North American (TSX:NOA) reported second-quarter financial results on Thursday. The transcript from the company’s second-quarter earnings call has been provided below.
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Summary
North American Construction Group Ltd reported $93 million in EBITDA for Q2 2026, with revenue up $86 million year-over-year, largely due to the acquisition of IMC which contributed $91 million.
The company has raised its full-year revenue guidance to $1.6-$1.8 billion, citing strong first-half performance and a robust $3.8 billion contractual backlog.
Australia remains a key growth area with a 31% CAGR in revenue from H1 2024 to H1 2026, supported by acquisitions like McKellar and IMC, and a strong bid pipeline of $3.9 billion.
In Canada, the company is expanding its presence in mining and infrastructure with new equipment arriving in Nunavut expected to drive 20% site-level revenue growth.
The oil sands operations have identified 260 heavy equipment assets for optimization, aiming for a medium-term mechanical availability target of 70% to improve margins.
Free cash flow generation was $23 million in Q2, with net debt rising to $1.1 billion due to strategic acquisitions and growth capital expenditures.
The company plans to announce a new CEO soon, reflecting ongoing leadership stability and strategic direction.
Full Transcript
Jenny, Investor Relations
Good morning, ladies and gentlemen. Welcome to the North American Construction Group Ltd conference call regarding the second quarter ended June 30, 2026. 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 listen-only mode. 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.
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. 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 SEDAR and EDGAR as well as on the Company’s website at nacg.ca.
I will now turn the conference call over to Jason Venstra, CFO.
Jason Venstra, CFO
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. Starting on slide 4, we delivered $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 $86 million from last year with IMC contributing $91 million of revenue in the quarter.
Excluding IMC, Australia was up organically 15% in the quarter on commission, 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 $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. Moving to slide 5, Australia posted a 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 reflected disciplined project execution, improved internal maintenance capability, lower repair costs, and the implementation of continued fleet efficiency initiatives, and importantly are trending in the right direction heading into the second half of 2026. 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.
Direct adjusted G&A was $15 million, 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%. All told, adjusted EPS of 32 cents was generated by solid operational performance. Interest expense increased to $18.9 million from $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 7, the business produced $78 million of operating cash flow before working capital, generated by EBITDA performance. Net of cash interest, free cash flow generation was $23 million after a $13 million positive working capital change in the quarter. Moving to slide 8, net debt increased $191 million to $1.1 billion, reflecting the acquisition of IMC and growth capital equipment purchased during the quarter.
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 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 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’ll pass the call to Barry.
OPERATOR
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 Rigor from Ross Capital Partners. Your line is now open.
Joseph Rigor, Analyst at Ross Capital Partners
Hey guys, thanks for taking the questions and congrats on a strong quarter.
So on the increased revenue guide, is this like, it’s part of it that there’s some flow-through costs that have also raised costs, which is why the EBITDA guide didn’t change? Or is there something else we should read into there?
Jason Venstra, CFO
Joe, 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 and then EBITDA being consistent with what we expected for the first half. So yeah, it’s a cost conclusion there. Okay.
Joseph Rigor, Analyst at Ross Capital Partners
And then follow-up on that: with higher diesel costs right now, is that something that’ll flow through your model? It won’t, like, you know, press too hard on your margins, but would potentially push you guys towards the higher end of the revenue guide?
Okay. All right. Thanks for the clarity there. I’ll turn it over.
Jason Venstra, CFO
No, there’s no impact to us either on revenue or EBITDA guide margin. It’s always, for the vast majority of our operations, it’s a flow-through.
OPERATOR
Thank you. Your next question is from Adam Palmer from Thompson Davis. Your line is now open.
Adam Palmer, Analyst at Thompson Davis
Hey, good morning, guys. Congrats on a nice quarter.
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?
Barry
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 different other contractors’ truck here or there. And 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. And what we see going forward is there’s other opportunities coming up where some of these contracts are nearing the end of what was contracted out four or five years ago.
And we’re in a very good position 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.
Adam Palmer, Analyst at Thompson Davis
And that was. So that’s not included in the Q2 backlog, correct?
Jason Venstra, CFO
Actually it is, Adam. It’s part of 3.8.
Adam Palmer, Analyst at Thompson Davis
Okay, well, still $5 million of spend for $135 million backlog is a pretty good trade. Excellent contract. And as Barry mentioned, it definitely is opening doors for additional ones and it’s a lot less capital intensive, as you alluded, with the $5 million.
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?
Barry
Yeah, I mean, the IMC integration is going really well. I mean, the beauty about IMC is they’re so like-minded of how we do business here in Canada. They’re very good operators. I mean, I guess that’s what attracted us to them, is that they’re so much like us on how they view equipment rebuilds. You know, they’re very, very, 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. You know, the better we perform, the better the margin is.
Adam Palmer, Analyst at Thompson Davis
Interesting.
Okay, perfect.
Thanks, guys.
Barry
Thanks, Adam.
OPERATOR
Thank you. And your next question is from Tim Monticello from ATB Cormark Capital Markets, your line is now open.
Tim Monticello, Analyst at ATB Cormark Capital Markets
Hey, good morning, guys.
Barry
Morning, Tim.
Tim Monticello, Analyst at ATB Cormark Capital Markets
Morning, Tim. I’m just wondering if you can dig in a little bit more on the equipment optimization strategy in the oil sands. So you’ve identified 260 fleet assets. What are you doing with the remainder? And you talked about some capital investments within that fleet. 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?
Barry
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 stuff or whatever we’re going to do. Some of these assets we’ve set aside are smaller assets that were underutilized.
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 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. 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 taking advantage of that. And I mean, there is opportunities, too.
You know, 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 $50 million range for 20, 26 to get us where we need to be.
Tim Monticello, Analyst at ATB Cormark Capital Markets
Okay, what has to happen with those assets? I was under the impression that they’re all in pretty good working conditions. So a little bit surprised that you have to invest more in them. So I’m just maybe if you could provide some context.
Barry
Yeah, I mean, it’s just, I mean, because they’re multi-life assets, you know, these things we run them for, you know, these things they got 20-plus year lives and they come up, you know, when the schedule hits on component change-outs. And these aren’t small-dollar items, you know, I mean 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 we planned and we satisfy the client’s needs and meet our margin targets.
Tim Monticello, Analyst at ATB Cormark Capital Markets
And then more generally in the oil sands, are you seeing an inflection in demand? We said higher crude prices.
Barry
Yeah, absolutely. I mean there’s a lot of excitement in the oil sands. I mean there’s, you know, we’re getting more offers every day of can you do this, can you do that? There’s this scope and so, and so, you know, we’re pricing stuff every day out there right now and it’s an exciting time in the oil sands. I mean look, I’ve been in the oil sands since the mid-80s and this is one of these times where over the last couple years it’s been kind of a bit of a lull and, you know, where there’s insourcing and stuff but it’s full steam ahead and there’s capital projects going on in the sites and there’s volume to be moved and 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. So yeah, we’re extremely excited about the oil sands right now.
Tim Monticello, Analyst at ATB Cormark Capital Markets
Okay, fantastic. And then last one just in Australia, understand that it’s a pretty large and diverse market but we did see a decline, fairly meaningful decline in your stated bid pipeline, quarter over quarter. So maybe you can talk a little bit about what’s going on there.
Barry
Yeah, so I mean there was one large project on there that we missed on and the funny thing is we still have opportunity on that. So we were shortlisted. It was between us and the incumbent and 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’ve come back to us already asking if there’s opportunity or we can see the possibility of putting a fleet or two onto that site.
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 years ago or a year ago. So yeah, we see great opportunities still there. And, you know, maybe it’s a blessing in a way because it’s not that that was a large amount of capital investment to get to win that work. So this will be less capital and yet still have opportunity to increase our revenue and margins on that site.
We also missed one in IMC on the west side, but we have another one right in our pipeline right now that’s, you know, we’re shortlisted for and again we think that we have a very good opportunity at winning. So we’ll see where that goes.
Tim Monticello, Analyst at ATB Cormark Capital Markets
Okay, I appreciate it. I’ll turn it back.
Barry
Thanks. Thanks, Tim.
OPERATOR
Thank you. Your next question is from Ramon Chinichi from National Bank of Canada. Your line is now open.
Ramon Chinichi, Analyst at National Bank of Canada
Good morning, Jason. Good morning, Barry. And congrats on the very good quarter. I just had a quick question on the pro forma FCF profile. So you’ve 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?
Jason Venstra, CFO
Sorry, Ramon, can you repeat that?
Ramon Chinichi, Analyst at National Bank of Canada
Oh, sorry. Was just looking for more color on free cash flow generation and conversion going forward given that IMC is a lower capital intensity asset.
Jason Venstra, CFO
Oh yeah, I think given IMC is 15% of our business, the conversion target of 30% remains. That’s still where we think when our business is, you know, at a run rate that we can operate at. We’ve been there before and we expect to be there this year when working capital is neutral. And so we don’t think IMC will have a meaningful impact on that ratio target, conversion target.
Ramon Chinichi, Analyst at National Bank of Canada
Sir, just as a follow up, do you see the 30% conversion holding for next year as well? I know it’s a bit hard to predict working capital, so just curious.
Jason Venstra, CFO
There’s. Yeah, there’s no reason why we can’t, you know, with our margin initiatives we should hopefully be able to actually increase that ratio next year. But I think it’s a good placeholder for your models.
Ramon Chinichi, Analyst at National Bank of Canada
Thank you so much.
Jason Venstra, CFO
Appreciate it.
OPERATOR
Thank you. Once again, that is star one should you wish to ask a question. And your next question is from Sean Jack from Raymond James, your line is now open.
Sean Jack, Analyst at Raymond James
Hey, good morning, guys. Just wanted to ask a quick question for Australia. Wondering with this increasing unit rate work from IMC, like should we be expecting that this type of contract might become like more popular in the broader segment or is this just going to be isolated in IMC?
Barry
No, I would say I don’t know if it’s more popular. I mean it’s 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, you know, it’s more than just load, haul, dump, place, it’s, you know, it’s more detailed type work. So that is pretty typical with that type of work anyway. I mean you’ll see it also in some of the remediation on mine sites and stuff.
But I would say it’ll kind of stay pretty much the status quo as it’s been.
Sean Jack, Analyst at Raymond James
Okay, perfect. Good to know. Next question for me would just be so obviously, you know, nation-building projects, et cetera, et cetera. Like there seems to be a big heat up of demand, especially sentiment in Canada. You guys have 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 that’s kind of swelling in Canada or in the United States.
Anything beyond stuff that’s already captured in your bid pipeline?
Barry
Oh, I don’t know. I mean that’s. Yeah, I mean we’ve captured most of what we see that excites us in the bid pipeline. What I would say though on that is, you know, I’m extremely excited about the opportunities are in front of Nuna. Nuna has, I mean just because of where they’re positioned, how they’re positioned. You know, they picked up some small wins over the last, you know, three to six months. And this puts us and 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, Ontario, Northwest Territories. I mean it’s 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.
Sean Jack, Analyst at Raymond James
Perfect. Okay. Yeah, that’s all from me guys. Congrats on the quarter. Thanks.
Barry
Thanks again, Shawn.
OPERATOR
Thank you. Your next question is from Chris Thompson from CIBC. Your line is now open.
Chris Thompson, Analyst at CIBC
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’s behind that?
Jason Venstra, CFO
Yeah, primarily that would be IMC. They, you know, have a G&A function. I’m assuming you’re looking at G&A and cost of sales as well, but that’s primary IMC related.
Chris Thompson, Analyst at CIBC
Got it. Okay. And then 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?
Barry
No, 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, 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’s where we get the margin improvement. You’ll see on some jobs where we start out and the margin isn’t exactly as stated 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.
Chris Thompson, Analyst at CIBC
Okay, so was that primarily an Australia-driven increase then? Okay. And then the capital spend in Australia on the growth side, does that include the IMC piece?
Jason Venstra, CFO
Yes. Yeah, that definitely. So IMC acquired on April 7, came with the balance sheet as disclosed, and then growth at that lithium mine came through our growth capital spending.
Chris Thompson, Analyst at CIBC
Okay, got it. And then just in terms of sustaining capital, back late last year, you guys guided to $60–$70 million of sustaining in 2026 and H1 is already at $84 million. Granted you’ve had some growth activity in the business, but how should we expect that sustaining number to trend through the balance of the year?
Jason Venstra, CFO
Yeah, we’re still, you know, just a A little north of 200 million, as Barry alluded to on that oil sands slide. You know, you know, 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’s really why we’re seeing going from, say, a little bit under 200 to above 200 for the year. Australia is exactly on track as we, 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.
Chris Thompson, Analyst at CIBC
Okay, thank you. I’ll hand it back.
OPERATOR
Thanks Chris.
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.
Barry Palmer, President and CEO
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 third quarter results.
OPERATOR
Thank you. This now concludes the North American Construction Group Ltd conference call regarding the second quarter ended June 30, 2017. You may now disconnect your lines.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.
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