Earnings Call: Q1 2021

Apr 29, 2021

Good morning, ladies and gentlemen. Welcome to the North American Construction Group Earnings Call for the First Quarter Ended 03/31/2021. 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 the 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 over to Joe Lambert, President and CEO. Please go ahead. Thanks, Simon. Good morning, everyone. In this my first quarter at CEO, I was very pleased that our great team of employees marked the milestone with such a solid operational and financial performance. While our NECG operations executed our winter work proficiently and consistent with our high standards, our more recent and growing indigenous partnerships and investments in commodity and geographic diversification performed exceptionally. Q one was not without its challenges. Our enthusiasm for the vaccine rollout has been quelled by rising case loads. And while our business recovery and financial performance was excellent, our safety performance regression conflicts with our core values and needs our full focus and commitment. In looking at our slide four, the safety slide, NACG and our industry in general has seen an increase in our injuries. And I have said many times, we can't celebrate our financial performance if our employees are being injured. We have a strong organizational culture that wants to get this right, and we'll focus all levels of our organization until we see improvement. At NECG, we know no one goes to work trying to figure out how to hurt themselves, so we don't blame the injured party. A thorough investigation is completed after an incident, and we identify root cause to build corrective action with the goal to prevent reoccurrence. The harder part is preventing the injury in the first place. We don't need to touch the stove to know it's hot and will burn us. We know the hazards, and we need to mitigate or remove the risk. I will touch on a couple of hazards that we'd be focusing on this year. They are slip, trips, and falls in COVID safety. Slips, trips, and falls make up more than half of our recordable injuries. This past winter proved to be an especially hazardous one in that we had frequent temperature fluctuations with an unusually high amount of freeze thaw events that create poor underfoot field conditions. To address these issues, we have implemented increased training, communications, and field inspections for these slip, trip, and fall hazards with an increased focus on not just seasonally, but every shift where temperatures are expected to cross between freeze and thaw. These hazards are nothing new or unusual for the environments we work in, but we need to get more focused and proactive at how we address them. Although not a hazard that we can directly correlate to any specific injury, we know our safety protocols for dealing with a pandemic can be in direct conflict with good work task and safety communications. Essentially, what's good for addressing the pandemic are masks, social distance, and isolation, which is contrary to what's good for safety, which includes consistent communication and looking every employee in the eye and assessing fitness for work and clarity of task. Our focus now and going forward will be on finding new and better ways to achieve this assessment and communications necessary for good safety without putting our workers' health at risk. With that, I'll turn it over to Jason for a review of our financials before summarizing our operational performance and the outlook ahead of us. Thanks, Joe, and good morning, everyone. We'll begin the financial review on Slide nine. Revenue for the quarter of $168,000,000 was $30,000,000 below last year's Q1 as we continue to recover from the widespread impacts of COVID-nineteen. The prior year variance relates to the strong quarter we had in 2020, particularly at the Fort Hills mine prior to their decision to temporarily reduce the operating capacity at that mine. The year over year variance represents a 15% decline in revenue, but is trending positively, being 23% up from Q4 twenty twenty and is the third quarter in a row of substantial steady increases. The quarter enjoyed fairly standard winter weather conditions, albeit very cold in February, and the top line revenue achieved was largely as expected. The resiliency of the oil sands remains strong, and as new protocols become more routine and predictable, we continue to see our productive operating hours and utilization increase. As Joe will explain later, the 66% operating utilization achieved in Q1 is trending in the right direction from the low of 24% in Q2 twenty twenty. While, of course, critical to our results, reported revenue inherently lends itself to the programs where we directly provide our own heavy equipment and where we provide the labor force. Equity accounted interests, like Nuna, are not reported in reported revenue, and our external maintenance and mine management contracts do not factor prevalently into reported revenue. But these are strong contributors to both EBITDA and EBIT and led to 26% of adjusted EBIT being generated from outside the Fort McMurray Region this quarter. We remain on track for our near term target of 45% for this, the full year of 2021. We expect our reporting to change slightly in Q2 as our diversification efforts continue, and we look to accurately represent this to the readers of our financial statements. Gross profit margin of 19% reflected an exceptional operating quarter, as mentioned by Joe in his opening prepared comments. Key drivers of this margin achieved were an effective and efficient use of our fleet in moving the contracted volumes during the quarter. As disclosed in our financials, the Canada Emergency Wage Subsidy program continued to support margins, and gross margin was also positively impacted by the mine management contracts, which provide strong returns. These positives in the quarter were offset by continued cost impacts at the Millennium Mine as we look to improve performance of the complex operating conditions and the increasingly large heavy equipment fleet at that mine. Included in gross profit margin was depreciation of 18.5% of revenue for the quarter. The percentage is largely related to the increased idle time due to a combination of the extremely cold weather in February, haul road conditions, and unplanned maintenance. For reference, idle time as a percentage of overall equipment hours was 24% in Q1 twenty twenty one versus 17% in Q1 twenty twenty. Depreciation as a percentage of revenue is also being impacted by our increasing Ultra Class fleet, which consists of haul trucks with load capacities greater than three twenty tons. We have been strategically investing in these haul trucks over the past two years via equipment rebuilds and major component overhauls. These investments result in increases to depreciable costs, which consequently drive higher depreciation as a percentage of revenue. Direct, general and administrative expenses in the quarter were $7,000,000 equivalent to 4.2% of revenue. This spending percentage is consistent with expectation and was achieved through continued cost discipline and strict attention to discretionary and nonessential spending. All said, adjusted EBITDA of $61,100,000 was just a notch over Q1 twenty twenty and establishes a new quarterly record for NACG, which is very exciting for us given the shocks we've absorbed over the past twelve months. This EBITDA performance is almost twice the metric we posted in Q2 twenty twenty and reflects well the recovery we've experienced as we return to pre pandemic form. The Nuna Group of Companies played a significant part in this EBITDA achievement as they posted the most active first quarter in their history, which was, of course, as a result of the gold mine contract in Northern Ontario. As shown in the financials, our share of Nuna's revenue was $25,200,000 and the 21% gross profit margin also shown in the financials is a testament to a strong operational quarter during a complex ramp up phase. Adjusted EPS for the quarter of $0.65 was generally consistent to Q1 twenty twenty, which generated $0.70 Higher adjusted earnings this quarter were more than offset by the impact of higher shares outstanding in Q1 twenty twenty one. Interest continues to trend nicely as the 4% rate and the $4,300,000 cash expense in this quarter compares favorably to the 4.5% incurred last year. We continue to benefit from both reductions in posted rates as well as competitive rates in equipment financing. Moving to Slide 10, I'll summarize our cash flow. Net cash provided by operations of $42,000,000 was produced by the business and includes a negative impact of $18,000,000 of working capital changes that impacted our free cash flow in the quarter. Sustaining maintenance capital of $42,500,000 had a major impact on free cash flow. The majority of sustaining capital additions during the quarter were incurred during a busy winter season in maintaining the existing fleet. The remaining spending related to the purchase of smaller heavy equipment assets in advance of the upcoming summer construction season. As our stakeholders are aware, sustaining capital additions are typically front weighted in the year, primarily for these two reasons. As a reference, additions in the first quarters of twenty twenty and twenty nineteen were 3940% of full year spending. To close out the financial review, we'll move on to our balance sheet on slide 11. Liquidity of $151,000,000 reflects our strong liquidity position. EBITDA generation offset by sustaining capital as well as working capital has a correlated effect of consistent senior debt levels and a slight increase in net debt. On a trailing twelve month basis, our senior leverage ratio as calculated by our credit facility was consistent at 2.1 times, which is well below our covenant of three point zero. And with those brief financial comments, I'll pass the call back over to Joe. Thanks, Jason. On slide 13, you'll find our operational priorities for 2021. This slide summarizes our objectives, and I'll watch walk through each topic in the slides that follow and finish up with our outlook. Our first priority is always the health and safety of our employees. However, since I discussed that at some length earlier, I'll move on to the drive for diversification on slide 14. One item that deserves a bit of a clarification to prevent possible confusion is the basis for our measurement on this slide versus the customer consolidation notes in our MD and A. Since a large portion of our work outside oil sands is performed through partnerships and management contracts, the reported revenue is not indicative to the earnings contributions. As an example, in our 2020 annual report, you will see that 96% of our reported revenue was earned with our top four clients in oil sands. However, all of our diversifying projects are within either the remaining 4% of revenue or the equity accounted joint ventures and constituted 35% of our adjusted EBIT generated last year. Jason has confirmed what we'll endeavor in q two to provide more clarity and transparency to these items. With that clarification, I'll get back to the diversification subject. The acceleration part of this slide is where we expect to continue the momentum of synergies with our Nuna group of companies as evidenced by the recent commencement ramp up at the Ontario gold mine, combined with two recent tenders submitted through partnerships for multiyear mining contracts in Quebec. In addition, we're finalizing our tender as partner in a major earthworks infrastructure project in The US. With this diversification focus, we expect to continue to meet our oil sands customer needs with high utilization of our large fleet, while at the same time improving the utilization of smaller fleet outside of oil sands and reduce the consolidation risk by having more customers and more commodity markets and geographic regions. We will also continue to pursue diversification in low capital intensity growth areas such as The US mine management contracts and major earthwork infrastructure projects. These contracts generally have fleets provided and as such don't affect our operating utilization measures, but they offer low to no capital entry and diversification into other commodities and regions. The next slide 15 highlights the bid pipeline that drives our confidence in our diversification success and has led to the increased EBIT target to 50% by the end of twenty twenty two. The bid pipeline shows increasing demand and the expanding opportunities in other resources and geographic regions where commodity prices are as strong as we have seen in a decade. Our recent contract win, project commencement, and continuing ramp up of our JV with Nuna adds to our confidence. And most recently, we we have the two tender submissions through a partnership for the multiyear mining contracts in Quebec. This is especially notable as this Quebec market has proven difficult to enter, these would be our first projects ever in Quebec. Lastly, but most probably most importantly, we simply believe in our strategy and that a safe, low cost, experienced contractor with strong indigenous partnerships, an extensive and well maintained fleet, and a commitment to sustainability will have significant competitive advantage to win our fair share of these tenders. Our equipment utilization priority on Slide 16 links closely to our diversification objectives as we seek gains in utilization of the smaller end of the fleet, which is uncommitted and underutilized in oil sands. Without rehashing all the history here, I just wanted to note that the fleet utilization began to get back to normal at 58% in q four last year, with average utilization growing nicely to 66% in q one with a March monthly peak of 70%, which exactly matches the full quarter q one twenty twenty average. In addition to getting back to and above the trend line, we also believe our increasing diversification in countercyclical summer works, such as the Ontario gold mine, will continue to lessen the q two and q troughs and provide more consistent overall improved fleet utilization. One new addition to potential utilization improvements is the fleet telematics program described on the following slide 17. The telematics program is a result of many years of product research and testing and is the largest investment in fleet monitoring technology n s NACG has ever made. It is the first tool we believe will perform all the operations and machine health monitoring we need across all makes and models of equipment. We expect to operate the system with our own resources, but our install setup operation and future development is also being supported by both Finning and Caterpillar. As you can see from the slide data, there are many areas of direct benefit to operations, maintenance, and sustainability. Over the next two years, we expect to install telematics across our entire large equipment fleet and advance the analytics development into artificial intelligence and machine learning. We have an excellent team with great support. I look forward to sharing with you the benefits we have received as we implement and develop this system. Moving on to the next slide in our sustainability update. I'm very pleased on the progress we have made in just two months since our inaugural sustainability report. In particular, we have had great success in growing our indigenous partnerships with a 52% increase in year over year quarterly revenue. We have also recently completed our first sale of a second life rebuilt 400 ton truck haul haul truck to our Mekkasu partnership, which we are confident will be an excellent investment. Rebuilding an ultra class haul truck and investing that asset in our indigenous partnership fits nicely within our sustainability strategy. I am likewise pleased in the progress we have made in promoting inclusivity and diversity in our workforce and our policies promoting volunteer work through paid time off. In addition to these areas, we are looking at new policies promoting electric vehicles and also looking at research and development of hydrogen fuels, which I hope to share more with you in the coming months. In our outlook on slide 19, we have meaningfully increased our EBITDA and free cash flow ranges based on Q1 results in our most recent forecast. The record Q1 we posted combined with our contracted backlog gives us the confidence to increase these ranges early in the year here. Included in the free cash flow, we moved the bottom lane of sustaining capital up a bit with the approval of the telematics program. On the capital allocation front, debt reduction and share buybacks remain high on the list of capital allocation priorities with growth capital being allocated to the highly accretive shop expansion, which broke ground earlier this month. As highlighted in the materials, we we remain vigilant for accretive m and a, which is admittedly difficult in this environment, but it's definitely not impossible. Despite the obvious criteria of being accretive on a stand alone basis, our m and a filter is also focused on fit, synergies, and vertical integration to ensure further upside moving forward. I'll now hand the call back to the operator for the q and a session. Thank you. Your first question comes from the line of Yuri Lynk with Canaccord. Your line is open. Good morning, guys. Nice quarter. Thanks, Jerry. Joe, just on the guidance, so I understand you're taking it up a little bit in terms of EBITDA and free cash flow, and that's nice to see. Just is that more because the first quarter came in a little bit better than you expected? Or do you have more confidence in the back half of the year? Just a little more color on on the reasoning there. I I'd say it's of those, Yuri. Obviously, the first quarter is in the in the book, so that's locked in. But as as we progress these three months, we also have higher visibility on our work for the year and our and our backlog. So I you know, both of those contribute to pumping it up low. Okay. Any any more detail you can give on opportunities in in Quebec that you that you had referenced? They're Terms. They're, you know, Brownfield expansions of of existing mine sites. It's looking for some increased mining of satellite deposits, very much like I outlined in the previous call. So, you know, with high metal prices and guys looking to mine satellite pits and produce a bit more while their commodity price is high, They're three to five year mining contracts, you know, typical drill blast load haul, truck shovel operations. Anything else you want me to cover on that, Yuri? Or Is is it would that be something you're pursuing Or No. It's actually another partner. A group we've worked with before who's well established in Quebec and has the, you know, all the systems and processes we would be used to in in French language also. Yeah. That always helps. Yeah. And and a and a workforce too, a Quebec based workforce in camp. Okay. Okay. Interesting. I'll I'll turn it over there, guys. Sure. Your next question comes from the line of Brian Fast. So you've done a good job at controlling the costs within your control, I guess. But where are you experiencing inflationary pressures, I guess, outside of your control? And then how have you been able to mitigate those? I, you know, I've I can't say I've I've noticed anywhere inflationary at this point, Brian. I think mostly because, probably 95% of our fuel, as an example, is provided through our clients, so we don't see that impact. And and and, you know, we don't use a lot of materials in our work. It's it's labor and equipment are 90% of our business, and those have been very steady on a cost. I'd say the, you know, the biggest inflationary impact on equipment would would be the US dollar exchange rate and because a lot of our suppliers are out The US, and that's actually been fairly positive with the exchange going up to point eight roughly right now. So I, you know, it's I don't think we felt any escalation. I I I know I've I've seen what a two by four cost, but we don't use a lot of them in our work. That's fair enough. Thanks, Joe. And then then just given how this third wave has flared up, I guess, in Northern Alberta, have you had any issues with, labor availability there? You know, we we haven't seen an an impact. And I think to explain that a little bit, Brian, is that the the biggest impacts to us aren't really totally driven by a positive case. It it's actually how well we were able to isolate it. So, you know, our biggest impact is where we have a positive case or or somebody who, and and they expose themselves to many people on our cruise. So that one person could warrant 20 people being sent home for isolation for two weeks, as an example, if they're on the bus or in close proximity. So that's the areas where we try and mitigate the risk. So even if you have, a, you know, a doubling or two positive cases, if you've kept those isolated, it will be two. It won't be the 20 that were associated on a bus ride or something like that. So there is where we focus our our really in keeping that isolation and and the quarantine separating of the the people. So, you know, we we really haven't seen any increase in in, impacts on our workforce with the recent uptick. Okay. Fair enough. That's it for me. Thanks. No worries. Your next question comes from the line of Maxim Sychev. Your line is open. Hi. Good morning, gentlemen. Morning, Matt. Joe, I I guess a quick question and and a follow-up on Quebec contracts. So are these two separate, I guess, instances if, you you know, you could win one, lose another one, or it all come sort of comes in in in one bucket? These are two separate instances, two different clients Okay. And and two different mine sites. And but they're very similar, you know, mining support contracts, you know, load haul dump. Okay. That's helpful. Thank you very much. And then in terms of when I look on on page 17, of, the PRESA, the utilization metrics, So, you know, like, the peak was, you know, sort of 82%. Is it fair to say, like I mean, I know, obviously, everybody calculates utilization rates differently. That kind of low eighties is basically sort of as high as you can get given sort of all the moving parts and, within your fleet? Or how how should we think about this? I mean, can it structurally go higher? You know, it could go higher, but we do see it as a fairly close to a practical limit. You know, if it was 85 or 86 or 87, that you know, I think everything went right. You tilt your head just right, you could get there. But, you know, we looked at it from, you know, I so I I think in that range, we've just looked at our historical numbers and when we've been flat out kind of where we've gotten to when at full demand in the q one or whatever. And that that's kinda how we came up with that practical limit. You know, the numerator is the same in everybody's analysis. Just a matter of what you wanna use in the denominator. So we kinda use that number based on where we think the practical limit is. Right. Okay. Makes sense. And then I was wondering if you don't mind maybe building on, the fleet telematics program, potential upside, and I guess, especially, you know, what that means for efficiency cost and maybe potentially the margin profile, down the line if it's possible. Yeah. I mean, this is an area I could totally geek out on because I love this telematics program and and and where we've got to with it because we've spent a long time on this. So, you know, you're monitoring there's, you know, dozens of dozens of sensors in on this equipment. It's as complex as any new electric vehicle or anything else. So being able to monitor all the machine health from the maintenance side, it gives you an opportunity and an ability to predict failures before they become bigger issues. And so if we can do that, the intention is we we improve our availability, we lower our cost, we we make our components last longer. And that maintenance side, especially when it comes to the AI and the machine learning side and being able to to set up parameters in in establishing your particular environment and not just the generalized parameter. So, you know, that'd be like, know knowing exactly at what temperature you should intervene on an engine, and those kind of things. And and on the operating side, you know, you you can monitor every move of a machine. So when it comes to training, when it comes to monitoring, and getting more proficient and efficient in operating and preventing damage, being able to monitor those machines real time, location, knowing speed, everything, it gives us a great opportunity to improve our training and our operator capabilities. And then, you know, last but certainly not least on the sustainability side, being able to monitor our fuel burn, these these are all pointing to making assets last longer and improving on a fuel burn, which and our idle time is an example. You you note earlier where Jason talked about, you know, the increase in our idle time over winter. If we can you know, when we have 20 to 25% of our equipment hours being in idle because of temperatures, if we can get a little better at shutting that down, you know, and saving five or 10% of the the hours and and without impacting our operations efficiency, you know, that's could relate to a five to 10% increase or re reduction in fuel burn, which obviously would reduce emissions. So, you know, it's just an all around great opportunity with this. And and I've you know, I don't have a lot of tangibles to show you yet, but as we get this in and and implement it over this year, I I really look forward to showing you what we're getting out of it because it's it's a pretty amazing system. Yeah. No. It's that sounds pretty exciting. Thanks for that. And maybe just one last question. You talked about, you know, potentially looking at, at m and a as capital deployment strategy. Any potential updates there in terms of, what, you know, you guys are potentially looking at? Thanks. I you know, I'd just say that the items that kinda fit into our wheelhouse and our strategy and, you know, whether it's whole companies or bolt ons, think vertically integrates with our maintenance, having the same culture being, you know, gives us the diversification we're looking for in commodity and geography. You know, those are all all areas we're looking at, opportunities. Okay. Okay. That's super helpful. Thank you so much. No worries, Max. Thanks. Your next question comes from the line of Tim Monachello. Your line is open. First question here just on the backlog. I noticed a nice uptick in the in the, equity investee portion of that backlog. I'm curious, if there's any read throughs there to diversification. Was there any new awards won in the quarter that weren't mentioned? Yeah. Tim, Jason here. I can take that one. That was that's just an update to the gold mine project at Nuna. So there's no new contracts in there. But as we've, you know, understood that opportunity better, we've been able to increase that backlog number. So has the scope of that project increased? Yes. It has. Just, you know, with the with the ramp up and just understanding the, the scope of work more clearly, the the gross number has has increased from from what we kinda communicated back in October. So we do see that through the, through the backlog number. Okay. Would that be mostly related to, I guess, the timeline of the project being extended, or do you expect that, you know, the quarterly revenue run rate should increase for that project? I'd I'd say it's a little bit of each. There was there was some slight scope increase, but there's some also some, some timing expansion on that. So it it I wouldn't say either of them are significant. It'll be spread out over twenty eight months, thirty months. Okay. Got it. Second question for you is just around slide 15. And if I look at, I guess, slide 15 from this quarter and Slide 22 from last quarter, it seems that the project outlook has materially accelerated. Most of the projects last quarter were sort of in that twelve to eighteen month time frame or or longer, and now it seems that most of the project are are before the twelve month time period. So, I guess, I was hoping for some commentary around how you're viewing this outlook and and what's what's driving that acceleration. Well, I don't know if the same dots have moved in more than the three months that are in there, but that a couple of ones I mentioned are pretty quick turnaround. Just like these two partnerships in Quebec are, you know, we just got them in in q one, and we're we're bidding them. And we expect the awards will occur in q two. So, you know, they're pretty quick turnaround because they have starts that are gonna be in 2021. So, you know, the the I guess, the few we've added on are are more more near term, and there was, I think one we pulled off that was a bit further out that, we don't think is gonna happen now. Okay. Would, I guess, in in terms of those Quebec projects, are you able to speak to the size of those? You know, they're in the range of total revenue. We're in a partnership with them that would be between a hundred and 300,000,000 at this point is our where we're looking at them, and they're stretched out over three to five year contracts. Okay. That would be key notice. I guess the other thing you would see there, Tim, is we've had significant tenders coming in within the oil sands also just in the last month. So some of those red dots there that are brought forward were were just tender package, and that's that's pretty typical that we'll see them come out in kind of the February, March time frame for oil sands, major projects work. Sorry. I interrupted your other question there, Tim. You just said a hundred to 3 hundred million. I was curious if that was cumulative between the two projects or hundred to 300 per project. No. No. One of them will be around a hundred, and the other one will be around 300. So cumulatively, it'll be 400 if we if we were fortunate enough to win them both. Right. And if you did win those two projects, would there be any expansions to the CapEx program for 2021, or could you do this within the the current fleet? We're we're looking at doing this with our current fleet and and the smaller end, like I said, in our in our diversification strategy is why it fits extremely well. So these are a hundred and a 50 ton trucks, which are the small end of our oil sands fleet. But when you get into those areas, it's a bigger It's you know, those those are considered large trucks in those applications. So I think we actually have an opportunity and advantage in in being our small trucks are big over there. They're bigger. Okay. Great. And then just to follow on your last comment, around the oil sands activity. I was wondering if you could just characterize what you're seeing in terms of, early insights into summer civil construction programs. Yeah. We we've had a couple of large bid packages that that actually extend over multiple years on, on several scopes from summer construction. So we we are seeing what we think is an uptick. We'll we'll we'll continue to see summer civil work come out between now and, you know, the May even for June kinda starts. But, you know, everybody in oil sands is running at full capacity. The curtailments aren't there anymore, and and we're seeing scope packages come out, more like what we'd say is average, although I can't remember what average years are anymore. It's been so long since we've had two in a row. Right. Okay. No. That that's helpful. If you were to win something sizable, do you think that would be something you'd press release, or would that just flow into, into quarterly results? Oh, I'm sure we would. You know, especially if it, is a unique like, an entry into Quebec, something like that, I'm sure we would press release those. And and those are significant enough size. Oh, you mean in oil? Yeah. I was I was meaning more in oil sense. I I don't know if we would. I think if just the matter if it was gonna be a a a significant change to what we would normally expect. If something came up that was unusual and a large dollar amount, I think we would. But if it was just, you know, winning a bit more summer work than a normal year, I don't think that would constitute press releasing. Right. And would that be the main driver of the, I guess, the range of your within your guidance? Well, our our main drivers are q one being in the books and then what we know about, but, you know, we aren't we aren't cooking any big wins in there. And I think we're we're fairly conservative on if it's in tender, we don't book it in backlog. So this is really looking more work in hand or what our typical work we would expect in our existing contracts. So, you know, I we haven't booked and and I don't roll the dice on on those ones as far as bids. They're they're they wouldn't be in there. Okay. And, sorry. Last one for me. Not trying to monopolize call here. But just around the Atchison shop expansion, I'm curious if you could just speak a little bit about how that third party maintenance business is is progressing. And if that shop expansion, do you expect that to to drive higher revenues in that third party maintenance business? You know, absolutely. It gives us four more bays. It gives us a cold storage facility. It you know, they they highlight in the back of there. So it just gives us more capacity to do things. We didn't have a tremendous amount of third party in the first quarter, but we we did have, you know, a pretty peak quarter in our component remanufacturing for our own use, which actually is kinda self fulfilling. That's why we didn't do a lot of external stuff as we're doing mostly for our ourselves, which is where, you know, you see the high capital spend. A lot of that was us doing our own components. You know? But but you will see, you know, this this sale of the second life rebuild to our Mikasa partnership. I think that, Jason, does that get booked as, external maintenance or that rebuilder? So I'm not sure how that I don't wanna put Jason on the spot here. But, you know, I I guess, suffice to say that or, Tim, that we expect we expect the shop expansion to give us more opportunity for external maintenance, along with being able to do more of our own. And and and we have had great success in getting skilled workforce in here and expanding on that. I think we've, you know, almost tripled what we originally had in here from when we entered the building just over two odd years ago. Gotcha. Well, I appreciate you guys, answering my questions, and I'll I'll turn it back. No worries. Your next question comes from the line of Devin Schilling. Congrats on the strong quarter here. Thanks, Dan. Just looking yeah. Just looking here, it looks like you guys added some some equipment in q one, twenty five pieces to the to the smaller fleet. Is this largely for the gold project in Ontario or or other potential work on the horizon? Yeah. I'm not exactly sure which side, but I think these are just, these are single life assets that we churn through. We don't do engines, and I I think that's predominantly on those single life assets, and we typically get them over the winter because that's when our peak usage is. And so you're just seeing them purchased into the fleet in q one. Okay. Okay. Again again, tying back to the same reason why q one capital you know, it's sustaining capital in those ones even though you're replacing a unit. But, know, we would have a a small excavator, and that's why there's so many of them too. If there's twenty five four hundred ton trucks, you'd notice it a lot more on the numbers because it it'd be a bigger number. Okay. Yeah. No. That's helpful. Thanks. And also here, one one of your operational priorities for the year is is lowering your, your dealer provided maintenance work. Can you just maybe remind me how much how much of this maintenance work is still being outsourced at this time? You know, I I'd I'd give a a a rough number that maybe five to 10% of our workforce support comes out of, vendors, and, predominantly, we try and limit that to warranty work. But we we've had great success in our development of our apprentice program and recruiting of HETs. I think, you know, year on year than q one, we we more than doubled our own field maintenance mechanics, which every every one of those guys is offsetting a you know, could be offsetting a vendor that we might have had in q one last year. Okay. Yeah. No. That's that's very helpful. Thanks a lot, guys. I'll turn it over. No worries. Thanks, Devin. This concludes the Q and A section of the call, and I will pass the call over to Joe Randert, President and CEO, for closing comments. Thanks, Simon. And my thanks to all of you for joining us today and for continued interest in our growth and diversification journey. I'm very excited about our opportunities to advance our business in 2021 and what we all hope and expect to be a much healthier and more stable environment. And thank you, ladies and gentlemen. This concludes the North American Construction Group q one twenty twenty one conference call. Thank you for participating. You may now disconnect.