Good morning, ladies and gentlemen. Welcome to the North American Construction Group earnings call for the second quarter ended June 30, 2022. At this time, all participants are in listen only mode. Following management's prepared remarks, there will be an opportunity for analysts, shareholders and loan holders 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 the participant's permission. This company wishes to confirm that today's comments contain forward-looking information and that actual results could differ materially from a conclusion, forecast or prediction containing the forward-looking information. Certain material factors or assumptions were applied in drawing conclusions or in making forecasts or predictions that are reflected in the forward-looking information.
Some 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 Joe Lambert, President and CEO. Please go ahead.
Thanks, Sergio. Good morning, everyone, and thanks for joining our call today. I'm going to start with the Q2 2022 operational performance before handing it over to Jason for the financial overview. I will conclude with the operational priorities and outlook for 2022 before taking your questions. In today's Q2 operational review, I want to give listeners some clarity on the issues affecting our business, what areas of the business are being affected, what we are doing about it, what progress we have made, and lastly, when we expect to have the issues resolved. On slide 3, our Q2 total recordable rate of 0.51 was a 40% improvement to our Q1 standalone results.
The trailing twelve month remains above our industry leading target frequency of 0.5, and we will continue focusing our efforts on further developing our green hand new hire training programs, reducing hand and lifting incidents, and prevention of high potential injury events. On slide four, we show the three major issues affecting our business. The first is a good issue to have high demand. I will speak more directly to this when we get to slide six, where we highlight fleet utilization. The second issue, inflationary pressures, is due to parts and labor price increases from key suppliers and vendors which are at historical highs. These inflationary pressures are immediately increasing equipment costs, which are not yet being captured in the contract escalation clauses which use lagging indices. Third on the list is the skilled labor shortage, which impacts our ability to promptly repair equipment.
The skilled labor shortage in oil sands in particular has also driven a wage escalation of almost 30% for mechanics as competition for their services increases. The parts price increase impacts all of our businesses, but the oil sands wage escalation is impacting the 50% EBIT of our business typically generated in oil sands. The diversification of our business across increased commodities and customers has definitely helped us limit the extent of the skilled trade wage escalation impacts. However, the cost escalation impacts from items two and three are driving the historically low Q2 margins. Operational execution and safety were in line with our expectations, but the continued increase in vendor parts pricing, our need to match oil sands wage escalation for skilled trades to prevent further quits, and the current disconnect between actual costs and lagging indices is a reason for margin reductions.
Moving on to slide 5, let's get into our response and how we are progressing against these core issues. First and foremost, we continue to develop, attract, and retain our skilled maintenance trades people to improve fleet utilization. NACG has an extensive and comprehensive program to expand both our Acheson and field-based maintenance workforce. As example of this progress, on our Q1 call, I noted that we had added approximately 20% more employees into our apprentice program since the beginning of the year. That increase is now over 50%. The total increase in heavy equipment technicians and apprentices in Q2 was just over 6%. Our shop expansion with additional remanufacturing capacity and services and a central telematics control room is complete and will allow for continued growth in our bench hands program and machine health monitoring for our current around 260 real-time connected assets.
Since the start of 2022, our bench hands program has grown by 30% and our telematics program is estimated to have saved just under CAD 1 million through reduced in-house monitoring costs and early machine health issue identification and interventions. I look forward to sharing more of the benefits of our telematics system with you as connected fleet and data increases and our systems and reporting mature. On the cost control side, we are seeing opportunities to increase in-house component remanufacturing and equipment servicing work and are actively looking at source suppliers and inventory management to reduce costs and increase efficiency in parts delivery. Lastly, we have added senior maintenance leadership to better support the field work. In summary, we're actively addressing all areas of cost and skilled trades development within our control. Moving on to slide 6.
While Q2 financial performance was well below our own expectations due to the previously mentioned market issues, the demand for our fleet remains high. The Q2 utilization of 59% was essentially equal to the previous Q2 high of 60% achieved in 2019. We expect the high demand to remain into and possibly beyond 2023. We likewise expect our progress on increasing the maintenance labor workforce will directly correlate to improved fleet utilization. Between this high demand, our progress on manpower issues, and our in-house maintenance capability, as highlighted in the following slide seven, we remain confident in our future business success. Slide eight is a quick snapshot of our current positioning as a company. Our indigenous partners and the contracts and fleet we have in place, coupled with our ever-improving maintenance capabilities, gives us solid and tangible confidence moving forward.
I will expand more on our future outlook after Jason reviews the Q2 financials.
Thanks, Joe. The financial review begins on slide 10 with a few of our key performance indicators. Combined revenue of CAD 228 million represented a strong quarter for us and was generally consistent with the last two quarters revenues of CAD 237 million and CAD 235 million, respectively. This revenue consistency highlights our diversification and has culminated with trailing revenue now exceeding CAD 900 million over the last twelve months. From a combined gross profit margin perspective, we generated 9.6% based on inflation factors that are much discussed throughout this quarter's materials. As referenced on this slide, the 9.6% can be split into our wholly owned businesses, which were significantly impacted by cost inflation, and all told, ended up posting a 7.4% gross margin.
That said, our joint ventures were much better positioned to manage inflation and based on their specific situations and strong operating performances, achieved a steady and impressive 15.7% gross margin in the quarter. Getting back to revenue and on slide 11, total combined revenue for the quarter of CAD 228 million was 30% ahead of Q2 2021. Revenue achieved in the quarter was driven by a broad listing of mine sites and business lines, which all show strong demand for our services. The remobilized fleet at the Fort Hills Mine had a full quarter of operations compared to a partial quarter in Q2 2021, which was a key driver of the positive revenue variance.
As you are likely aware, the commercial posture in the oil sands region is robust, and we experienced this firsthand this quarter as the focus on production means our equipment is critical to our customers' success. DGI Trading, which we purchased in Q3 2021, as well as the sale of haul trucks into one of our joint ventures also boosted revenue this quarter. Revenue from our joint ventures of CAD 60 million was identical to Q1 2022, as continued volumes at the Gold Mine contract in Northern Ontario were coupled with the increasing prominence of our Mikisew joint venture and progress being made on the Fargo-Moorhead Area Diversion project.
Combined gross profit margin of 9.6% was influenced most notably by the workforce shortages in the skilled trades, which has the combined impact of lessening top-line potential while increasing the need to implement less effective measures, including reliance on third-party providers and rental equipment. Other notable drivers impacting this quarter's margin included supplier and vendor cost increases primarily related to parts and components, which we conservatively estimate to have directly impacted Q2 costs by around CAD 5 million. Secondly, the timing impact of rate escalations which lag based on published index values. Moving to slide 12. Adjusted EBITDA of CAD 42 million was identical to last year, but the lower margin of 18.3% reflects the harsh cost impacts previously mentioned.
Included in EBITDA is general and administrative expenses, which were CAD 6.9 million in the quarter, equivalent to 4.1% of revenue. As always, we pride ourselves on G&A discipline, and Q2 was no different in that regard. Going from EBITDA to EBIT, we expensed depreciation equivalent to 12.7% of combined revenue, which reflected the depreciation rate of our entire business. When looking at just the wholly owned entities and our heavy equipment within them, the depreciation percentage for the quarter was 15.7% of revenue and reflected an effective, albeit less than planned, use of our fleet this quarter. Adjusted earnings per share for the quarter of CAD 0.17 was driven by CAD 12.8 million from adjusted EBIT net of routine interest and taxes.
Our overall effective interest rate year to date is now 4.8% as we trend up from the 2021 effective rate of 4.3% from the well-known interest rate increases. Our credit facility, which currently has drawn CAD 140 million and makes up approximately 35% of net debt, is the only instrument directly impacted by rate increases. Moving to slide 13. I'll briefly summarize our cash flow. Net cash provided by operations of CAD 35 million was produced by the business, with the difference between this figure and the CAD 42 million of EBITDA being cash interest paid in the quarter of CAD 5.8 million. Sustaining maintenance capital of CAD 22 million was primarily dedicated to maintenance of the existing fleet as we invest in the fleet that drives our core business.
Working capital was flat for the quarter and similar to last year's Q2. I'll end on slide 14. Total capital liquidity of nearly CAD 200 million reflects our strong position as we benefit from our disciplined approach in years past. On a trailing twelve-month basis, our senior leverage ratio, as calculated by our credit facility, remains steady at 1.6 times. Net debt levels increased CAD 10 million in the quarter as free cash flow of CAD 10 million was more than offset by the purchase and subsequent cancellation of over 1.1 million shares for CAD 17.4 million in the quarter. With those summarized financial comments, I'll pass the call back to Joe.
Thanks, Jason. Looking at slide 16. This slide summarizes our priorities for 2022. I've addressed item 4 as part of our response to the current macro environment. Now, looking at item 1, we are and will continue to be laser focused on contract administration in regards to the application and accuracy of contract escalation clauses, and in particular, the local oil sands maintenance wage increases and the impact of OEM and vendor equipment parts price increases. As I've stated previously, we are confident that our transparency and long-standing client relationships will result in mutually acceptable resolution. We have 4 oil sands customers, and we're in active daily discussions with all of them, and we fully expect to achieve resolution within Q3.
Of the 2 remaining priorities, item two, detailed on slide 17, is our ongoing efforts to ensure a well-planned and smooth startup of our Red River Valley Alliance Fargo Moorhead project. The project is progressing well, and we expect to commence earthwork as planned in Q3. The equipment fleet has been procured, design work and planning are rapidly approaching construction ready status, and hiring remaining field staff and workers has commenced. We are eager to get going and look forward to the latter half of the year when we can start providing progress reports on the actual construction activity. Moving on to slide 18. This bid pipeline slide highlights our remaining item three from the priority slide 16.
Our bid pipeline remains strong, and we expect to win our fair share of their large red dot regional oil sands tender, and believe we'll see another blue dot win outside oil sands before year-end. Demand continues to grow, and the number of projects in the active tender stage, that is the second row of the bid pipeline, has doubled since Q1 for both oil sands from 1 to 2 projects, but more impressively, outside oil sands from 5 to 10 active tender projects. On slide 19, our backlog sits at CAD 1.6 billion, and we continue to replenish and win our fair share of work across all resource sectors. What I believe are key takeaways on this slide is that our backlog is roughly proportionate to our diversification target, demonstrating both confidence and sustainability of our diversification efforts.
Lastly, but possibly most importantly, if we achieve the bid wins noted on the previous slide, we expect our backlog to exceed CAD 2 billion before the year is out. On slide 20, we have provided our revised outlook for 2022. As I stated in my shareholder letter, while lowering guidance is neither enjoyable or something we want to be seen as common in our business, the fact that our business can withstand such unusual inflationary and market pressures and still produce a free cash flow that enables reductions of debt and common shares by 78% and allows modest growth investment, gives us confidence in the business core strength and resiliency.
On the upside, we see slide 21 as a reasonable projection of our business based on high demand, modest growth, improved utilization from our expected stronger maintenance workforce, and increasing margins as we continue to lower costs and advance operations efficiency. Combined, we see these last two slides as showing a business with a core strength to endure high near-term inflationary impacts while maintaining a strategy and execution to provide consistent long-term growth and returns in shareholder-friendly ways. With that, I'll open it up for any questions you may have.
Thank you. To ask a question, please press star followed by the number 1 on your touch-tone phone. If you wish to withdraw your question, you can press star followed by number 2. If you have completed your question and would like to return to the queue, please press star 1 again. After a brief pause, we'll begin the Q&A session. Your first question comes from Yuri Lynk from Canaccord Genuity. Please go ahead.
Hey, good morning.
Morning, Yuri.
Hi, Yuri Lynk.
Morning. Joe, I wanted to circle back on your discussions with your customers on the contract escalation clauses. Assuming you're successful, will those be retroactive at all? Will they go back into, you say, the spring when you started to see these really higher costs? The second part of that question would be, what's assumed in your guidance for these discussions?
We've got an estimate on the resolution. I think we're conservative on that. I really want to tell you specifics. We're in negotiations, and I would, you know, I'd like to think that we might be able to improve upon that. Essentially, the reason for the drop-down in the guidance is we do believe there's a timing gap. It will then have an overhang when there's deflation, if you would. Roughly, we think we're probably about two months of overlap on that we aren't going to be able to recover, and that would be predominantly as we incurred it in Q2.
We do think the Q3, Q4 numbers and our projection for the outlook are in line with the timing and what we think we'll get. Does that cover it all, Yuri? I'm sorry, I was a little bit vague in that.
You know, I understand you're in the middle of negotiations. But I guess the point would be that, you know, there's no kind of catch-up payment for Q2 that could conceivably, you know, boost Q3 above where it might otherwise be. It doesn't sound like that's the case. It sounds like you're trying to get the costs adjusted such that the back half of the year kind of reverts.
It-
to more normalized margins. Is that it?
Yeah. I'd say that's spot on, Yuri.
Yeah. Okay. That's great for me. I'll turn it over there.
Thanks.
Thank you. Your next question comes from Jacob Bout from CIBC. Please go ahead.
Hi. Good morning.
Morning, Jacob.
I wanted to go back to the escalation costs. How much of these contracts can be negotiated versus, you know, it's just systemic and we just have to deal with these lagging indices?
We've done these consistently over time, both with increases and decreases. Particularly in oil sands, Jacob. The contracts we have in oil sands, they've been amended outside of contractual arrangements based on what's going on in the market. You know, whether we had a depressed oil price and we were looking for ways to reduce our costs and pass on to customers, which we've done, or, you know, in this case where it's escalating, we would expect. I'd say any time we have unusual market conditions, both up or down, either our clients or we've approached our clients or our clients has approached us for amendments outside of the normal cycle of the contract.
To be clear, in your view, all of these contracts should be negotiable?
Yes.
Okay.
I would say we've probably done this in the order of half a dozen times in the last six or seven years.
Okay. Just on the technician shortages. What's your equipment utilization baked into the second half guidance? Do things return to normal or?
It actually starts to return to normal over Q3, and we believe we can possibly improve upon that come Q4. It's a return to normal. We really just started gaining, I'd say, in May and June. That's where we picked up that 6% of the workforce during the quarter. It was predominantly in the latter half. Based on our projections, which I believe are reasonably conservative, we would get back to a more normal utilization over Q3. We've got kind of normal into the forecast, but I do believe there could be some upside in Q4 if we're able to progress in some of the areas better. It's a direct correlation between manpower and utilization right now.
I'm assuming there's a cost associated with attracting that new talent. Like, you know, how are you competing against, you know, guys like Finning or Deere?
It's market wage for us. I think, you know, one of the things, the different areas we've built upon, like our bench hands program, aren't things that a lot of other people can do. That's kind of a shop-based setup, and you gotta have enough mass. Our apprenticeship program, you know, it's for somebody to be able to build up. I think we're somewhere in a range around 70 total apprentices. You know, that doesn't happen overnight, especially because they're scattered through the years in equal distribution. We think, you know, we'll get roughly a quarter of that, a third or a quarter will come out as full HETs every year. I you know, not everybody can do that.
You know, I know some of our vendors have zero apprentices or had the last time I checked. Some have a significant amount. You know, the bench hand program isn't something I hear a lot about different companies doing that. Our ability to move people around the shop environment we have here versus the field and get work that matches, you know, some guys might wanna work longer extended schedules and have more opportunity to overtime and live in camps or some might wanna be home-based and be home every night and be more shop-based. I think we certainly have an offer of a work here, I think that matches a lot of different people's work-life balance and what they wanna do. I don't think a lot of others have that, even vendors.
Last question is just you talked about, you know, 6% increase in hiring. Maybe you can just comment on what attrition has been over the first half of the year.
Well, we had about. I actually have the numbers here. We had a loss of about, I'd say 20-odd people total in Q1 going into April of Q2, and we've recovered more than half of that in the May and June timeframe. This was really big. This was us resisting to pay those increases. We didn't see increasing wages as bringing more skilled trades into the region, that if all you're doing is people walking across the street, we're not actually bringing more resources into the area, we're not fixing the issue. But ultimately we start having people leave because these are, you know, these are significant wage increases. This isn't somebody getting CAD 0.50 an hour more, it's them getting CAD 15 an hour more.
Ultimately we had to match it or we would keep losing people. That's what we did. You know, that stopped and we were able to start recruiting again.
Thank you for your answers.
No worries. Thank you.
Thank you. Your next question comes from Brian MacArthur from Raymond James. Please go ahead.
Yeah. Thanks. Good morning.
Good morning, Brian.
Yeah. Maybe just some comments on DGI. How has that part of the business performed of late? Are you seeing an increase in interest as we continue to see that tight equipment and parts market?
Yeah, certainly. You know, it's performed as planned, slightly better, I believe, which was a tremendous accomplishment certainly during the pandemic and the limited ability to travel. 'Cause a lot of this work is finding assets and cores that are all around the world. You know, travel is a pretty integral part of that business. I'd say the demand on new equipment and people wanting to extend used equipment life longer, including ourselves, we're one of DGI's best customers internally, you know, certainly bodes well for their future. We have them looking at expanding more into Canada. There's a significant market here, and I think we're gonna set up a bit of a shop here for our DGI guys and be able to grow this business.
It's not a huge top-line business, but it's certainly shown to be resilient and consistent and with great opportunities for growth.
Okay. Thanks, Joe. I know you provided some color, but is there any reason to believe that technician availability is different from prior cycles? I mean, is this a tighter environment where your available talent pool has actually shrunk as people have left the industry?
You know, I'm just talking from my perception. I don't think the numbers have shrank. I think the demand for equipment has increased, and so you got more equipment operating hours and the same amount of people. We're not drawing them in, so that's just making the ones that are there of higher value. You know, we've got looking at ways we can get people from outside of the region. Again, this is just my perception, Brian, but I think historically we've been able to draw from other resource areas that were in a downturn. Whatever commodity it was, people that were working in that commodity in those regions, you know, that were no longer working, those were areas you recruited.
You know, there's not really any commodity area down, so people aren't looking to leave whatever region they're in now. That's really why we pushed that apprenticeship program saying, "We need to build our own, be it bench hands or apprentices, and not count on them just coming from different areas of the country that might be in more depressed resource markets.
Okay, thanks. That's it for me.
No worries. Thanks, Brian.
Thank you. Your next question comes from Aaron Macneil from TD Securities. Please go ahead.
Hey. Morning all. Thanks for-
Hello.
Taking my questions. Joe, I'm sure you're dying to answer more questions about inflation, so figure I'll add one. What are you doing to ensure, you know, projects like Fargo Moorhead or some of your other diversified projects don't experience the same inflationary pressures that you've seen in your oil sands operations? You know, I can appreciate the oil sands are, you know, it's own unique animal, but I mean, inflation pressures across parts and people are pervasive across sectors. Just wanna get your sense of what you're doing now to ensure that you don't see these pressures elsewhere.
Well, in areas we're actively bidding, including that large regional oil sands contract, we're putting it into the contract clauses that there's reopeners based on these unusual market conditions. We're making it more a contractual right than a mutually agreed upon amendment, you know, just giving it a bit more force and then also trying to increase the frequency. Just when there's high volatility, you don't want the overhang. You want the timing to match up as best you can. You know, when the difference is in indices 3% and your actual was 4 or 2, it's no big deal. You know, when the variance grows as big it is, then the overhang is a big deal. We're putting that into contracts.
Places like Fargo Moorhead are, I guess I would say, probably less of an issue because they have longer term profiles. You know, when you have 6 years of construction and 29 years of operation and maintenance, things tend to move towards the averages when you have terms like that. You know, short term inflationary pressures won't necessarily adjust. You'll You know, my guess is 10 years down the road, Fargo's inflation looks like an average inflation, although it may put some pressure on the first year of operating here. Then, that, I guess that's, you know, the key for us is just making sure what we learn and how the disconnect between indices and real costs are, we try and put directly into contract language so that, you know, it's not a mutually agreed negotiation.
It's actually, you know, a contractual right.
Okay. Understood. I'm done on the inflationary thing. Maybe a couple more follow-ups. Could you maybe walk us through, you know, your slate of projects for Nuna this summer, you know, given that it's the seasonally strongest quarter? You know, how does the job mix, I guess, compare year-over-year?
You know, it's pretty similar. You know, the largest driver being the Northern Ontario gold mine. You know, when we go through the bid pipeline, that's a combined Nuna and North American bid pipeline. You know, it's. There's equal distribution. I'd say probably the broadest distribution, you know, in those 10 or 12-odd dots in that middle row. You know, there's a couple of oil sands. They're easy to pick out, the red ones. There's a couple of infrastructure. There's a couple of gold. There's potash, iron, gold, platinum, nickel, diamonds. You know, it's probably the most diverse and active bid pipeline we've seen in a long time.
A lot, a good chunk of that is Nuna because it's outside of oil sands or areas we would look to partner with Nuna if there's larger asset requirements. They're meaningful terms and jobs as well. You know, it's not a-
Sorry to interrupt quickly. It's a great segue to the last question I had. You know, looks like there's a lot of diversified projects on the radar, a lot of them being smaller. Like, how many of these smaller projects could you reasonably execute on before it kind of becomes too cumbersome for a company of your size? I guess, like, the context of the question is just, you know, the oil sands operations were so efficient because they're all big, and they're all in the same area. I guess I'm just wondering, you know, if you're worried about losing some of those efficiencies if you were to take on a lot of those little projects.
These projects actually have good terms and reasonable size. 7 out of those 12 projects are plus CAD 100 million. These aren't, you know, a CAD 10 million tailings lift for two months in the summer somewhere. Multiple ones of them, not to be redundant, but multiple of them are multiple year contracts. It's not, you know, typical 3-month summer work kind of contract. There's some significant term and volume and dollar value in these contracts, and that's really what's extremely exciting about not only diversification. These are areas that typically are underutilized fleet in oil sands. You know, our 100- and 150-ton trucks that are small in oil sands and typically get high utilization in winter, but very low in summer.
This gives us an opportunity to get year-round utilization on those fleets for multiple years, hopefully in these longer term contracts. You know, these aren't distractions that are gonna be two-month jobs. These are meaningful jobs that'll have, you know, at least more than half of them that will be gains in utilization along with diversification.
Okay. Perfect. Thanks, Joe. I'll turn it over.
No worries. Thanks, Aaron.
Thank you. Your next question comes from Maxim Sytchev from National Bank Financial. Please go ahead.
Hi. Good morning, gentlemen.
Morning, Max.
Jason, maybe the first question for you. Do you mind just reminding us how we should think about the revenue ramp up at Fargo? Because, I mean, I presume it's gonna be some JV accounting. Yeah, can you just remind us how we should be thinking about this? Thanks.
Yeah. Next year, 2023 is the big year. 2023 and 2024. About CAD 650 million of our backlog is Fargo, and about CAD 150 million of that per year is in 2023 and 2024. That comes through in our combined revenue. It won't be reported revenue, but it shows in our combined revenue. That's quite a steep ramp from this year. Year to date, it's been very modest in the kind of 15 million year to date and a little higher than that through Q3 and Q4.
That's kind of the ramp. We've always said 2023 is gonna be kind of the step change for Fargo.
Okay. Okay, that's helpful. Thank you. Then, another question for Joe. You know, some of the clients in the oil sands have been you know, facing some you know, management changes and some pressure. Just wondering, in terms of what you're hearing in relation to the trends to insource versus, you know, outsource work, what is your sense right now from, you know, some of these bigger clients, if you can maybe comment? Thanks.
I guess I don't have much of a changing sense until I get a better understanding of what may happen with those executive teams. You know, I've generally the people we deal with are the guys with P&L responsibility that are overseeing the mine sites. They're generally, you know, those VP of Ops or GMs of sites that are usually the decision makers and the ones we're very much engaged with. Ultimately they get approval from whatever level in their organization. I don't think any of the changes that are occurring or may occur in any of our clients are going to affect our abilities and our negotiations are ongoing.
I really don't have a sense before if it's going to change perceptions and give us better opportunity to in-house some of the work that they're doing. You know, I guess I really lack a good answer on that for you, Max. I wait to see what happens and how, you know, if there's any change in strategy from those clients.
Right. I guess are you seeing any changes from your other three key clients on that front, or it's sort of business as usual?
You know, I believe one area, and I do believe this is an area we'll continue to make inroads on, is our maintenance and our maintenance rebuild, and component remanufacturing capabilities. I think there's certainly opportunity to do more of that for our clients, and I think they're, you know, we've shown more of them and done more of that work for them. I think, you know, near term, we're really focused on getting our own gear fixed and running, so it's hard to put much time into others right now, until we have more capacity built up. I do think that's an area that we could easily grow. Our clients are showing more and more interest in that.
In-housing some of the maintenance that they may be doing, or may have other vendors doing and bringing it in to us, I think that's a very real possibility.
Right. Do you mind maybe just providing a bit of sort of a bridge to how many people do you have to hire, like, in terms of absolute numbers or in terms of, you know, percentages, so that you have the capacity to do outside kind of your own fleet work? Like, is it, you know, 15%-20%, or is it much higher than that?
Actually, Max, excuse me, Max. We'd probably get back to, you know, where we expect to be with another 5-6% kind of add, and I think we'll get that in the next quarter. Then as we add, we're, you know, with our own high demand, I think we'll focus on improving utilization as we can grow beyond that. You know, this 5 or 6% is 5 or 6 guys, basically. It's actually about 11 guys for that 6% increase. That once we add another 11, actually probably 9-11, I think it was, we'll be at where we were in Q1 with our head count.
As we go above that, which I believe we will be able to do, we'll look to improve our own utilization using that manpower, but we'll also start looking at doing more work for others. We have been doing some and continue to do. It's just, you know, we wanna make sure we focus on our own fleet first, before we offer our maintenance services to others. Then I think our Acheson facility has the best capabilities and ability to draw people in, and this is where we've added quite a bit of capacity so that we can move equipment down here. I think we'll continue to be able to do that. Does that cover all where you were, Max?
Yeah, for sure. Just, I think in the past you said, you know, the goal is to get to CAD 25 million off external maintenance. Is that kind of still the number that you're working towards? Where are we right now as in run rate relative to those numbers? Thanks.
I think we're on track to actually exceed that slightly and predominantly from those rebuilds we did for the joint venture partner. You know, like I said, that's with us drawing back some capacity to work on our own fleet. I think the upside of that, Max, I think we'll exceed those numbers that you said this year. Like I said, as we get more manpower, we'll be able to increase upon that external maintenance work.
Okay. Super helpful. That's it for me. Thank you so much.
You bet. Thanks, Max.
Thanks, Max.
Thank you. Ladies and gentlemen, as a reminder, should you have a question, please press star followed by the number one. 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.
Thanks, Sergio. Thanks again everyone for joining us today.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your-