Q2 2026 North American Construction Group Ltd Earnings Call

August 13, 2026

Speaker #1: Good morning, ladies and gentlemen. Welcome to the North American Construction Group Conference call regarding the second quarter ended June 30, 2026. At this time, all participants are in a listen-only mode.

Speaker #1: 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 listen-only mode.

Speaker #1: They are free to quote any member of management, but they are asked not to quote remarks from any other participant without that participant's permission.

Speaker #1: The company wishes to confirm that today's comments contain forward-looking information, and that actual results could differ materially from a conclusion, forecast, or projection contained in that forward-looking information.

Speaker #1: Certain material factors or assumptions were applied in drawing conclusions or in making forecasts or projections that are reflected in the forward-looking information. Additional information about those material factors is contained in the company's most recent management's discussion and analysis which is available on Cedar and Edgar, as well as on the company's website at nacg.ca.

[Company Representative] (North American Construction Group): Additional information about those material factors is contained in the company's most recent management's discussion and analysis, which is available on SEDAR and EDGAR, as well as on the company's website at nacg.ca. I will now turn the conference call over to Jason Veenstra, CFO.

Speaker #1: I will now turn the conference call over to Jason Veenstra, CFO.

Speaker #2: Thanks, Jenny. And good morning, everyone. I'll start today's call with brief commentary on the financials, then pass the call to Barry for his operational and forward-looking comments, and we'll conclude, as per usual, with Q&A.

Jason Veenstra: Thanks, Jenny, and good morning, everyone. I will start today's call with brief commentary on the financials, then pass the call to Barry for his operational and forward-looking comments, and we will conclude, as per usual, with Q&A. Starting on slide four, we delivered CAD 93 million of EBITDA in the first quarter, translating into year-over-year improvements in both adjusted earnings and margin performance. Combined revenue was up CAD 86 million from last year, with IMC contributing CAD 91 million of revenue in the quarter. Excluding IMC, Australia was up organically 15% in the quarter on commissioning growth assets and strong execution. Offsetting these increases was the year-over-year impact of the divestiture of the ultra-class haul trucks in Canada. The CAD 456 million of total combined revenue finished off a strong H1 foundation of over CAD 875 million, supporting our 2026 combined revenue midpoint of CAD 1.7 billion.

Speaker #2: Starting on slide 4, we delivered 93 million dollars of EBITDA in the first quarter. Translating into year-over-year improvements in both adjusted earnings and margin performance.

Speaker #2: Combined revenue was up 86 million dollars from last year, with IMC contributing 91 million dollars of revenue in the quarter. Excluding IMC, Australia was up organically 15% in the quarter on commission growth assets and strong execution.

Speaker #2: Offsetting these increases was the year-over-year impact of the divestiture of the ultra-class haul trucks in Canada. The $456 million of total combined revenue finished off a strong first-half foundation of over $875 million, supporting our 2026 combined revenue midpoint of $1.7 billion.

Speaker #2: Moving to slide 5, Australia posted 13.6% gross profit margin, and Canada delivered a combined adjusted margin of approximately 7%, despite difficult seasonal conditions early in the quarter in both regions.

Jason Veenstra: Moving to slide five, Australia posted 13.6% gross profit margin and Canada delivered a combined adjusted margin of approximately 7%, despite difficult seasonal conditions early in the quarter in both regions. These results reflect a disciplined project execution, improved internal maintenance capability, lower repair costs, and the implementation of continued fleet efficiency initiatives. Importantly, they are trending in the right direction heading into the H2 of 2026. Moving to slide six, Q2 EBITDA and EBIT were both up meaningfully from the prior year quarter on the acquisition of IMC and a more typical quarter from the Fargo joint ventures. Direct adjusted G&A was CAD 15 million, or 3.8% of reported revenue, well below our 5% targeted threshold, demonstrating operating leverage on stronger revenue.

Speaker #2: These results reflect disciplined project execution, improved internal maintenance capability, lower repair costs, and the implementation of continued fleet efficiency initiatives. And, importantly, we are trending in the right direction heading into the second half of 2026.

Speaker #2: Moving to slide 6, Q2 EBITDA and EBIT were both up meaningfully from the prior year quarter on the acquisition of IMC and a more typical quarter from the Fargo joint ventures.

Speaker #2: Direct adjusted G&A was 15 million dollars, or 3.8% of reported revenue, well below our 5% targeted threshold. Demonstrating operating leverage on stronger revenue. Depreciation as a percent of combined revenue dropped to 13% from 16% last year, as IMC's lower capital intensity resulted in the combined number being lower than our expected range midpoint of 15%.

Jason Veenstra: Depreciation as a percent of combined revenue dropped to 13% from 16% last year, as IMC's lower capital intensity resulted in the combined number being lower than our expected range midpoint of 15%. All told, adjusted EPS of CAD 0.32 was generated by solid operational performance. Interest expense increased to CAD 18.9 million from CAD 14.1 million last year, reflecting the financing of our strategic expansions in Australia. Our average cost of debt for the quarter remained consistent at 6.4%. Moving to slide seven, the business produced CAD 78 million of operating cash flow before working capital, generated by EBITDA performance net of cash interest. Free cash flow generation was CAD 23 million after a CAD 13 million positive working capital change in the quarter. Moving to slide eight, net debt increased CAD 191 million to CAD 1.1 billion, reflecting the acquisition of IMC and growth capital equipment purchased during the quarter.

Speaker #2: All told, adjusted EPS of 32 cents was generated by solid operational performance. Interest expense increased to 18.9 million dollars from 14.1 million dollars last year, reflecting the financing of our strategic expansions in Australia.

Speaker #2: Our average cost of debt for the quarter remained consistent at 6.4%. Moving to slide 7, the business produced 78 million dollars of operating cash flow before working capital, generated by EBITDA, performance, net of cash interest.

Speaker #2: Free cash flow generation was 23 million dollars after a 13 million dollar positive working capital change in the quarter. Moving to slide 8, net debt increased 191 million dollars to 1.1 billion.

Speaker #2: Reflecting the acquisition of IMC and gross capital equipment purchased during the quarter. Trailing 12-month net debt leverage is reported as 2.9 times, but importantly, is not yet benefiting from 12 months of IMC EBITDA.

Jason Veenstra: Trailing 12 net debt leverage is reported as 2.9 times, but importantly, is not yet benefiting from 12 months of IMC EBITDA. Based on our H2 run rate, we are operating at a 2.6 times leverage ratio, with the plan to decrease that moving forward. Senior secured debt remains steady at 1.7 times based on the CAD 200 million of senior unsecured notes we raised in the quarter and the impact of unsecured debt that partially funded the IMC acquisition. With those comments on the financials, I will pass the call to Barry.

Speaker #2: Based on our second-half run rate, we are operating at a 2.6 times leverage ratio with the plan to decrease that moving forward. Senior secured debt remains steady at 1.7 times based on the 200 million dollars of senior unsecured notes we raised in the quarter and the impact of unsecured debt that partially funded the IMC acquisition.

Speaker #2: With those comments on the financials, I'll pass the call to Barry.

Speaker #3: Thanks, Jason, and good morning, everyone. As Jason just outlined, our first half performance was stronger than expected entering the year, and gives us the confidence to raise our full-year revenue outlook.

Barry Palmer: Thanks, Jason, and good morning, everyone. As Jason just outlined, our H1 performance was stronger than expected entering the year and gives us the confidence to raise our full year revenue outlook. More importantly, the quarter reinforced that North American Construction Group is in an inflection point. The strategic groundwork we have put in place is increasingly translating to measurable growth, stronger earnings visibility, and more resilient operating profiles. Our operating platform continues to evolve and there is even more opportunity ahead of us. We are now seeing clear evidence that our broader geographic reach, expanded capabilities, and operating discipline are working together. Our focus is to convert that opportunity into quality earnings and free cash flow through consistent execution across all operations. On slide 11 summarizes the three strategic building blocks supporting our growth. First, scaling toward a national tier 1 contractor platform in Australia.

Speaker #3: More importantly, the quarter reinforced that North American Construction Group is in an inflection point. The strategic groundwork we have put in place is increasingly translating to measurable growth, stronger earning visibility, and more resilient operating profile.

Speaker #3: Our operating platform continues to evolve, and there is even more opportunity ahead of us. We are now seeing clear evidence that our broader geographic capabilities, and operating discipline are working together.

Speaker #3: Our focus is to convert that opportunity into quality earnings and free cash flow through consistent execution across all operations. On slide 11, summarizes the three strategic building blocks supporting our growth.

Speaker #3: First, scaling toward a national tier-one one contractor platform in Australia. Secondly, securing infrastructure awards across North America and third, expanding mining services in Canada and the United States.

Barry Palmer: Secondly, securing infrastructure awards across North America. Third, expanding mining services in Canada and the United States. These are distinct markets, but the underlying model is consistent. We establish a position where our equipment, people, and execution capabilities create the right to win. We then deepen our customer relationship, expand the scope of work, and allocate capital where we can earn attractive returns. The regional updates that follow are proof that this strategy is gaining further traction. On slide 12, Australia remains our primary growth engine. Revenue has increased approximately 31% compound annual rate from H1 2024 through H1 2026. H1 2026 revenue was 14% above H2 2025. This momentum reflects the scale we have added through MacKellar and IMC, supported by favorable operating conditions and strong market demand.

Speaker #3: These are distinct markets, but the underlying model is consistent. We establish a position where our equipment, people, and execution capabilities create the right to win.

Speaker #3: We then deepen our customer relationship, expand the scope of work, and allocate capital where we can earn attractive returns. The regional updates that follow are proof that this strategy is gaining further traction.

Speaker #3: On slide 12, Australia remains our primary growth engine. Revenue is increased approximately 31% compound annual rate from the first half of 2024 through the first half of 2026.

Speaker #3: And first half 2026 revenue was 14% above the second half of 2025. This momentum reflects the scale we have added through McKeller and IMC, supported by favorable operating conditions and strong market demand.

Speaker #3: Together, McKeller and IMC give us a broader national presence and a capability to pursue larger, more comprehensive scopes across all of Australia. IMC's new 8-way MACHIA workshop is another important step.

Barry Palmer: Together, MacKellar and IMC give us a broader national presence and the capability to pursue larger, more comprehensive scopes across all of Australia. IMC's new eight-bay Macha workshop is another important step. It expands our maintenance capacity and supports our equipment rebuild program, as well as the larger projects we expect to pursue over time. The strategic value extends beyond scale. We are increasing our exposure to lower capital unit rate work and diversifying across gold, lithium, iron ore, nickel, and other critical minerals. This combination will support more consistent utilization and a better balance of growth and returns. This integration is also benefiting from a close alignment in safety, culture, core values, and maintenance capabilities, which is critical to sustaining performance as the business expands. As of 30 June, our Australian operations had approximately CAD 3.4 billion of contractual backlog and a further CAD 3.9 billion bid pipeline.

Speaker #3: It expands our maintenance capacity and supports our equipment rebuild program as well as the larger projects we expect to pursue over time. The strategic value extends beyond scale.

Speaker #3: We are increasing our exposure to lower-capital unit rate work and diversifying across gold, lithium, iron ore, nickel, and other critical minerals. This combination will support more consistent utilization and a better balance of growth and returns.

Speaker #3: This integration is also benefiting from a close alignment in safety, culture, core values, and maintenance capabilities, which is critical to sustaining performance as the business expands.

Speaker #3: As of June 30th, our Australian operations had approximately 3.4 billion dollars of contractual backlog and a further 3.9 billion bid pipeline. Supported by approximately 278 billion of public infrastructure spending and a 242 billion major project pipeline, this gives us meaningful runway as we continue building the platform.

Barry Palmer: Supported by approximately CAD 278 billion of public infrastructure spending and a CAD 242 billion major project pipeline, this gives us meaningful runway as we continue building the platform. Turning to slide 13. In northern Canada, where I want to focus on our infrastructure discussion for today's call. Our strategy is to position capital and capabilities where our operating experience provides a clear advantage. Nuna is a strong example, with a fleet of approximately 230 heavy equipment assets. New equipment is arriving in Nunavut during Q3, increasing capacity and mechanical availability at an established mine site. We expect that expansion to drive approximately 20% site-level revenue growth, with our ownership stake providing NACG exposure to Nuna's growing earnings contribution. At the same time, we are executing a land and expand strategy across priority mining regions.

Speaker #3: Turning to slide 13, in Northern Canada, where I want to focus on our infrastructure discussion for today's call. Our strategy is to position capital and capabilities where our operating experience provides a clear advantage.

Speaker #3: NUNA is a strong example, with a fleet of approximately 230 heavy equipment assets new equipment is arriving in Nunavut during the third quarter, increasing capacity and mechanical availability at an established mine site.

Speaker #3: We expect that expansion to drive approximately 20% site-level revenue growth with our ownership state providing NACG exposure to NUNA's growing earnings contribution. At the same time, we are executing a land and expand strategy across priority mining regions.

Speaker #3: The Yukon infrastructure award and three initial projects in Ontario establish footholds from which we can pursue larger follow-on scopes. Our ability to safely deliver on time, on budget, with zero deficiencies is how we earn the opportunity to do more for these customers.

Barry Palmer: The Yukon Infrastructure Award and three initial projects in Ontario establish footholds from which we can pursue larger follow-on scopes. Our ability to safely deliver on time, on budget, with zero deficiencies is how we earn the opportunity to do more for these customers. Nuna's deep remote operating expertise, established infrastructure, and Indigenous partnerships are difficult to replicate. Those capabilities position us well as critical minerals, defense, and nation-building investment advances across northern Canada. With approximately CAD 5 billion of opportunities in the regional pipeline, we see a significant pathway to long-term growth while remaining disciplined in how we pursue it. Turning to slide 14. In the oil sands, customer demand is shifting towards more equipment-intensive work as haul distances lengthen and operating requirements broaden. This creates an attractive opportunity for North American that can provide reliable fleet availability and consistent service, but it has also required a disciplined operating plan.

Speaker #3: NUNA's deep remote operating expertise established infrastructure in indigenous partnerships are difficult to replicate. Those capabilities position us well as critical minerals defense and nation-building investment advances across Northern Canada.

Speaker #3: With approximately 5 billion of opportunities in the regional pipeline, we see a significant pathway to long-term growth while remaining disciplined in how we pursue it.

Speaker #3: Turning to slide 14, in the oil sands, custom demand is shifting towards more equipment-intensive work as hauled distances lengthen and operating requirements broaden. This creates an attractive opportunity for North American that can provide reliable fleet availability and consistent service but it is also required a disciplined operating plan.

Speaker #3: During the second quarter, we formally identified 260 multi-life heavy equipment assets as our target fleet and aligned our maintenance and operations team around clear objectives.

Barry Palmer: During the Q2, we formally identified 260 multi-life heavy equipment assets as our target fleet and aligned our maintenance and operations team around clear objectives. Mechanical availability is a primary operating measure with a medium-term target of 70%. Improving reliability reduces downtime, provides greater schedule certainty, and allows us to capture visible demand more efficiently. This is not simply about increasing activity. It is about improving the quality of earnings. We are concentrating on investment for assets and scopes that meet our return thresholds with incremental investments targeting IRRs above 40% and a clear line of sight towards gross profit margins in the 15% range. Better fleet performance, selective capital allocation, and operating discipline are the levers that we will translate strong customer demand into resilient margins. Turning to slide 15. This shows the depth of our diversity in the opportunity set.

Speaker #3: Mechanical availability is a primary operating measure, with a medium-term target of 70%. Improving reliability reduces downtime, provides greater schedule certainty, and allows us to capture visible demand more efficiently.

Speaker #3: This is not simply about increasing activity. It's about improving the quality of earnings. We are concentrating on investment for assets and scopes that meet our return thresholds with incremental investments targeting IRRs above 40% and a clear line of sight towards gross profit margins in the 15% range.

Speaker #3: Better fleet performance, selective capital allocation, and operating discipline are the levers that we will use to translate strong customer demand into resilient margins. Turning to slide 15, this shows the depth of our diversity in the opportunity set.

Speaker #3: Our total bid pipeline exceeds 12 billion dollars, with approximately 3.6 billion currently in active tender and procurement. The active pipeline is balanced geographically with approximately 1.8 billion in Australia and 1.8 billion in North America.

Barry Palmer: Our total bid pipeline exceeds CAD 12 billion, with approximately CAD 3.6 billion currently in active tender and procurement. The active pipeline is balanced geographically, with approximately CAD 1.8 billion in Australia and CAD 1.8 billion in North America. It is also balanced by type, with 54% in mining services and 46% in infrastructure across 14 resource categories. Expected award timing is weighted across the H2 2026 and into 2027, with additional opportunities beyond that period. We do not need every project to move forward to create meaningful growth. Our priority is to convert the opportunities where our capabilities provide a clear advantage and where the risk-adjusted returns meet our standards. Turning to slide 16, our outlook. Record contractual backlog of approximately CAD 3.8 billion as of 30 June underpins our full-year expectations.

Speaker #3: It is also balanced by type, with 54% in mining services and 46% in infrastructure across 14 resource categories. Expected award timing is weighted across the second half of 2026 and into 2027, with additional opportunities beyond that period.

Speaker #3: We do not need every project to move forward to create meaningful growth. Our priority is to convert the opportunities where our capabilities provide a clear advantage and where the risk-adjusted returns meet our standards.

Speaker #3: Turning to Slide 16, our outlook: record contractual backlog of approximately $3.8 billion as of June 30th underpins our full-year expectations. Based on stronger-than-expected revenue in the first half, including a quarterly revenue record for Q2, we are raising our combined revenue guidance to a range of $1.6 billion to $1.8 billion.

Barry Palmer: Based on stronger than expected revenue in the H1, including a quarterly revenue record for Q2, we are raising our combined revenue guidance to a range of CAD 1.6 billion to CAD 1.8 billion. The new midpoint of CAD 1.7 billion is CAD 100 million above our prior midpoint and approximately 14% above our full year 2025 result. We are growing. We continue to expect adjusted EBITDA of CAD 380 million to CAD 420 million and free cash flow of CAD 110 million to CAD 130 million. At the midpoints, that represents CAD 400 million of adjusted EBITDA and CAD 120 million of free cash flow. In Australia, we expect optimal dry seasonal conditions in Queensland to support MacKellar while IMC activity ramps up in Western Australia. In the oil sands, utilization should improve following the spring breakup, supported by fleet optimization and incremental project scopes.

Speaker #3: The new midpoint of $1.7 billion is $100 million above our prior midpoint and approximately 14% above our full-year 2025 result. We are growing. We continue to expect adjusted EBITDA of $380 million to $420 million and free cash flow of $110 million to $130 million.

Speaker #3: At the midpoint, that represents $400 million of adjusted EBITDA and $120 million of free cash flow. In Australia, we expect optimal dry seasonal conditions in Queensland to support McKeller, while IMC activity ramps up in Western Australia.

Speaker #3: In the oil sands, utilization should improve following the spring breakup, supported by fleet optimization and incremental project scopes. At NUNA, we expect the seasonally strong third quarter to be followed by fourth quarter uplift from the Nunavut fleet expansion.

Barry Palmer: At Nunavut, we expect a seasonally strong Q3 to be followed by a Q4 uplift from the Nunavut fleet expansion. Taken together, our H1 performance, record backlog, and identifiable H2 operating drivers support the raised revenue outlook and our continued confidence in the adjusted EBITDA and free cash flow ranges. Our job is now straightforward, safely execute with discipline, improve the quality of earnings, and convert the opportunity embedded across the platform into sustainable shareholder value. Lastly, I am extremely pleased to announce that our Chairman, Martin Ferron, has confirmed that our CEO search is going very well and we plan to announce our new CEO in the coming weeks. That concludes the Q2 presentation and we would be happy to take any questions you may have.

Speaker #3: Taken together, our first half performance, record backlog, and identifiable second half operating drivers support the raised revenue outlook and our continued confidence in the adjusted EBITDA and free cash flow ranges.

Speaker #3: Our job is now straightforward. Safely execute with discipline, improve the quality of earnings, and convert the opportunity embedded across the platform into sustainable shareholder value.

Speaker #3: Lastly, I'm extremely pleased to announce that our chairman, Martin Farron, has confirmed that our CEO search is going very well and we plan to announce our new CEO in the coming weeks.

Speaker #3: That concludes the Q2 presentation, and we would be happy to take any questions you may have.

Speaker #1: Thank you, ladies and gentlemen, to ask a question. Please press door one on your touchstone phone. If you wish to withdraw your question, you can press door two.

[Company Representative] (North American Construction Group): Thank you. Ladies and gentlemen, to ask a question, please press star one on your touchtone phone. If you wish to withdraw your question, you can press star two. Once you have completed your questions and would like to return to the queue, please press star one again. After a brief pause, we will begin the Q&A session. Your first question is from Joseph Rigger from Rock Capital Partners. Your line is now open.

Speaker #1: Once you have completed your questions and would like to return to the queue, please press door one again. After a brief pause, we will begin the Q&A session.

Speaker #1: Your first question is from Joseph Wigger from Ross Capital Partners. Your line is now open.

Speaker #2: Hey, guys. Thanks for taking the questions and congrats on a strong quarter.

Joseph Rigger: Hey guys, thanks for taking the questions and congrats on a strong quarter.

Speaker #4: Thanks, Joel.

Barry Palmer: Thanks, Joe.

Speaker #2: So on the increased revenue guide, is this part of it that there's some flow-through costs that have raised revenue, but have also raised costs, which is why the EBITDA guide didn't change?

Joseph Rigger: So on the increased revenue guide, is part of it that there is some flow through costs that have raised revenue but have also raised costs, which is why the EBITDA guide did not change? Or is there something else that we should read into there?

Speaker #2: Or is there something else we should read into there?

Speaker #4: Joel, that's a good way to look at it. It's really a first half impact when we look at revenue, and how strong it was in the first half.

Barry Palmer: Joe, that is a good way to look at it. It is really a H1 impact when we look at revenue and how strong it was in the H1, and then EBITDA being consistent with what we expected for the H1. Yeah, it is a cost conclusion there.

Speaker #4: And then EBITDA being consistent with what we expected for the first half. So yeah, it's a cost conclusion there.

Speaker #2: Okay. And then follow-up on that, with higher diesel costs right now, is that something that'll flow through your model? It won't press too hard on your margins, but would potentially push you guys towards the higher end of the revenue guide?

Joseph Rigger: Okay. Then follow up on that. With higher diesel costs right now, is that something that will flow through your model? It will not press too hard on your margins, but would potentially push you guys towards the higher end of the revenue guide?

Speaker #4: No, there's no impact to us either on revenue or EBITDA margin. It's always for the vast majority of our operations, it's a flow-through.

Barry Palmer: No, there is no impact to us either on revenue or EBITDA margin. For the vast majority of our operations, it is a flow through.

Speaker #2: Okay. All right. Thanks for the clarity there. I'll turn it over.

Joseph Rigger: Okay. All right. Thanks for the clarity there. I will turn it over.

Speaker #1: Thanks

Barry Palmer: Thanks.

Speaker #2: Thank you . Your question is from Adam Fulmer from Thompson . Davis . Your line is now open

[Company Representative] (North American Construction Group): Thank you. Your next question is from Adam Palmer from Thompson Davis. Your line is now open.

Speaker #3: Hey . Good morning guys . Congrats on a nice quarter Thanks , Adam . Hey , the the fuel services contract that you won in July .

Adam Palmer: Hey, good morning, guys. Congrats on a nice quarter.

Barry Palmer: Thanks, Adam.

Adam Palmer: Hey, the fuel services contract that you won in July, can you give some more color on that and comment if you see additional opportunities similar to that award?

Speaker #3: Can you can you give some more color on that ? And comment if you see additional opportunities similar to that award

Speaker #4: Yeah , it's great . And you know , I mean , that was a great win for us . I mean , you know , that business has been up till now solely servicing our own gear with odds and ends with with different other contractors truck here or there .

Barry Palmer: Yeah, it is great and that was a great win for us. That business has been, up till now, solely servicing our own gear with odds and ends with different other contractors, truck here or there and we have been looking to win something like that for a while. So it was very exciting to win that, and what we see going forward is there are other opportunities coming up where some of these contracts are nearing the end of what was contracted out four or five years ago. We are in a very good position to certainly take advantage of some of that, and we look forward to winning one, two, or maybe even three more of these as they come online.

Speaker #4: And , and we've been , we've been looking to win something like that for a while . So that's very , you know , it was very exciting to win that .

Speaker #4: And what we see going forward is there are other opportunities coming up where some of these contracts are nearing the end of what was contracted out four or five years ago.

Speaker #4: And , and we're in a very good position to , to certainly take advantage of some of that . And we look forward to , you know , winning one , two or maybe even three more of these as they come online .

Speaker #3: And that was so that's not included in the Q2 backlog . Correct

Adam Palmer: So that is not included in the Q2 backlog, correct?

Speaker #4: Actually, it is, Adam. It is part of the 3.3.8.

Barry Palmer: Actually, it is, Adam.

Adam Palmer: It is.

Barry Palmer: It's part of the 3.8.

Speaker #3: Okay . Well , still 5 million of spend for 135 million . Backlog is a pretty good trade

Adam Palmer: Well, still, CAD 5 million of spend for CAD 135 million backlog is a pretty good trade.

Speaker #4: Excellent contract . And as Barry mentioned , it definitely is opening doors for additional ones . And it's a it's a lot less capital intensive , as you alluded , with the 5 million .

Barry Palmer: Excellent contract, and as Barry mentioned, it definitely is opening doors for additional ones. It's a lot less capital intensive, as you alluded, with the CAD 5 million.

Speaker #3: And then a quick update—can you just give a quick update on IMC integration, how that's going, and how you think the margin profile of that business is going to trend over time?

Adam Palmer: Can you just give a quick update on IMC integration, how that's going, and how you think the margin profile of that business is going to trend over time?

Speaker #4: Yeah , I mean , the IMC integration is going really well . I mean , the , the beauty about IMC is they're , they're so like minded of how we do business here in Canada .

Barry Palmer: Yeah, the IMC integration's going really well. The beauty about IMC is they're so like-minded of how we do business here in Canada. They're very good operators. I guess that's what attracted us to them, is that they're so much like us on how they view equipment rebuilds. They're very structured. They've been executing unit rate work for many, many years. As far as the margins go, they're not quite as high as what we would expect on the equipment rental side in the Queensland business, because a lot of the work that they do is unit rate work. However, there is opportunity to go higher because of the unit rate style contract. The better we perform, the better the margin is.

Speaker #4: They're very good operators . I mean , I guess that's what attracted us to them is that they're , there's so much like us on how they view equipment rebuilds .

Speaker #4: You know , they're very , very , very structured . They they've been executing unit rate work for many , many years as far as the margins go , they're not quite as high as what we would expect on the equipment rental side in , in the Queensland business , because a lot of the work that they do is unit rate work .

Speaker #4: However , there is opportunity to go higher because of the unit rate , style contract . You know , the better we perform , the better the margin is .

Speaker #3: Interesting. Okay, perfect. Thanks, guys.

Adam Palmer: Interesting. Okay, perfect. Thanks, guys.

Speaker #4: Thanks , Adam

Barry Palmer: Thanks, Adam.

Speaker #2: Thank you . And your next question is from Tim Monticello from ATB Cormark Capital Markets . Your line is now open

[Company Representative] (North American Construction Group): Thank you. Your next question is from Tim Monachello from ATB Capital Markets. Your line is now open.

Speaker #5: Hey , good morning guys .

Tim Monachello: Hey, good morning, guys.

Speaker #4: Morning , Tim .

Barry Palmer: Morning, Tim.

Jason Veenstra: Morning, Tim.

Speaker #5: Tim . I'm just wondering if you can dig in a little bit more on the equipment optimization strategy in in the oil sands .

Tim Monachello: I'm just wondering if you can dig in a little bit more on the equipment optimization strategy in the oil sands. You've identified 260 fleet assets. What are you doing with the remainder? You talked about some capital investments within that fleet. What type of investments need to be made there? I guess, how do you expect that in terms of CapEx in 2026 and 2027 coming through?

Speaker #5: So, you've identified 260 fleet assets. What are you doing with the remainder? And you talked about some capital investments with net fleet.

Speaker #5: What type of investments need to be made there . And I guess , how do you expect that in terms of , CapEx in 26 and 27 coming through

Speaker #4: Yeah . So so on the fleet , we've identified it just just to clarify , that's on multi life assets . So that's that's the large assets .

Barry Palmer: Yeah. So on the fleet we've identified, and just to clarify, that's on multi-life assets. So that's the large assets. So that's the fleet that we see vision for active work in the oil sands where we can take advantage of some of this additional work that's coming out. As for the remainder of this, look, we're in no rush to say we're going to sell this stuff or whatever we're going to do. Some of these assets we've set aside are smaller assets or were underutilized. But with the activity that's going on in the oil sands, with some of this exciting opportunities that we're seeing through Nuna, we feel that we'll have the ability to bring some of those units back in because of their smaller nature and actually put those things to work.

Speaker #4: So that's , that's the fleet that we that we see vision for active work in the oil sands where we can take advantage of some of this additional work that's coming out .

Speaker #4: As for the remainder of this , look , we're no , we're in no rush to say we're going to sell this stuff or whatever we're going to do some of these assets we've set aside are smaller assets , or we're underutilized .

Speaker #4: But with the activity that's going on in the oil sands , with some of this , you know , exciting opportunities that we're seeing through Nuna , we've we feel that we'll have the ability to bring some of those units back in because they're the smaller nature and actually put those things to work .

Speaker #4: And if somebody come along and we didn't have a use for some of these units , and they offered the right price , obviously we'd look at at taking advantage of that .

Barry Palmer: If somebody come along and we didn't have a use for some of these units and they offer the right price, obviously, we'd look at taking advantage of that. There is opportunities, too, I've said this in the past, with moving some units to Australia. It's not front and center, but because the way IMC is structured and their rebuild philosophy and it's something that we've already done. We've sent half a dozen units that way because it made good sense. As far as the capital spend, what's required this year, it's probably on the fleet that we want to focus on and get our availability up above that 70% range. We're probably in the CAD 50 million range, for 2026 to get us where we need to be.

Speaker #4: And I mean , there is opportunities to , you know , I've said this in the past with with moving some units to Australia .

Speaker #4: It's it's not it's not front and center , but because the way IMC is structured and , and their rebuild philosophy and it , it's something that we've already done .

Speaker #4: We've sent half a dozen units that way because it made good sense as far as the capital spend . What's required this year , it's probably on the fleet that that we we want to focus on and get our availability up above that 70% range .

Speaker #4: We're probably in the $50 million range for 2026 to get us where we need to be

Speaker #5: Okay. What has to happen with those assets? Like, why was I under the impression that they were all in pretty good working condition?

Tim Monachello: Okay. What has to happen with those assets? I was under the impression that they're all in pretty good working condition, so a little bit surprised that you have to invest more in them. Just maybe if you could provide some context.

Speaker #5: So a little bit surprised that you have to invest more in them . So just maybe if you could provide some context .

Speaker #4: Yeah . I mean , it's , it's just , I mean . Because they're multi life assets , you know , these things we , we run them for , you know , these things they got 20 plus year lives and , and they come up , you know , when , when the schedule hits on , on component change outs and , and these , these aren't small , small dollar items , you know , I mean , it's , it's , it's some of these things are million dollar items .

Barry Palmer: Yeah. Because they're multi-life assets, these things, we run them for. These things, they got 20-plus year lives, and they come up, when the schedule hits on component change outs, and these aren't small dollar items. Some of these things are million dollar items. So it's just in the cycle of where we're at with them, and we just need to focus and make sure that we're doing the proper thing here and replacing components as they need and making sure these things are in tip-top shape so that when we win work, we go in there and we execute as planned, and we satisfy the client's needs and to meet our margin targets.

Speaker #4: So it's just in the cycle of where we're at with them . And , and , and we just need to focus and make sure that we're doing the proper thing here and replacing components as they need and making sure these things are in tip top shape so that when we win work , we go in there and we execute as we as planned .

Speaker #4: And , and we satisfy the client's needs and , and to meet our margin targets

Speaker #5: And then more generally in the oil sands , are you seeing an inflection in demand alongside higher crude prices ?

Tim Monachello: More generally in the oil sands, are you seeing an inflection in demand alongside higher crude prices?

Speaker #4: Yeah , absolutely . I mean , it's there's a lot of excitement in the oil sands . I mean , there's , you know , we're we're getting we're getting more offers every day of , of can you do this ?

Barry Palmer: Yeah, absolutely. There's a lot of excitement in the oil sands. We're getting more offers every day of, "Can you do this? Can you do that? There's this scope." We're pricing stuff every day out there right now, and it's an exciting time in the oil sands. Look, I've been in the oil sands since the mid-'80s, and this is one of these times where over the last couple of years, it's been a bit of a lull and where there's insourcing and stuff, but it's full steam ahead, and there's capital projects going on on the sites, and there's volume to be moved. As we said in the deck, the haul distances are lengthening, which means you have to add more trucks to move the same amount of volume. Yeah, we're extremely excited about the oil sands right now.

Speaker #4: Can you do that ? There's this scope and so , and so , you know , we're , we're pricing stuff every day out there right now .

Speaker #4: And , and it's , it's , it's an exciting time in the oil sands . I mean , look , I've been in the oil sands since the , the mid 80s .

Speaker #4: And , and this is one of these times where over the last couple of years , it's been kind of a bit of a lull .

Speaker #4: And , you know , where there's in-sourcing and stuff , but it's it's full steam ahead and there's capital projects going on on the sites and there's , and there's volume to be moved .

Speaker #4: And as we said in the deck . The hall distances are lengthening , which means you have to add more trucks to move the same amount of volume .

Speaker #4: So yeah , I mean , we're extremely excited about the oil sands right now

Speaker #5: Okay , fantastic . And then last one , just in Australia , I understand that it's , you know , pretty large and diverse market , but we did see a decline in a fairly meaningful decline in your stated bid pipeline for quarter over quarter .

Tim Monachello: Okay, fantastic. Last one, just in Australia. Understand that it's a pretty large and diverse market, but we did see a decline, a fairly meaningful decline in your stated bid pipeline quarter over quarter. Maybe you can talk a little bit about what's going on there.

Speaker #5: So maybe you can talk a little bit about what's going on there.

Speaker #4: Yeah . So I mean , you know , there was one large project on there that we missed on and , and , and the funny thing is , is we still have opportunity on that .

Barry Palmer: Yeah. There was one large project on there that we missed on. The funny thing is, we still have opportunity on that. We were shortlisted. It was between us and the incumbent. I think obviously the owner thought that replacing the incumbent was far too expensive at this point in time, so they went with the incumbent. That said, they have come back to us already asking if there is opportunity or if we can see the possibility of putting a fleet or two onto that site. We still see opportunity there. We are actively working on that site, always have been. We won a fairly good contract there a couple of years ago, or a year ago. Yeah, we see great opportunities still there. Maybe it is a blessing in a way because that was a large amount of capital investment to win that work.

Speaker #4: So , so it was , we were short listed . It was between us and the incumbent . And , and I think the obviously the owner thought that replacing the incumbent was far too expensive at this point in time .

Speaker #4: So they , they went with the incumbent that said , they've come back to us already asking if there's opportunity or , or if we can see the possibility of putting a fleet or two onto that site .

Speaker #4: So we still see opportunity there . We're actively working on that site . Always have been . We won a fairly good contract there a couple of years ago , a year ago .

Speaker #4: So yeah , we see we see great opportunities still there . And , and , you know , maybe it's a blessing in a way because it's , it's not that that was a large amount of capital investment to get to win that work .

Speaker #4: So this will be less capital and yet still opportunity to increase our , our revenue and margins on that site . We also we also missed one in , in IMC on , on the west side , but we have another one right in our pipeline right now .

Barry Palmer: This will be less capital, yet still opportunity to increase our revenue and margins on that site. We also missed one in Iron Mine Contracting, on the west side. We have another one right in our pipeline right now that we are shortlisted for, and again, we think that we have a very good opportunity at winning. We will see where that goes.

Speaker #4: That's , that's , you know , we're short listed for and , and , and again , we think that we have a very good opportunity at winning .

Speaker #4: So we'll see where that goes .

Speaker #5: Okay . I all turn it back

Tim Monachello: Okay. Appreciate it. I will turn it back.

Speaker #1: Thanks .

Speaker #4: Thanks , Tim .

Barry Palmer: Thanks, Tim.

Speaker #2: Thank you . Your next question is from Roman from National Bank of Canada . Your line is now open

[Company Representative] (North American Construction Group): Thank you. Your next question is from Roman Chanichi from National Bank of Canada. Your line is now open.

Speaker #6: Good morning . Good morning , Barry and congrats on a very good quarter . I had a quick question . I just had a quick question on the pro forma FCF profile .

Roman Chanichi: Good morning, Jason. Good morning, Barry. And congrats on the very good quarter.

Barry Palmer: Thanks, Roman.

Roman Chanichi: I just had a quick question on the pro forma FCF profile. You have right-sized the fleet. You bought a much less capital-intensive asset in IMC. Could you maybe give us some color on what the conversion looks like going forward?

Speaker #6: So you've rightsized the fleet . You bought it much less capital intensive asset in IMC . Could you maybe give us some color on what the conversion looks like going forward

Speaker #4: Sorry , Roman , can you repeat that ?

Barry Palmer: Sorry, Roman, can you repeat that?

Speaker #6: Oh , sorry . I was just looking for more color on free cash flow generation and conversion going forward . Given that I am seeing a lower capital intensity asset .

Roman Chanichi: Oh, sorry. Was just looking for more color on free cash flow generation and conversion going forward, given that Iron Mine Contracting is a lower capital intensity asset.

Speaker #4: Oh yeah . I , I think given I'm C is , is 15% of our business , the conversion target of 30% remains .

Barry Palmer: Well, I think given Iron Mine Contracting is 15% of our business, the conversion target of 30% remains. That is still where we think when our business is at a run rate that we can operate at. We have been there before, and we expect to be there this year when working capital is neutral. We do not think Iron Mine Contracting will have a meaningful impact on that ratio target, conversion target.

Speaker #4: That's still where we think when our business is , you know , at a run rate that that we can operate at , we've been there before and we expect to be there this year when working capital is neutral .

Speaker #4: And so, we don't think IMC will have a meaningful impact on that ratio target or conversion target.

Speaker #6: And so he just as a follow up , do you see the 30% conversion holding for next year as well ? I , I know it's a bit hard to predict a working capital .

Roman Chanichi: Sorry, just as a follow-up, do you see the 30% conversion holding for next year as well? I know it is a bit hard to predict working capital, so just curious there.

Speaker #6: So just curious there .

Speaker #4: Yeah , there's no reason why we we can't , you know , with our margin initiatives , we should . Hopefully be able to actually increase that ratio next year .

Barry Palmer: Yeah. There is no reason why we cannot. With our margin initiatives, we should hopefully be able to actually increase that ratio next year. But, I think it is a good placeholder for your models.

Speaker #4: But I think it's a good placeholder for , for your models .

Speaker #6: Perfect . Thank you so much . Appreciate it .

Roman Chanichi: Perfect. Thank you so much. Appreciate it.

Speaker #1: Thanks

Barry Palmer: Thanks.

Speaker #2: Thank you . Once again , that is star . One . Should you wish to ask a question and your next question is from Sean Jacques from Raymond James .

[Company Representative] (North American Construction Group): Thank you once again. That is star 1 should you wish to ask a question. And your next question is from Sean Jack from Raymond James. Your line is now open.

Speaker #2: Your line is now open .

Speaker #7: Hey good morning guys . Just wanted to ask a quick question for Australia . Wondering with this increase in unit rate work from IMC , should we be expecting that this type of contract might become more popular in the in the broader segment ?

Sean Jack: Hey, good morning, guys.

Barry Palmer: Hey, Sean.

Sean Jack: Just wanted to ask a quick question for Australia. I am wondering, with this increase in unit rate work from IMC, should we be expecting that this type of contract might become more popular in the broader segment, or is this just going to be isolated in IMC?

Speaker #7: Or is this just going to be isolated in IMC?

Speaker #1: No , I would say I don't know if it's more popular . I mean , it's it's been very prevalent anyway in Western Australia for a lot of the work .

Barry Palmer: No, I would say, I don't know if it is more popular. It has been very prevalent anyway in Western Australia for a lot of the work. The majority of the work that IMC does has been unit rate style work because a lot of their scopes are mine site civil. So, it is more than just load, haul, dump, place. It is more detailed type work. So that is pretty typical with that type of work anyway. You will see it also in some of the remediation on mine sites and stuff, but I would say it will stay pretty much the status quo as it has been.

Speaker #1: The majority of the work that IMC does has been unit-rate style.

Speaker #4: Work because a lot of their scopes are mine site civil . So , you know , it's more than just load haul , dump place .

Speaker #4: It's , it's , you know , it's more detailed type work . So that is pretty typical with that type of work . Anyway .

Speaker #4: I mean , you'll see it also in some of the remediation on mine mine sites and stuff . But I would say it'll kind of stay pretty much the status quo as it's been

Speaker #7: Okay , perfect . Good to know . Next question from me would just be so obviously , you know , nation building projects , etc.

Sean Jack: Okay, perfect. Good to know. Next question from me would just be, so obviously, nation building projects, et cetera, there seems to be a big heat up of demand and especially sentiment in Canada. You guys have touched upon a growing bid pipeline in Canada, but I just wanted to hear from you guys, any other sort of commentary on levels of excitement, level of demand that is kind of swelling in Canada or in the United States? Anything beyond stuff that is already captured in your bid pipeline?

Speaker #7: , etc. like there seems to be a big heat up of demand and especially sentiment in Canada . You guys have , you know , touched upon a growing bid pipeline in Canada , but I just wanted to hear from you guys like any other sort of commentary on levels of excitement , level of demand .

Speaker #7: That's kind of swelling in Canada or in the United States . Anything beyond , you know , stuff that's already captured in your bid pipeline

Speaker #4: I don't know , I mean , that's yeah , I mean , we've captured most of what we what we see . That that excites us in the bid pipeline .

Barry Palmer: Oh, I do not know. We have captured most of what we see that excites us in the bid pipeline. What I would say, though, on that is I am extremely excited about the opportunities that are in front of Nuna. Nuna, just because of where they are positioned, how they are positioned, they have picked up some small wins over the last three to six months, and this puts us and them in very good light of follow-on projects that will be the bigger projects. This is scattered across Nunavut, northern Quebec, Ontario, Northwest Territories. It is exciting times for them, and we just need these things to come to RFP, the bigger projects, and to be let out there so that we have the opportunity to win them and then get in there and start executing.

Speaker #4: What I would say , though , on that is , you know , I'm extremely excited about the opportunities that are in front of Nuna Nuna has has I mean , just because of where they're positioned , how they're positioned , you know , they've they've picked up some small wins over the last , you know , 3 to 6 months .

Speaker #4: And this puts us puts us in them in very good light of follow on projects that will be the bigger projects . And I mean , this is scattered across Nunavut , northern Quebec , Northwest Territories .

Speaker #4: I mean , it's it's exciting times for them . And it's , it's we just need these things to , you know , come to RFP .

Speaker #4: The bigger projects and to be led out there so that we have the opportunity to win them . And then . And then get in there and start executing

Speaker #7: Perfect . Okay . Yeah . That's all from me , guys . Congrats on the quarter . Thanks .

Sean Jack: Perfect. Okay. Yeah, that is all from me, guys. Congrats on the quarter. Thanks.

Speaker #4: Thanks again . Sean

Barry Palmer: Thanks again, Sean.

Speaker #2: Thank you . Your next question is from Chris Thompson from CIBC . Your line is now open .

[Company Representative] (North American Construction Group): Thank you. Your next question is from Chris Thompson from CIBC. Your line is now open.

Speaker #8: Hey guys . Good morning . Just a couple questions here for you on the salaries and wages quarter over quarter increase . Could you provide a bit more color on on on what's behind that ?

Chris Thompson: Hey, guys. Good morning. Just a couple questions here for you. On the salaries and wages quarter-over-quarter increase, could you provide a bit more color on what is behind that?

Speaker #4: Yeah , primarily that would be IMC . They , you know , have a , a function . I'm assuming you're looking at G and A and cost of sales as well .

Barry Palmer: Yeah, primarily that would be IMC. You will have a G&A function. I am assuming you are looking at G&A and cost of sales as well, but that is primary IMC related.

Speaker #4: But that's primarily IMC related

Speaker #8: Got it. Okay. And then, I take it that the third-party rentals piece was meaningfully higher in Q2, and both those and salaries and wages are in your COGS. Is that a run rate that we should expect going forward?

Chris Thompson: Got it. Okay. I take it the third party rentals piece meaningfully higher in Q2, and both those and salaries and wages in your COGS, is that a run rate that we should expect going forward?

Speaker #4: No , I , I mean , on the salaries are one thing , but the third party rentals , the third party rentals that typically what that is , Chris , is some of the jobs we take on .

Barry Palmer: No. The salaries are one thing, but the third party rentals, typically what that is, Chris, is some of the jobs we take on, they come to us quicker than anticipated, so we end up having third party rentals to start out with as we bring our own fleet in, and then those costs somewhat disappear. So that is where we get the margin improvement. You will see on some jobs where we start out and the margin is not exactly as stated, and as the project progresses along, those margins come back, and that is when that third party rentals disappear and we get our own fleet actively engaged.

Speaker #4: They come . They come to us quicker than than anticipated . So we end up having third party rentals to start out with as we bring our own fleet in .

Speaker #4: And then those costs somewhat disappear . So , you know , that's where we get the margin improvement . You'll see on some jobs where we start out in the margin isn't exactly as stated .

Speaker #4: And as the project progresses along , those margins come back . And that's when that third party rentals disappear . And we get our own fleet actively engaged .

Speaker #8: Okay , so was that a primarily an Australia driven increase then ?

Chris Thompson: Okay. Was that primarily an Australia-driven increase then?

Speaker #4: Yes .

Barry Palmer: Yes.

Speaker #8: Got it . Okay . And then the capital spend in Australia on , on the growth side , does that include the IMC piece

Chris Thompson: Got it. Okay, the capital spend in Australia on the growth side, does that include the IMC piece?

Speaker #4: Yes . Yeah , that definitely . So IMC acquired on April 7th came with the balance sheet as disclosed . And then growth at that lithium mine came through our growth capital spending

Barry Palmer: Yes, that definitely. IMC acquired on 7 April, came with a balance sheet as disclosed, and then growth at that lithium mine came through our growth capital spending.

Speaker #8: Okay . Got it . And then just in terms of sustaining capital back late last year , you guys guided to $6,070 million of sustaining in 2026 .

Chris Thompson: Okay, got it. Just in terms of sustaining capital, back late last year, you guys guided to CAD 60 million to CAD 70 million of sustaining in 2026, and H1 is already at CAD 84 million. Granted, you have had some growth activity in the business, but how should we expect that sustaining number to trend through the balance of the year?

Speaker #8: And each one is already at 84 million . Granted , you've had some some growth activity in the business , but how should we expect that sustaining number to trend through the balance of the year

Speaker #4: Yeah , we're still , you know , just a little north of 200 million as Barry alluded to on that , that oil sands slide , you know , you know , given the inflection of demand and and our our strategy to really , you know , run efficiently in the oil sands with mechanical availability .

Barry Palmer: Yeah, we are still just a little north of CAD 200 million. As Barry alluded to on that oil sands slide, given the inflection of demand and our strategy to really run efficiently in the oil sands with mechanical availability well north of 70% MA, that is really why we are seeing going from, say, a little bit under 200 to above 200 for the year. Australia is exactly on track as we agreed on back in December with those operating teams. The change is really a reflection in commitment to the oil sands and getting that operation running more efficiently.

Speaker #4: Well north of 70% m a that's that's really why we're seeing going from , say , a little bit under 200 to above 200 for the year .

Speaker #4: Australia is , is exactly on track as , you know , agreed on back in December with those operating teams . So the change is really a reflection in commitment to the oil sands and getting that operation running more efficiently

Speaker #8: Okay . Thank you . I'll hand it back

Chris Thompson: Okay. Thank you. I will hand it back.

Speaker #4: Thanks .

Barry Palmer: Thanks.

Jason Veenstra: Thanks, Chris.

Speaker #9: Chris

Speaker #2: Thank you . There are no further questions at this time . I will now pass the call back over to Barry Palmer , president and CEO , for closing comments .

[Company Representative] (North American Construction Group): Thank you. There are no further questions at this time. I will now pass the call back over to Barry Palmer, President and CEO, for closing comments.

Speaker #4: Thanks , Jenny .

Barry Palmer: Thanks, Jenny, and thanks again, everyone, for joining us today. As always, we remain focused on disciplined execution and look forward to providing our next update with our Q3 results.

Speaker #10: And thanks again , everyone , for joining us today . As always , we remain focused on discipline , execution , and look forward to providing our next update with our third quarter results

[Company Representative] (North American Construction Group): Thank you. This now concludes the North American Construction Group conference call regarding the Q2 ended 30 June 2026. You may now disconnect your lines.