or McKellar.

Joseph C. Lambert: Are they pretty much supporting existing sites.

Unknown Attendee: Okay. There are just opportunities.

Unknown Attendee: They're not all going one spot there three year four there where there was opportunities where we didn't have fleet either western plant higher mackellar.

Unknown Attendee: Okay. And could you, I mean, put some bookends around like what the net asset value of those definitely would be like the stuff that you view as underutilized?

Speaker Change: Okay and could you.

Unknown Attendee: Put some bookends around like what their net asset value of those.

Unknown Attendee: Definitely it would be <unk>.

Unknown Attendee: Stuff that you view is underutilized.

Joseph C. Lambert: You know, I don't have that offhand, Tim. I can probably get that for you later. Thank you. Thank you. You know, we're looking at the number of users that, Then that asset value just depends on which units we pick, and it can vary dramatically between two different units of the same fleet based on what value is left in the component life of those assets. So 200-ton trucks can vary by, you know, can differ by twice as much on what the net asset value is based on what components are in them.

Speaker Change: I don't have that off hand, Tim I can probably get that for you later.

Joseph C. Lambert: Yeah.

Joseph C. Lambert: Yeah.

Joseph C. Lambert: Yeah.

Joseph C. Lambert: We're looking at that number.

Joseph C. Lambert: That.

Joseph C. Lambert: The net asset value just depends on which units we picked and it can vary dramatically between two different units of the same fleet based on what what values left in the component life of those assets. So to 200 tonne trucks can vary by.

Joseph C. Lambert: Can differ by twice as much on what the net asset value is based on what components are in it.

Unknown Attendee: Right. Okay, that makes sense. And then in Canada, obviously, some weed ketolization in Q1, but some optimism around growing utilization through the rest of the year. Curious if you can comment on how utilization for the Canadian fleet exited Q1 and is trending in Q2.

Tim Monachello: Right, Okay that makes sense.

Unknown Attendee: And then in Canada.

Unknown Attendee: Obviously, some weak utilization in Q1, but some.

Unknown Attendee: Ism around growing utilization through the rest of the year curious.

Unknown Attendee: He can comment on how utilization for the Canadian fleet exited Q1, and it's trending in Q2.

Joseph C. Lambert: Well, it was definitely at a low in February when we were moving the fleet around, and then it started picking up in March. And, yeah, we expect that to continue through Q2, and we expect to achieve that 75 percent by the end of the year.

Unknown Attendee: Well it was definitely at a low in February when we are.

Joseph C. Lambert: Moving fleet around.

Joseph C. Lambert: And then started picking up in March and yes, we expect that to continue through Q2, and and we expect to achieve that 75% by the end of the year.

Jason William Veenstra: Okay, and then a big working capital build in the quarter. Jason, I'm curious, can you talk a little bit about what the drivers of that were and how you see that playing out the rest of the year should that unwind?

Joseph C. Lambert: Okay.

Joseph C. Lambert: And then a big working capital build in the quarter.

Jason: I'm curious can you talk a little bit about what.

Jason: The drivers of that were and how you see that playing up the rest of the year should that unwind.

Jason William Veenstra: Yeah, we do expect it to unwind. It was primarily in Canada with a really busy March.

Jason: Yeah, we do expect it to unwind it was primarily in Canada with with a really busy March.

Jason: We booked some pretty sizable accounts receivable and in the month and collected that in April. So we expect that to work itself out.

Jason William Veenstra: We booked some pretty sizable accounts receivable in the month and collected that in April, so we expect that to work itself out. McKellar had the same thing, although not as big a receivable build in March, but they had a bigger March than January and February and built receivables as well. So yeah, expect it to unwind, and hope for 2023 working capital to be kind of neutral, and we kind of expect that for 2024 as well. It won't all unwind in Q2, but expect it to unwind over the nine months. Okay.

Jason William Veenstra: Mckellar had the same thing although not as big a working are in accounts receivable build in March but they had a bigger march than January and February and belt accounts receivable.

Jason William Veenstra: As well so yeah, I expect it to unwind and hope.

Jason William Veenstra: For 2023, working capital full year was kind of neutral and we kind of expect that for 2024 as well it won't all unwind in Q2.

Jason William Veenstra: But expected to unwind over the nine months.

Tim Monachello: Okay, very helpful. Thanks a lot. I'll turn it back on.

Jason William Veenstra: Yeah.

Jason William Veenstra: Okay.

Speaker Change: Very helpful. Thanks, a lot I'll turn it back.

Tim Monachello: Lisa.

Aaron MacNeil: Your next question comes from the line of Aaron MacNeil of TD Cowen. Your line is now open.

Tim Monachello: Your next question comes from the line of Aaron Macneil of TD, calling your line is now open.

Joseph C. Lambert: So I know you mentioned the bid opportunities for smaller mining assets, but it looks like some of the bigger bid opportunities in your pipeline don't occur until 2025. I know it's early, but as we think about Unknown Attendee, Aaron MacNeil, Tim Monachello, Maxim Sytchev, Yuri Lynk, Rahul Malhotra,

Speaker Change: Uh huh.

Joseph C. Lambert: So I know you mentioned the bid opportunities for smaller mining assets, but it looks like.

Joseph C. Lambert: Some of the bigger bid opportunities in your pipeline don't occur until 2025, I know, it's early but as we think about.

Joseph C. Lambert: 2025, what do you see as the big puts and takes year over year like does it will look a lot like 'twenty four with maybe the benefit of some fleet reallocation or are there other major factors that we should be thinking about.

Joseph C. Lambert: I think those opportunities in fleet allocations are not just about improving utilization, but it's just inherent that you get more opportunities to put more hours on equipment in Australia just because of the weather and the way the projects are set up. So, you know, we do think there's upside in not just getting parked assets moving but getting long-term commitments for stuff that was uncommitted in 2025 that may be highly utilized now. I haven't looked at what the net impact of that would be top line. I think we've always expected a kind of a 5% annual improvement rate.

Joseph C. Lambert: Well I think those opportunities.

Joseph C. Lambert: In fleet allocations are not just.

Joseph C. Lambert: Improved utilization, but.

Joseph C. Lambert: It's just inherent that you get more opportunities to put more hours on equipment in Australia, just because of the weather and the way the projects are set up so.

Joseph C. Lambert: We do think there is upside in <unk>.

Joseph C. Lambert: Not just getting park assets, moving but getting long term commitments.

Joseph C. Lambert: For stuff that was uncommitted in 2025, there may be highly utilized now.

Joseph C. Lambert: Sure.

Joseph C. Lambert: Look at what the <unk>.

Joseph C. Lambert: Net impact of that would be top line I think we've always expected a net.

Joseph C. Lambert: A 5% annual kind of improvement right I Havent bedded that with these actual numbers there are some.

Joseph C. Lambert: I have embedded that with these actual numbers. There are some, you know, there are some big projects. You know, the coal ones I was talking about in Australia, were in the magnetite, there are three $400 million jobs. And we would look at those. Unknown Attendee, Aaron MacNeil, Tim Monachello, Maxim Sytchev, Yuri Lynk, Rahul Malhotra

Joseph C. Lambert: There are some big projects.

Joseph C. Lambert: The the cold ones I was talking about in in Australia.

Speaker Change: And the magnitude.

Joseph C. Lambert: There are three or $400 million jobs, and we would look at those.

Joseph C. Lambert: Say 30, 30, or so of our of our 100 assets.

Joseph C. Lambert: Going to any one of those projects for opportunities, where we can put them.

Joseph C. Lambert: That use underutilized equipment to work I mean, it won't be the entire fleet and there'll probably be some.

Joseph C. Lambert: Ads in here and there for growth capital for matching shovels or things like that but we see it as a great opportunity to meet that growth curve.

Joseph C. Lambert: So the 30 you just mentioned, would that be incremental over and above the 20 that you've already sent over there? Yeah. Got it. And then for the balance, I guess, you know, 20 plus 30 minus 150 remainder, like, where do you think the most likely is, and Markets for those sort of remaining 50 and up if you had to guess.

Speaker Change: So the 30, you just mentioned would that be incremental over and above the 20 that you have already sent over there.

Joseph C. Lambert: Yes.

Joseph C. Lambert: Got it and then for the balance I guess 20, plus 30 minus 150 remainder like where do you think the most likely.

Joseph C. Lambert: End markets for those sort of.

Joseph C. Lambert: Remaining 50, and if you had to guess.

Joseph C. Lambert: I would say we will place half of them into summer works and oil sands this year and possibly into iron ore or Australian magnetite next year. And I think the, you know, the remaining say 20 odd units are likely ones that we would look at, selling as is or rebuilding and selling. I do think there are some opportunities. Unknown Attendee, Aaron MacNeil, Tim Monachello, Maxim Sytchev, Yuri Lynk, Rahul Malhotra, dollar amount, I'd say I think I said something like 20 million bucks or something like that.

Joseph C. Lambert: I would say, we we place.

Joseph C. Lambert: Half of them into summer works in oil sands, this year and possibly into.

Joseph C. Lambert: Iron ore or Australia magnetite.

Joseph C. Lambert: Next year and I think they.

Joseph C. Lambert: The remaining say 20 odd units are likely ones that we would look at selling.

Joseph C. Lambert: Selling as is or rebuilding and selling I do think there's some opportunities.

Joseph C. Lambert: For our maintenance team to value add to those and rebuild and we're evaluating those markets right now.

Speaker Change: It wouldn't be a huge.

Joseph C. Lambert: I'd say I think I said, something like 20 million lecture.

Joseph C. Lambert: Got it. That's Joe. That's very helpful. Thanks.

Speaker Change: Got it.

Speaker Change: That's very helpful. Thanks, I'll turn it over.

Speaker Change: No worries thanks Shneur.

Speaker Change: Your next question comes from the lineup Jacob bout CIBC. Your line is now open.

Rahul Malhotra: Your next question comes from the line of take-about of CIB. Your line is now open. Good morning, Joe and Jason. This is Rahul on behalf of Jacob. Go up tomorrow. So, looking at slide five, targets of fleet utilization of about 85% in Australia and 75% in Canada.

Rahul Malhotra: Good morning, Joe and Jason This is Tom.

Rahul Malhotra: I'm on for Jason.

Rahul Malhotra: Tomorrow.

Rahul Malhotra: Morning.

Rahul Malhotra: Looking at slide five target.

Rahul Malhotra: <unk> up about 85% in Australia, and 75% in Canada.

Unknown Attendee: Unknown Attendee, Aaron MacNeil, Tim Monachello, Maxim Sytchev, Yuri Lynk, Rahul Malhotra, Sean Jack

Rahul Malhotra: Hum.

Joseph C. Lambert: So you touched on this in the prepared remarks, but what would you say are the biggest factors that would help you list those targets?

Unknown Attendee: Okay.

Joseph C. Lambert: About this in the prepared remarks, but what would you say are the biggest factors that would help you guys always target.

Unknown Attendee: Bye!

Joseph C. Lambert:

Speaker Change: Got it.

Joseph C. Lambert: I think the biggest factor is within our own control, and that's maintaining our high level of maintenance support for the fleet. So keeping that fleet operational when the demand's there. And then, secondary, it's getting these underutilized fleets put to work and winning those couple of bids I said.

Unknown Attendee: I think the biggest factor is within our own control and it's maintaining our high level of maintenance support for the fleet. So keeping that fleet operational when the demand is there and then secondary.

Joseph C. Lambert: Getting these underutilized fleets put to work in winning those couple of beds I said.

Joseph C. Lambert: But you know you got it's maintaining the fleet and even if demand is there if you can't have mechanical availability needs to keep them running.

Joseph C. Lambert: You won't get the utilization so.

Joseph C. Lambert: The biggest part of this is always within our control and it's why we continue.

Joseph C. Lambert: Bush, our maintenance team to continue improving and to continue their strong performance and then the rest of it is about getting these assets placed where we think they've got long term opportunities to continue to improve on utilization.

Joseph C. Lambert: Right, right. That's helpful. And, then maybe just a question on Nuna. So, you mentioned that restructuring was effectively done in Q1, and you've brought in new leadership. Would appreciate it if you could talk a bit more about the steps that have been taken there at Nuna. And, and do you still see margins at Nuna getting back to normalized levels by the summer?

Speaker Change: Great that's helpful.

Joseph C. Lambert: And maybe just a question on <unk>. So you mentioned that restructuring was effectively done in Q1.

Joseph C. Lambert: And you've brought in new leadership.

Joseph C. Lambert: Would appreciate if you could talk a bit more about the steps.

Joseph C. Lambert: That had been taken there Adam.

Joseph C. Lambert: And do you still see margins at noon that getting back to normalized levels by the summer.

Joseph C. Lambert: Starting from the end, yes. And the steps we've taken are really bringing in a lot more of the stronger project controls and processes, especially around contract administration and change management. And just tune up those processes and get them up to North American standards. And I believe we've been able to get guys in there who are extremely strong performers in these areas. And I'm very confident in that. And then I think there's some upside to continuing to look at how we can build synergies and event strength between our two offices because we're both right here in Edmonton. All right.

Joseph C. Lambert: Starting from the end yes.

Joseph C. Lambert: Definitely taken it really to be bringing in a lot more of the stronger project controls and processes, especially around contract administration and change management and.

Joseph C. Lambert: Just tune up those processes and get them up to North American standards and.

Joseph C. Lambert: I believe we've been able to we've got guys didn't earn an extremely strong performance in these areas and I'm very confident in that and then I think there's some upside in continuing to look at how we can.

Joseph C. Lambert: Build synergies in the bench strength between our two offices because we are both right here in Edmonton.

Aaron MacNeil: I appreciate it. Thank you very much.

Joseph C. Lambert: Alright, alright.

Speaker Change: I appreciate it thank you very much.

Speaker Change: Thank you.

Aaron MacNeil: Yeah.

Maxim Sytchev: Your next question comes from the line of Maxim Sytchev of National Bank Financial. Your line is now open.

Speaker Change: Your next question comes from the line with Maxim set that muscle back financial your line is now open.

Maxim Sytchev: Hi, good morning, gentlemen.

Maxim Sytchev: Hey, Matt.

Joseph C. Lambert: Joe, I was wondering if you would mind maybe expanding a little bit on MacKellar, obviously, you know, very strong contribution from those assets in the first two quarters, but, you know, curious to see around sort of the integration, how that's been going, you know, ERP thoughts, and more importantly, how that will impact potential profitability, sort of asset utilization on a going forward basis, and maybe anything that you can mention in terms of the So yeah, let's sort of if you don't mind talking about this.

Maxim Sytchev: Joe I was wondering if you don't mind, maybe expanding a little bit on my color, obviously very strong contribution from those assets.

Joseph C. Lambert: First two quarters, but.

Joseph C. Lambert: Curious to see around sort of the integration how thats been going.

Joseph C. Lambert: ERP thoughts and more importantly, how that.

Joseph C. Lambert: In part.

Joseph C. Lambert: Potential profitability, some asset utilization going forward basis.

Joseph C. Lambert: And maybe anything that you can mention in terms of the infrastructure opportunities.

Speaker Change: Yeah, so yeah.

Joseph C. Lambert: No.

Joseph C. Lambert: You can see you get a mind talking about us.

Joseph C. Lambert: Yeah, I guess I'll start with the infrastructure. And we're still in the early days there. I don't have a lot of projects by name.

Joseph C. Lambert: Yeah.

Speaker Change: I'll start with the infrastructure and we were still early days there I don't have a lot of projects by name.

Joseph C. Lambert: You know, we're, we're really just in the research and setting up teams, I guess, you know. And so it's pretty early days on that, and I expect more towards, then to Q2, Q3. We'd have better information on that. You know, the ERP system rollout's gone smoothly. We're expecting a Q3 rollout of that. I do think there's...

Joseph C. Lambert: Where we're really just in that.

Joseph C. Lambert: Research and setting up teams I guess.

Joseph C. Lambert: And so it's pretty early days on that and I expect more towards.

Joseph C. Lambert: The end of Q2 Q3, we'd have better information on that.

Joseph C. Lambert: The ERP system rollout has gone smoothly we're expecting.

Joseph C. Lambert: Q3 rollout of that I do think there is.

Joseph C. Lambert: I think there are huge opportunities for us to gain on efficiencies. It's very hard to put a number to that, but I know that, you know, when you get stronger, inventory control systems and stronger work order systems in your maintenance. There's Unknown Attendee, Aaron MacNeil, Tim Monachello, Maxim Sytchev, Yuri Lynk, and Rahul Malhotra. I doubt we'll be able to measure them because you're measuring against something that you don't know exists right now.

Joseph C. Lambert: I think there's huge opportunities for us to gain on efficiencies, it's very hard to put a number to that but I know that you know when you get stronger.

Joseph C. Lambert: Inventory control systems and stronger work order systems in your maintenance. There is there is an inherent improvement in your efficiency.

Joseph C. Lambert: Because you just know a lot more about your equipment you know a lot more about your your parts and I think we're going to see gains there I just.

Joseph C. Lambert: I doubt, we'll be able to measure them, because you're measuring against something that you don't know exists right now.

Joseph C. Lambert: But we've done this before. We've done it here. We've done it at NUNA.

Joseph C. Lambert: But we've done this before we've done here we've done it at Nona and we always identify things. After the fact that we that were improvements that we didn't even over there.

Joseph C. Lambert: And we always identify things after the fact that there were improvements that we didn't even know were there. And, you know, there are continued opportunities for growth are extremely strong across really all commodity markets, I'd say, except for maybe nickel and possibly lithium. That's really been the only downside in Australian markets. Unknown Attendee, Aaron MacNeil, Tim Monachello, Maxim Sytchev, Yuri Lynk, Rahul Malhotra, an extremely strong market and, you know, blue chip clients that are willing to look at five-year terms, which is great when we're dealing with, you know, assets of these sizes. Anything I didn't cover up there, Max?

Speaker Change: And there are continued opportunities and four.

Joseph C. Lambert: Growth.

Speaker Change: Streaming is strong across really all commodity markets I'd say, except for maybe nickel.

Joseph C. Lambert: And possibly lithium that's really been the only downside and Australia markets.

Speaker Change: The iron ore the gold all the call from PCI metallurgical thermal.

Speaker Change: Extremely strong market and.

Speaker Change: Blue chip clients that are willing to look at five year terms, which is great. When we're when we're dealing with.

Speaker Change: Assets of these sites.

Speaker Change: And I didn't cover out there match.

Unknown Attendee: Unknown Attendee No, and actually, just maybe building a little bit on the opportunity on the commodity side of things, because you have extended one of your major contracts in Australia. I'm just wondering if there's any other ones that are on a sort of rolling forward basis that need to be renewed.

Speaker Change: No and that's just building a little bit on sort of the.

Unknown Attendee: Opportunity.

Unknown Attendee: On the commodity side of things because you have extended one of your major contracts in Australia I'm just wondering if there's.

Unknown Attendee: Any other ones that are on them.

Speaker Change: So kind of rolling forward basis, I think it needs to be used to doing it.

Unknown Attendee: Yeah.

Unknown Attendee: I don't think there's anything coming up within this year. I don't know if that will slide in the back.

Speaker Change: I don't think theres anything coming up and.

Unknown Attendee: Within this year.

Unknown Attendee: I don't know if thats slide in the back.

Joseph C. Lambert: I don't have a list memorized, but I don't think there's any near-term items that need renewal. I think there's, You know, next next year and after that there's some, and you know. Most of these minds McKellar has been on for decades. So, you know, I think the risk of renewals is very low, especially in the, you know, the. Unknown Attendee, Aaron MacNeil, Tim Monachello, Maxim Sytchev, Yuri Lynk, Rahul Malhotra, and I think, with improved systems and performance down there, that's just going to get better.

Unknown Attendee: I don't have a memory.

Speaker Change: I don't have a memorized, but I don't think there's any near term items that need.

Unknown Attendee: Renewal I think there is.

Unknown Attendee: Next next year and after that Theres some.

Unknown Attendee: Most of these mines in Macau has been on for decades.

Unknown Attendee: So I think the risk of renewals.

Unknown Attendee: It is very low, especially in the.

Unknown Attendee: The major ones are on where they are the only supplier of equipment on.

Unknown Attendee: And the two major coal mines, the one thermal and met so.

Unknown Attendee: And everything.

Unknown Attendee: Everything I've heard and I've seen as we've had extremely positive client relationships.

Unknown Attendee: And I think.

Unknown Attendee: With improved systems and performance down there, that's just going to get better.

Maxim Sytchev: Right, absolutely. Okay, thank you. And then maybe just one follow-up question for Jason, if I may. So again, a lot of things on the Keller side of things are being tightened up right now. How should we think maybe around, I don't know, sort of data-free cash flow conversion from those assets, kind of like before and after, if you don't mind maybe talking directionally, how should we be thinking about that?

Speaker Change: Right absolutely okay. Thank you.

Maxim Sytchev: Just one follow up for Jason if I may so it seems like there's a lot of things on the color side of things are being tightened up right now how should we think maybe.

Speaker Change: Round I don't think so.

Jason: EBITDA to free cash flow conversion from those assets kind of like before and after.

Jason: You don't mind, maybe talking.

Jason: Directionally, how should we be thinking about this.

Jason William Veenstra: Yeah, we've been talking in kind of the on the margin side with the with the new ERP and tightening things up in the kind of Unknown Attendee, Aaron MacNeil, Tim Monachello, Maxim Sytchev, Yuri Lynk, Rahul Malhotra, [inaudible] Unknown Attendee, Aaron MacNeil, Tim Monachello, Maxim Sytchev, Yuri Lynk, Rahul Malhotra, They're running at a pretty optimal level where we got to get them is their utilization up to, you know, and staying in the 80s and cresting 85. Okay, that's

Jason: Yeah, we.

Jason: Been talking and kind of on the margin side with the with the new ERP and tightening things up in the kind of.

Jason William Veenstra: One to 2% to 3% range Max we're not looking for a step change in their margin profile, there, they're well over 30% as in EBITDA margin.

Jason William Veenstra: And.

Jason William Veenstra: Very strong in their kind of cost culture and operational excellence. So we don't expect a step change there as far as margin.

Jason William Veenstra: And yeah, you'll see their sustaining capital in the quarter.

Jason William Veenstra: It came in kind of in the $15 million range and so yeah. There are free cash flow conversion is probably 10% to 15% higher than ours on a full year basis, we have a frontloaded capital program as opposed to them but.

Jason William Veenstra: The run rate Dave established here in the first six months, we see as being indicative, we're not expecting step changes with the ERP or even with the growth assets there.

Jason William Veenstra: They're running at a pretty optimal level, where we got to get them as their utilization up to.

Jason William Veenstra: Staying in the eighties and cresting 85.

Frederic Bastien: Okay, that makes sense. Okay, that's great. Thank you so much. Your next question comes from the line of Frederic Bastien of Raymond James. Your line is now open.

Speaker Change: Yeah makes sense, Okay. That's great. Thank you so much.

Frederic Bastien: Thank you Max.

Frederic Bastien: Yeah.

Frederic Bastien: Your next question comes from the line of credit Bastion of Raymond James Your line is now open.

Joseph C. Lambert: Good morning.

Frederic Bastien: Good morning.

Frederic Bastien: Good morning Frederic.

Frederic Bastien: Hi, guys I know a priority of yours is to Delever and bring down your debt to EBITDA ratio to within our one five times by year end, but do share buybacks reenter the picture with your stock price trading below 30 Bucks right now.

Frederic Bastien: It's certainly always a conversation point, Frederick, it's, you know, we're, it's how you measure the return. It's a risk-return discussion with the board all the time. You know, I would say that the return on the debt is high, with us hitting our highest rates. And obviously, the risk when you pay down debt is nil.

Joseph C. Lambert: Certainly.

Frederic Bastien: Always a conversation probably Frederic it's.

Frederic Bastien: How do you measure the return on a risk return discussion with the board all the time.

Frederic Bastien: I would say that the.

Frederic Bastien: The return on the debt is is high.

Frederic Bastien: Hi.

Frederic Bastien: Hitting our highest rates and obviously the risk when you pay down debt is nil.

Joseph C. Lambert: So we're comparing that against risk versus return on where you think your share price should be fairly valued. And then even in looking at our growth, we'll still look at bolt-ons and smaller stuff this year. If there was a bigger project, the odds, or an M&A opportunity, we'll still have the discussion. But it likely would not have an effect on this year because they're usually, like McKellar was 2 and 1

Frederic Bastien: So we're comparing that against risk versus return on where do you think you're a.

Joseph C. Lambert: Your share price should be fairly valued and.

Joseph C. Lambert: And then even even in looking at our growth.

Joseph C. Lambert: Let's go look at.

Joseph C. Lambert: Bolt ons and smaller stuff. This year, if there was a bigger project.

Joseph C. Lambert: M&A opportunity we will.

Joseph C. Lambert: Still have the discussion, but it likely would not have an effect on this year because they are usually like mckellar was two and a half years.

Joseph C. Lambert: But we'll still look at any opportunities for vertical integration, even growth capital, in winning some of these bids where we might have to add some fleet and balance those risks versus returns with our base case of deleveraging and our share price. And yes, there is a share price. I like to get these things to a solid metric, and it'll be something we'll work with the board at our board meeting next month to say at what price do you switch. Unknown Attendee, Aaron MacNeil, Tim Monachello, Maxim Sytchev, Yuri Lynk, Rahul Malhotra, And we expect to set those with firm numbers and have a clear understanding of that.

Joseph C. Lambert: But we will still look at any opportunities for vertical integration, even growth capital and winning some of these bids where we might have to add some fleet.

Speaker Change: And <unk>.

Joseph C. Lambert: And balancing those those risk versus returns with our our base case of deleveraging and in our share price and yeah. There is a share price I'd like to get these things to a solid metric and it'll be something we'll work with the board in our.

Joseph C. Lambert: And our board meeting next month.

Speaker Change: Jay at what price do you switch being share price or what.

Joseph C. Lambert: Return on a growth opportunity.

Joseph C. Lambert: Would we switch those deleverage dollars into growth capital or share buybacks and we expect to set those with firm numbers in and have a clear understanding of that.

Speaker Change: Okay. Thanks, Joe I appreciate that color, that's all I have.

Joseph C. Lambert: Thanks.

Joseph C. Lambert: Yeah.

Adam Robert Thalhimer: Your next question comes from the line of Adam Thalhimer of Thompson Davis. Your line is now open.

Joseph C. Lambert: Your next question comes from the line of Adam Thalheimer of Thompson Davis. Your line is now open.

Joseph C. Lambert: Hey, good morning guys. Congratulations on the record Q1. Good morning to you. Is it too early to give high-level thoughts about oil sands demand in the next peak season? I'm thinking about this Q4 and next year's Q1.

Adam Robert Thalhimer: Hey, good morning, guys. Congrats on the record Q1.

Joseph C. Lambert: Alright.

Joseph C. Lambert: Is it too early to give high level thoughts for the oil sands demand in the next peak season I'm thinking about this Q4 and then next year's Q1.

Joseph C. Lambert: Yeah.

Joseph C. Lambert: Yeah, I mean, we generally don't see our winter reclamation scopes until September or so, October. And so it's hard for us to gauge the winter programs, and and they've varied our winter work, you know, if you go back over the last four or five years, our winter work has been in our small truck like reclamation work has been as high as, you know, $80 million in a winter with small truck work to as low as 20.

Joseph C. Lambert: Yeah, I mean, we generally don't see our winter reclamation sculpts until.

Joseph C. Lambert: September or so October and so it's hard for us to gauge the winter programs.

Joseph C. Lambert: And they've they varied our winter work if you go back over the last.

Joseph C. Lambert: Four or five years, our winter work has been in our small truck like reclamation work has been it is $80 million.

Joseph C. Lambert: On a winter with small truck works to as low as 20.

Joseph C. Lambert: And we've seen that kind of volatility in the winter scope works. As far as the bulk work and the base overburden are concerned, we see that being steady or growing. This year's reductions were a bit of a surprise, in scope, but generally, we think that's more of a deferral than an elimination, and I expect volumes and demand for big earthworks and oil sands to increase next year. But I don't have that scope. And again, we've got a three-year contract, but it's being awarded on one-year terms, and I would expect to see next year's volumes, I'm guessing sometime between July and September of this year for us to tender on for next year.

Joseph C. Lambert: We've seen that kind of volatility in the winter winter scope works.

Joseph C. Lambert: As far as the.

Joseph C. Lambert: The bulk of work in the base overburden.

Joseph C. Lambert: We see that being steady or growing this year's reductions.

Joseph C. Lambert: We're a bit of a surprise.

Joseph C. Lambert: And in scope, but generally.

Joseph C. Lambert: We think thats more of a deferral then then the elimination.

Joseph C. Lambert: <unk>.

Joseph C. Lambert: I expect volumes and demand in big earthworks in oil sands to increase next year.

Joseph C. Lambert: But I don't I don't have that scope and again.

Joseph C. Lambert: We've got a three year contract, but its being awarded in one year terms and I would expect to see next year's volumes I'm guessing sometime between <unk>.

Joseph C. Lambert: July and September of this year for us to tender on for next year.

Adam Robert Thalhimer: Okay, that's perfect. I know that's a hard question to answer, but there were so many moving parts last year. So, and then in Australia.

Speaker Change: Okay. That's perfect I know that's a that's a hard question to answer.

Adam Robert Thalhimer: But there are so many moving parts last year, so and then.

Adam Robert Thalhimer: In Australia.

Joseph C. Lambert: So you've called out weather for Matt Keller for a couple quarters, even though the results have been. I'm just curious, as I think about the year-over-year comp for Matt Keller, how much was weather and impact in Q4, Q1?

Adam Robert Thalhimer: So you've called out weather for Matt Keller for a couple of quarters, even though the results have been.

Joseph C. Lambert: Really strong I'm, just curious as I think about the year over year comp for Mac Cal or how much was weather an impact in Q4 Q1.

Joseph C. Lambert: Unknown Attendee, Aaron MacNeil, Tim Monachello, Maxim Sytchev, Yuri Lynk, Rahul Malhotra, They had a pretty wet year. And when you get a lot of rain there, roads actually start getting shut down, and you can't get supplies into mine sites. It's generally not the mine site's ability to operate as far as operators getting trucks. It's getting supplies and people to the site because massive rains have cut off road access and that can last for a week at a time kind of thing.

Joseph C. Lambert: Compared to the previous year, Oh, no sorry, I'm thinking we had significant significant cyclone activity in Queensland.

Joseph C. Lambert: In.

Joseph C. Lambert: In both Q4, and Q1, especially January and February so.

Joseph C. Lambert: They incurred a pretty wet year and when you get a lot of rain there roads actually start getting shut down and you can't get supplies into mine site. It's generally not the mine site's ability to operate as far as operators getting truckage, it's getting supplies and people to the site because.

Joseph C. Lambert: Massive range of cutoff road access and that can last for a week at a time kind of thing.

Adam Robert Thalhimer: Yeah, I guess I'm just thinking because of the weather, Matt Keller, even though the results were good, they actually had easy comps because of the weather, Q4, Q1. Is that fair?

Speaker Change: Yeah, and I guess I'm, just thinking because of the weather, Matt Keller, even though the results were good they actually have easy comps.

Adam Robert Thalhimer:

Adam Robert Thalhimer: Because of the weather Q4, Q1 is that fair.

Joseph C. Lambert: We would typically expect less weather-related disruptions than what we had this year. Usually, it would be more December-January centric, and we actually had November-February kind of impacts as well.

Adam Robert Thalhimer: We would typically expect less weather related disruptions than what we had this year.

Joseph C. Lambert: Usually it would be more December January centric and we actually had November February kind of impacts as well.

Adam Robert Thalhimer: Okay, and then the high end of the revenue guy. What would have to happen for you to trend more towards the high end?

Joseph C. Lambert: Okay.

Joseph C. Lambert: And then the high end of the revenue guide.

Adam Robert Thalhimer: Well what would have to happen for you to trend more towards the high end.

Joseph C. Lambert: I'd say getting a lot of summer work in the oil sands in the next few months and getting a big winter program. It starts early and picks up, something like that. Iron Ore Mining, Quebec.

Adam Robert Thalhimer: Okay.

Adam Robert Thalhimer:

Joseph C. Lambert: Getting a lot of summer work in.

Joseph C. Lambert: In the oil sands.

Joseph C. Lambert: In the next few months.

Joseph C. Lambert: And.

Joseph C. Lambert: And getting a big winter program.

Joseph C. Lambert: It starts early.

Joseph C. Lambert: And.

Joseph C. Lambert: And picking up.

Joseph C. Lambert: Something like that.

Joseph C. Lambert: Iron ore mining, Quebec work.

Joseph C. Lambert: Yeah.

Adam Robert Thalhimer: Okay, well, good luck with that. We'll talk to you in a few months. There are a lot of moving parts right now, that's for sure.

Speaker Change: Okay, well good luck with that we'll talk to you in a few months.

Speaker Change: [laughter] Theres a lot of other sites right now and that's for sure but okay.

Speaker Change: Nowhere, it's perfect. Thanks, guys.

Adam Robert Thalhimer: Thanks.

Prem Kumar: Your next question comes from the line of Prem Kumar, an individual investor. Your line is now open.

Adam Robert Thalhimer: Your next question comes from the line of Graham Kumar and individual Investor.

Prem Kumar: He is now open.

Joseph C. Lambert: Good morning, Joe. Good morning, Jason. Good morning, Brent.

Prem Kumar: Good morning, John Good morning, Jason Good.

Prem Kumar: Good morning, Brent.

Prem Kumar: I have a couple of questions on capital allocation. One of the previous gentlemen asked about buying back shares. My questions are all on the same line, especially considering where the shares are trading and how reasonable the price is. Unknown Attendee, Aaron MacNeil, Tim Monachello, Maxim Sytchev, Yuri Lynk, Rahul Malhotra, Sean Jack, So the fee cash flows of the expected range for the year are around 160 to 185 million. After, you know, I'm assuming even after we hit the leverage target of 1.5 and pay the dividend, there'll be quite a bit of money left on the table. How high are buybacks on the list for this incremental capital, I guess?

Prem Kumar: I had a couple of questions on capital allocation I know the previous gentleman asked about.

Prem Kumar: About buying back shares.

Prem Kumar: They're all on the same line.

Prem Kumar: Especially considering where the shares are trading and how reasonable the play.

Prem Kumar: Yeah.

Prem Kumar:

Prem Kumar: So free cash flows.

Prem Kumar: Expected range for the year is on a $160 million to $185 million.

Prem Kumar: After.

Prem Kumar: I'm, assuming you've been active and hit the target on one point buying and paying the dividend that would be.

Prem Kumar: Quite a bit of money left on the table.

Prem Kumar: Hi.

Prem Kumar: Buybacks on the mist.

Prem Kumar: This for this.

Speaker Change: Incremental capital Hey, guys.

Joseph C. Lambert: Like I said, right now, our default is to pay down debt because of the high rates. But, you know, we're going to evaluate it at whatever point in time and where the share price is. You know, I'd also say we have more opportunity as we get later in the year just because we're so. We're very back-weighted in our free cash flow. So the bulk of that free cash flow comes in in Q3 and Q4. Unknown Attendee, Aaron MacNeil, Tim Monachello, Maxim Sytchev, Yuri Lynk, Rahul Malhotra, Sean Jack

Prem Kumar: Yeah.

Prem Kumar: Right now our default is to pay down debt because of the high rates, but.

Joseph C. Lambert: What we're gonna evaluated at whatever point in time, and where the share price is you know I'd also say.

Joseph C. Lambert: We have more opportunity as we get later in the year just because we're so.

Joseph C. Lambert: We're very back weighted in our free cash flow. So the bulk of that free cash flow comes in in Q3 and Q4.

Joseph C. Lambert: And so that's really when we have more flexibility.

Joseph C. Lambert: At this point in time, where we're looking at where we consider all those options, we would consider M&A growth opportunities.

Joseph C. Lambert: We'll look at increasing dividends, we will look at share buybacks and everything is going to play on a balanced playing field of risk versus reward and those are discussions we have at every board meeting.

Prem Kumar: Okay, thanks Joe. And can you maybe talk a little bit about the acquisition landscape, like M&A in terms of, is there a pipeline of companies that you kind of keep an eye on and how are the valuations and just the landscape in general, and the geography, maybe are you looking mostly in Australia, Canada, other geographies or not?

Speaker Change: Okay. Thanks, Joe.

Prem Kumar: Can you maybe talk a little bit about the acquisition landscape M&A tons.

Prem Kumar: Is there a pipeline of companies that you kind of keep it.

Prem Kumar: Look on and how are the valuations and just the landscape in general.

Prem Kumar: And the geography, maybe a European modestly in Australia, Canada and other geographies are.

Joseph C. Lambert: Can you give a bit more color on that jaw, Jason? Thank you. Yeah, I think there is.

Prem Kumar: Can you give a bit more color on that.

Jason: Jason Thank you.

Joseph C. Lambert: Yeah, I think there's there's always opportunities I again With low share price and things like in these positions. It's very hard to find accretive deals But certainly if there was another McKellar deal like available, we would certainly pursue it We are predominantly focused in North America and Australia now But we've also considered South America as a potential in particular Chile So if there was an opportunity there we do see that market is Having become more stable and having some growth opportunities going forward, especially with their strong copper and gold markets down there, so we keep an eye out for those and and if the opportunity comes it's Another deal that's highly accretive like that.

Jason: Yeah, I think there's always opportunities.

Joseph C. Lambert: Again with low share price and things like in these positions, it's very hard to find accretive deals.

Joseph C. Lambert: But certainly if there was another mckellar deal.

Joseph C. Lambert: Available, we would certainly pursue it.

Joseph C. Lambert: We are predominantly focused in North America, and Australia now, but we've also considered South America as a potential in particular, Chile. So if there was an opportunity there if we do see that market is.

Joseph C. Lambert: Having become more stable and having some growth opportunities going forward, especially with their strong copper and gold markets.

Joseph C. Lambert: Markets down there so we keep an eye out for those and.

Joseph C. Lambert: And if the opportunity comes.

Joseph C. Lambert: We will certainly pursue it. It's likely, like I said earlier. They don't develop overnight. They're usually a year and a half to two and a half year kind of processes, so we really wouldn't have expected anything even if it was on our desk today to affect anything this year.

Joseph C. Lambert: Another deal that's highly accretive like that we'll certainly pursue it likely like I said earlier, they don't develop overnight they are usually.

Joseph C. Lambert: A year and half to two and a half year kind of processes. So we really wouldn't have expected anything even if it was on our desk today to affect anything this year.

Prem Kumar: Okay, thanks, Jeff. That's all I have. Thank you.

Speaker Change: Okay. Thanks, that's all I had.

Prem Kumar: <unk>.

Prem Kumar: Yeah.

Karthi Tradshara: Your next question comes from the line of Karthi Tradshara 1. He's a private investor. The line is now open.

Speaker Change: Your next question comes from the line of car T Chek shut up I E.

Karthi Tradshara: He's a private investor Your line is now open.

Karthi Tradshara: Hey, hi, Joe. Hi, team. Thank you so much for this conference call. It's been a fantastic, you know, run with you folks so far.

Karthi Tradshara: Hi, Joe Hi team. Thank you so much for the conference call.

Karthi Tradshara: That's correct.

Joseph C. Lambert: Just had a question. When I look at Joe's letter, he mentions that contracts are becoming more about time and material. So just wanted to understand what the implication on your EBITDA margin or any of those margin metrics that you want to talk about when you move towards contracts which are more of a time and material nature.

Karthi Tradshara: With you folks so far.

Karthi Tradshara: Just had a question when I look at Joel.

Joseph C. Lambert: He was mentioning about the contract becoming more about a claim and Mcgee deal. So.

Joseph C. Lambert: So just wanted to understand what is the implication on your EBITDA margin.

Joseph C. Lambert: All of those modern metrics I wanted to talk off when you move towards contract with modal timing might.

Speaker Change: It might be it might be if it doesn't meet you.

Karthi Tradshara: Yeah, I was in particular and I think I went into even more detail on the year-end stuff that the, the, work in the oil sands that was typically more weighted towards unit rate work, and unit rate work, we got paid a fixed price per BCM of material or set unit of material we moved, but we wore all the operating productivity and weather risk. We have a lot more equipment rentals, maintained rentals, maintained and operated rentals, and time and material work than in the past.

Joseph C. Lambert: Yeah.

Joseph C. Lambert: Particularly I think I went into even more detail on the year end stuff that day.

Karthi Tradshara: The work in the oil sands. It was typically more weighted towards unit rate work and unit rate work, we got paid a fixed.

Karthi Tradshara: Price per bcm of material or set unit of material, we moved but we were all the operating productivity and weather risks.

Karthi Tradshara: We have a lot more equipment rentals maintained rentals maintained and operated rentals and time and material work than historical.

Karthi Tradshara: I'd say just rough numbers. Historically, we were probably 75% unit rate work. Now we're probably more like 25%, to give you a scale of things. And when you go into the rental side, and it actually is. We don't have the longer-term commitments, and we don't have the upside potential, but we also don't have the downside potential. So, typically, what you're going to see is higher EBITDA margins and lower risk. Unknown Attendee, Aaron MacNeil, Tim Monachello, Maxim Sytchev, Yuri Lynk, Rahul Malhotra, You're even as a percentage of the overall rate is higher. Does that make sense to you?

Karthi Tradshara: I would say.

Karthi Tradshara: Rough numbers historically, we were probably 75% unit rate work now.

Karthi Tradshara: Now, we're probably more like 25% to give you a scale of things and when you go into the rental side and.

Speaker Change: It actually.

Karthi Tradshara: We don't have the longer term commitments and we don't have the upside potential, but we also don't have the downside potential.

Karthi Tradshara: Typically what youre going to see as higher EBIT margins and lower risk.

Speaker Change: Net margins would be the same but because you don't have operators labor in some of the stuff and youre not wearing some of the operating cost.

Speaker Change: Your EBITDA as a percentage of the overall rate is higher.

Speaker Change: Does that makes sense.

Joseph C. Lambert: Show your thanks for this; it was very helpful, thank you. No worries.

Speaker Change: Sure. Thanks, a lot that's very helpful. Thank you know works.

Tim Monachello: Your next question comes from the line of Tim Monachello of TB Capital Markets. Your line is now open.

Speaker Change: Your next question comes from the line of steam on a churro of Keybanc capital market Your line.

Tim Monachello: And is now open.

Tim Monachello: Hey guys, just a follow up here. I'm wondering if you can help us contextualize the guidance range relative to your utilization targets, like what's in what's embedded in your guidance on the top and bottom.

Tim Monachello: Hey, guys just a follow up here I'm wondering if you can help us contextualize the guidance range relative to your utilization targets like what's what's embedded in your guidance on the top and bottom.

Speaker Change: Well our.

Joseph C. Lambert: We're expecting to get When we talk about 75 and 85, we're expecting to be above those marks at the end of the year. So if you want to know how it ramps up, I would just follow how we put the EBITDA split in there and follow that on utilization and with it ending at 75 or 85 in Q4. I'm It's so I expect we're ramping up to probably, a P or Q3 peak, and then it fairly levels off in Q4 or slight dips in Q4, but we expect to be right there in that range. Okay, so like

Tim Monachello: We're expecting to get.

Joseph C. Lambert: When we talk about 75% to 85, we're expecting to be above those marks at the end of the year.

Joseph C. Lambert: So if you wanted to out ramps up I would just follow how we've.

Joseph C. Lambert: But the EBIT split in there and follow that on utilization.

Joseph C. Lambert: With it ending at 75% to 85%.

Joseph C. Lambert: In Q4.

Joseph C. Lambert:

Joseph C. Lambert: So I expect we're ramping up to probably.

Joseph C. Lambert: Pete or Q3 peak and then it fairly leveled off in Q4.

Joseph C. Lambert: A slight dip in Q4, but we expect to be right there in that range.

Tim Monachello: Okay, so the midpoint of your guidance would include you achieving those utilization targets.

Speaker Change: Okay. So like the midpoint of your guidance.

Tim Monachello: Would include you achieving those utilization targets.

Tim Monachello: Thanks.

Joseph C. Lambert: By the end of the year, yeah. Okay, so it's not. We're not going to be at 75% in Q2.

Tim Monachello: By the end of the year yeah.

Speaker Change: Okay. So it's not we're not going to be at 75% in Q2.

Tim Monachello: Like you won't do 75% on average in Canada in 24 hours.

Joseph C. Lambert: Like you won't do 75% on average in Canada at 124.

Joseph C. Lambert: Not on average, we will get to 75 by the end of the year, and we would expect to be able to hold it through next Got it. OK.

Tim Monachello: Not on the average.

Tim Monachello: We will get back to 75 by the end of the year and we would expect to be able to hold that through next year.

Tim Monachello: Got it. Okay. I appreciate it.

Speaker Change: Got it okay I appreciate it.

Speaker Change: Don't worry.

Will Woodridge: Your next question comes from the line of Will Woodridge of Woodridge and Company. Your line is now open.

Tim Monachello: Your next question comes from the line of seal with Fitch approaches and company. Your line is now open.

Will Woodridge: Hi, so the tax rate gets Unknown Attendee, Aaron MacNeil, Tim Monachello, Maxim Sytchev, Yuri Lynk, Rahul Malhotra, Cash Tax Versus the First.

Will Woodridge: Hi, so the tax rate.

Will Woodridge: It seems to move around a fair bit what could you say just for modeling purposes, a reasonable normal run rate for taxes would be and how much would you call that.

Will Woodridge: Cash tax versus deferred.

Jason William Veenstra: Yeah, great question. You know, we're at about 30% in Australia, 25 in Canada, so you could use a modeling rate of 27 and a half if you wanted to put a blended rate, and about half of that is cash taxable. Australia is cash taxable given their history, and their you know, they don't carry loss carry forwards in the Australian regime, which maxes out their tax depreciation. So we do pay cash taxes in Australia, but we don't have any cash taxes in Canada this year. We expect to pay some cash taxes in Canada in 2025.

Will Woodridge: Yes, great question.

Jason William Veenstra: We're at about 30% in Australia 25 in Canada. So you could use a modeling rate of 27 and a half.

Jason William Veenstra: If you wanted to put a blended and about half of that is cash taxable Australia is cash tax will given their history and there you know they don't carry loss carryforwards in the Australia regime.

Jason William Veenstra: Maxes out their tax depreciation so we do pay cash taxes in Australia.

Jason William Veenstra: But we don't have any cash taxes in Canada.

Jason William Veenstra: This year.

Jason William Veenstra: We expect to pay some cash taxes in Canada in 2025.

Will Woodridge: Okay, thanks. And just review. I know you're a different beast than you were just six or nine months ago. So help me understand the seasonal pattern that we should see play out quarter to quarter over the course of the year. Thanks.

Speaker Change: Okay. Thanks, and just review I know you are a different beast in the works for six or nine months ago. So help me understand the seasonal pattern that we should see play out.

Will Woodridge: Quarter.

Speaker Change: During over the course of the year.

Will Woodridge: Yeah.

Speaker Change: Got it I.

Jason William Veenstra: I guess it's a unique year, we would expect when we get into next year, we're going to be a lot more consistent quarter upon quarter, because of the transition and the way the contract was awarded and the equipment movements and oil sands, we're actually at, you know, Q1 is our low. This year and we ramp up to a Q3 and with a slight drop in Q4 and we provided quite a bit of information around, 45% in front half of the year 55% of our even in second half And then I'd say that going forward in 2025, and I don't have those exact numbers, but my expectation is that it's a lot more consistent quarter from quarter, and we're not going to see, 10% variances between quarters, we're going to be seeing single digits.

Speaker Change: I guess, it's a unique year, we would expect when we get into next year, we're going to be a lot more.

Jason William Veenstra: Consistent quarter upon quarter.

Jason William Veenstra: Because of the transition and the way the contract was awarded to equip the movements in oil Sands, where we're actually at Q1 as our low.

Jason William Veenstra: This year, and we ramp up to Q3 and with it but the slight drop in Q4, and we provided quite a bit of information around.

Jason William Veenstra: 45% front half of the year of 55% of our even in the second half.

Jason William Veenstra: And then I'd say that going forward in 2025, and I don't have those exact numbers, but my expectation is that it's a lot more consistent quarter from quarter, and we're not going to see.

Jason William Veenstra: 10% variances between quarters were going to be seeing single digit.

Jason William Veenstra: Great.

Will Woodridge: Yeah, yeah, thanks. So paint the picture of long-term capability. (inaudible)

Speaker Change: Yes, thanks, so paint the picture of long term capability.

Will Woodridge: Gross capability for the company going over a number of years that clearly you have.

Speaker Change: Some vision.

Speaker Change: Given your large backlog, how do you see the company being able to grow organically and whatever tuck ins you have in mind over the next four or five years.

Will Woodridge: Yeah.

Joseph C. Lambert: You know, I think most of our tuck-ins, like when we vertically integrate or more or more about reducing our internal costs by in-housing our maintenance. So really, you know, what I would say is our growth opportunity. I've always said that I think there's five to 15% annual growth in our marketplace. And if you look at, you know, the first 20 or 30% of that we can pretty much cover with Unknown Attendee, Aaron MacNeil, Tim Monachello, Maxim Sytchev, Yuri Lynk, and Rahul Malhotra, those usually come with some growth capital.

Will Woodridge: I think most of our tuck ins like when we vertically integrate or more are more about reducing our internal costs by in housing or maintenance.

Joseph C. Lambert: So is that really what I would say is our growth opportunity I've always said I think there's.

Joseph C. Lambert: 5% to 15% annual growth in our marketplaces.

Joseph C. Lambert: And.

Joseph C. Lambert: If you look at.

Joseph C. Lambert: The first 20 or 30% of that we can pretty much cover with.

Joseph C. Lambert: Existing assets by increased utilization of existing assets and obviously those usually come with some growth capital. So I'll give you. An example, where we're looking at possibly placing.

Joseph C. Lambert: So again, I'll give you an example of where we're looking at possibly placing some assets in Australia on a long-term contract. It's not just equipment we have. We have to actually go out and look at a few shovels that would complement the fleet as well. So it's not. We don't have everything all the time. We have to add, and like Jason said, we have added 20 million in growth capital so far to meet the demands of the Australian marketplace.

Joseph C. Lambert: Some assets in Australia, and a long term contract.

Joseph C. Lambert: It's not just the equipment, we have we have to actually go out and look at a few a few shovels that would complement the fleet as well. So it's not we don't have everything all the time, we have to add and like Jason said, we added $20 million in growth capital So far too.

Joseph C. Lambert: To meet the demands in the Australian marketplace. So.

Joseph C. Lambert: So you would get that kind of growth additions into that just by utilizing the fleet. But, you know, certainly that first 20 odd percent of growth we think we can do with existing assets and some minor top-up on growth capital.

Joseph C. Lambert: You would get that kind of growth additions into that just by utilizing the fleet but.

Joseph C. Lambert: Certainly that first 20 odd percent of growth. We think we can do with existing assets and some minor top up on on growth capital.

Will Woodridge: Great, so plenty on your plate now as you continue to work in McKellar. You know, so how long do you feel it takes to digest all of that, and your plate is now empty, and you're ready for something significant again at some point in the future?

Joseph C. Lambert: Great. So plenty on your plate now as you continue to work in the Keller.

Will Woodridge:

Will Woodridge: So how long do you feel it takes to digest all of that and the players is now empty and you're ready for something significant again at one point in the future.

Joseph C. Lambert: You know, one thing I say is that I'm very pleased that we had the bench strength to place an integration team and change out leadership at NUNA all within the last six months, and I don't, you know, the business has been able to absorb that and not miss a beat on performance. [inaudible] I'm very comfortable with that going forward, that we have the people in place, and, you know, we've got a lot of things going on.

Will Woodridge: Yeah.

Will Woodridge: One thing I'd say, it's very pleased in that way.

Joseph C. Lambert: We have the bench strength to place an integration team and changed out leadership at noon.

Joseph C. Lambert: All within the last six months and I don't you know.

Joseph C. Lambert: The business has been able to absorb that and not not miss a beat on performance.

Joseph C. Lambert: So I'm very comfortable.

Joseph C. Lambert: Comfortable with that going forward that.

Joseph C. Lambert: That we've got the people in place and you know.

Joseph C. Lambert: We've got a lot of things going on you know, where we're going to turn around it and know that we're doing the integration and in Australia, but I think that people are there and very comfortable with the way they're performing that.

Joseph C. Lambert: You know, we're doing a turnaround at NUNA, and we're doing the integration in Australia, but I think the people that are there, I'm very comfortable with the way they're performing. I don't see a lot of anxiety in that.

Joseph C. Lambert: Don't see a lot of anxiety that if something else came up.

Joseph C. Lambert: If something else came up, you know, our plate isn't empty, and nor do I ever expect it to be fully empty. But if something came up and there was a good opportunity... We wouldn't shy away from it because we don't have the resources. We have the capability to do that.

Joseph C. Lambert: <unk> played an empty and nor do I ever expected to be fully empty.

Joseph C. Lambert: If something came up and there was a good opportunity.

Joseph C. Lambert: We wouldn't shy away from it because we don't have the resources, we have capability to do that.

Will Woodridge: Except for the balance sheet. So I presume that's the principal limiting factor here. I, you know. I guess if we're

Joseph C. Lambert: For the balance sheet, so I presume that's the principal limiting factor here.

Will Woodridge: Hi.

Joseph C. Lambert: I guess if we were to look at a debt-funded McKellar tomorrow, but things don't happen at that speed. If it happens at the same speed as McKellar did and it's two years from now, I'd be very confident we have the balance sheet by the end of this year, frankly, to start looking at bigger things like that.

Will Woodridge: I guess, if we were to look at a debt funded mckellar tomorrow, but if they don't happen at that speed. If it happens at the same speed of Mckellar data and its two years from now.

Joseph C. Lambert: Very confident we've got the balance sheet.

Joseph C. Lambert: By the end of this year frankly to start looking at bigger things like that.

Speaker Change: Great. Thank you.

Speaker Change: No worries thank you.

Operator: This concludes the Q&A section of the call, and I will pass the call over to Joel Lambert, President and CEO, for closing comments.

Joseph C. Lambert: This concludes the Q&A session of the call and I will pass the call over to Joe Lambert, President and CEO for closing comments.

Joseph C. Lambert: Thanks, Enrico. Thanks again everyone for joining us today. We look forward to providing the next update upon the closing of our Q2 2024 results.

Joseph C. Lambert: Thanks Enrico.

Operator: Thank you. This concludes the North American Construction Group conference call for Q1 2024.

Joseph C. Lambert: Thanks again, everyone for joining us today, we look forward to providing next update upon closing of our Q2 2024 results.

Operator: Okay.

Joseph C. Lambert: Thank you. This concludes the North American construction Group conference call on Q1 2024.

Operator: Yeah.

Operator: Yeah.