Good morning, ladies and gentlemen. Welcome to the North American Construction Group conference call regarding the first quarter ended March 31st, 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 over to Jason Veenstra, CFO.
Thanks, Joanna. 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 remarks, and we'll conclude, as per usual, with Q&A. Starting on slide four, we delivered CAD 99 million of EBITDA in the first quarter, demonstrating sequential improvement in both earnings and margin performance. Australia produced a Q1 regional revenue record excluding IMC, including an all-time monthly record in March. IMC contributed CAD 65 million of revenue as expected. Canada also grew sequentially despite the full quarter impact of the 797 divestiture. This CAD 423 million start provides a solid foundation for our reaffirmed 2026 combined revenue midpoint of CAD 1.6 billion. Moving to slide five, the quarter's margin performance is an important indicator of operating execution.
Australia delivered a 16.7% gross profit margin, and Canada delivered 9.5% despite seasonal conditions in both regions. These results reflect disciplined project execution, improved internal maintenance capability, lower repair costs, and the implementation of continued fleet efficiency initiatives. Moving to slide six, Q1 EBITDA and EBIT were in line with the prior year quarter but improved meaningfully on a sequential basis over Q4 2025, up 27% and 119% respectively. Direct G&A was CAD 14 million or 4.3% of reported revenue, below our 5% target, demonstrating operating leverage on stronger revenue. Depreciation remained within our expected range at approximately 15% of combined revenue. Adjusted EPS was CAD 0.37.
Interest expense, in particular, increased to CAD 19.1 million from CAD 17.8 million last year, reflecting the financing of our strategic expansion in Australia. Moving to slide seven, the business generated CAD 63 million of operating cash flow before working capital, supported by EBITDA performance net of cash interest. Free cash flow was CAD 4 million after a CAD 34 million working capital investment in the quarter. Moving to slide eight, net debt increased CAD 18 million to CAD 196 million, reflecting growth capital, share purchases, and dividends. Net debt leverage remained consistent at 2.5 times, while senior secured debt increased to 1.7 x based on the payout of the convertible debentures.
IMC added CAD 125 million of debt on April 7th, its EBITDA contribution and financing structure are expected to keep the presented leverage ratios broadly consistent. Since commencement of our normal course issuer bid in November, we have returned approximately CAD 30 million to our shareholders through the combination of share repurchases and dividends, demonstrating our commitment to shareholder returns while simultaneously growing our business and expanding our global presence. With those comments on the financials, I'll pass the call to Barry.
Thanks, Jason, good morning, everyone. As you're seeing in our Q1 report, our operations teams on both sides of the Pacific performed ahead of expectations we had set entering the year. I'm encouraged by this performance, particularly in light of cautious outlook we communicated back in Q4 update as the quarter reflects disciplined execution, improved operating focus, and with that, early progress against the priorities we established in 2026 in both our core regions of Australia and Canada. As heavy equipment and civil construction company at our core, consistent disciplined execution is what drives our business. From my vantage point, that is what our teams delivered in the first quarter. With that, let's dive into slide 10. I'll start with some exciting updates regarding our previously announced acquisition of Iron Mine Contracting or IMC for short.
We successfully closed on IMC on April 7th, 2026, shortly after our Q1 wrapped up. This shifts our focus now on the integration of IMC into our Australian operations to establish a nationwide Tier 1 platform capable of executing large comprehensive Western Australia. Strategically, IMC is a strong fit. Culture, core values, and maintenance capabilities align well with our existing platform in Australia and worldwide. To remind everybody, IMC brings approximately 120 heavy equipment assets and roughly CAD 840 million of contractual backlogs. This also accelerates our objectives to expand lower capital unit rate work across Australia, where in times of geopolitical uncertainty, the Western world is increasingly looking for stable and predictable critical mineral supplies.
Having overseen our operations in Australia over the past couple of years, I'm incredibly excited about our opportunities on the continent and what that will mean for North American Construction Group overall. Moving to slide 11. As outlined in March, I want to share an update on our operational priorities and how we've been tracking since our last earnings call. I've been particularly encouraged by the increase of internal maintenance headcount during the quarter at MacKellar, which is a key driver in reducing the use of external subcontract labor and more efficient operations through improved equipment availability translating to improved utilization. Moving to slide 12. With my operational focus in mind, the next slide step back and look at the bigger picture and structural growth drivers we put in place over the past several years that will translate into visible traction in the back half of 2026 and beyond.
At a high level, firstly, scaling into a Tier 1 contractor platform in Australia. Secondly, securing infrastructure awards across North America. Third, expanding our mining services in Canada and the U.S. Diversified in scope, these are building blocks for an even stronger, more resilient operating profile and a deeper pipeline of opportunities across end markets. Moving to slide 13. Australia is our primary growth engine with operations across 18 sites with reasonably consistent conditions that support year-round equipment utilization. Our commodity exposure spans coal, gold, iron ore, lithium, copper, and mining-related infrastructure. IMC strengthens our Western Australia position and accelerates our move towards nationwide Tier 1 scale, particularly on rare earth and critical minerals market. This is all in the context of a contractor market that is over CAD 19 billion in size and of which our market share remains less than 10%.
The support of 2026, 2027 Australian federal budget, including major investments in critical minerals, fuel security, and streamlined project approvals, further reinforces our strong long-term outlook for mining activity and contract mining demand across that country. Moving to slide 14. Fargo- Moorhead advanced 5% in the quarter and has now moved beyond the 90% completion, further demonstrating our execution capability in large-scale civil earthworks. That track record supports our pursuit of major infrastructure opportunities and projects across Canada and the U.S. move from announcement towards execution. Our infrastructure bid pipeline is approximately CAD 5 billion, including roughly CAD 1.3 billion tied to the Ring of Fire, Northern Access, and Northern Basin opportunities. Moving to slide 15.
We operate across a broad geography from north of the Arctic Circle to the heart of Texas, being one of the most experienced operators in the Canadian oil sands with one of the largest fleets of haul trucks, shovels, and mining equipment in North America in the Canadian oil sands. We have identified our primary heavy equipment fleet and are focused on improving the mechanical availability of those units to best support our clients. While last year the main theme was budget constraints, this year the focus is increased production, and it's our responsibility to meet that demand in a cost-effective and efficient manner. Moving to slide 16. We are reintroducing an overview of our bid pipeline this quarter. Our global pipeline remains strong, and we are well-positioned to convert some of these opportunities into meaningful growth.
Operating throughout the regions, our global bid pipeline totals approximately CAD 14.5 billion, of which CAD 4.6 billion are in active tender and procurement phase. While Australia has approximately CAD 3.3 billion in its active pipeline, we continue to see strong opportunities for nation-building projects, defense contracting, and critical mineral mining in Canada. I'd like to highlight that these opportunities are based on strong demand for our heavy assets, low obsolescence offering. While other industries may face downward pressure to their business due to the threat of AI, our pipeline opportunities are going nowhere as mining services and infrastructure demand continues to ramp without alternatives. Turning to our 2026 financial outlook and guidance on slide 17, let me start with how I see our execution priorities and strategic growth drivers translate to our financials.
We started 2026 with strong visibility supported by our contractual backlog and bidding activities. Currently, our contractual backlog sits at CAD 3.9 billion, with CAD 1.5 billion of estimated annual revenue already secured for 2026, which is up CAD 1.2 billion during our last earnings call. Beyond our backlog, our total bid pipeline and bids currently in active tender, both of these again up from last quarter's call. Taken together, this provides improved visibility into the year ahead and supports our expectation for another year of growth for NACG. At the midpoint, we continue to expect combined revenue of CAD 1.6 billion, adjusted EBITDA of CAD 400 million, and free cash flow of CAD 120 million.
An important point on the cadence and contour of our adjusted EBITDA. While we were pleased with our strong start of the year, our guidance continues to reflect our original outlook for Q2 performance due to the seasonal extended spring break- up in the oil sands, which historically corresponds to 15% revenue impact between Q1 and Q2. Our clear focus under my leadership is to deliver to expectations, and I will make certain we remain focused on this objective. We, however, continue to expect meaningful improvements in the second half of 2026 as IMC synergies and opportunities are realized, newly acquired equipment is commissioned, and seasonal activity strengthens. Historically, from 2022 to 2025, second half revenue consistently exceeded the first half, averaging approximately 20% higher contribution. This profile is consistent with how our business typically builds through the year.
That ends my prepared remarks. We're happy to take any questions you have.
Thank you. To ask a question, please press star one on your touch tone 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. After a brief pause, we will begin the Q&A section. First question comes from Adam Thalhimer from Thompson Davis. Please go ahead.
Hey, good morning, guys. Congrats on a solid Q1. I wanted to ask about or I want to start on slide 16, which, as you mentioned, is kind of a new presentation of the bid pipeline. The Q2 award outlook is strong, but the Q1 2027 is super strong. I was just wondering if you could provide some color on, you know, why so many awards are in that Q1 2027 bucket.
Yeah, sure. I think what's happening is this stuff is coming out now. It's in the, you know, the EOI stage. You know, some of this stuff, it takes quite a while to get it through the procurement stage to where it actually, you know, is put out for tender and then go through the stage of awards. These are large projects, and it just takes that amount of time to get it through the process.
Can you maybe provide some color on geographically how that, how that shakes out?
Yeah, I would say geographically, Adam, primarily it's North America that is the early 2027. That's more of the lag, with the projects, going through a process here early in Q3 through Q4 and then award in early 2027. The Australian opportunities are more near term.
Okay. Last one is on that comment. I was curious if you could update us on the Western Australia demand and for IMC, how their pipeline has evolved since you guys did the acquisition.
Yeah. They're trucking along pretty consistent with what we thought. I think got a couple of really good projects, opportunities near term, which we're following very closely. Again, it's a busy, robust market over there, and they're poised in a good position to, you know, to challenge for some of these bigger jobs now.
I'll turn it over. Thanks, guys.
Thanks.
Thank you. The next question comes from Joseph Reagor with Roth Capital Partners. Please go ahead.
Hey, guys. Thanks for taking the questions, and congrats on a strong start to the year. I guess first thing, as we look at your revenue guide, do you guys open to breaking out what part of that is top line revenue versus, you know, the combined revenue, including JVs?
Yeah. Joe, I would say about CAD 100 million full year is JVs. You know, with how IMC was reported in Q1, it came through, you know, in the adjusted combined metric, but IMC moving forward will come through in reported revenue. The JVs aren't, you know, a massive contributor in 2026, about CAD 100 million of the CAD 1.6 billion is through the JVs.
Okay. Okay. Then, as you pointed out, the about 60 or so in that Q1 number is really IMC, which moves up to the, to the top line, right?
Correct. In Q2, that will all be reflected. We see about a 10% increase in Q2 from that 65. That will be in reported, quote-unquote, normal revenue moving forward.
Okay. As you guys think about margins from IMC, should they be similar to other Australian operations, or should we expect any movement there, as that transitions into Q2?
Our gross profit margin is quite consistent with Eastern Australia in the, in the, you know, mid to high teens. With unit rate work, it can bring more variability, so there could be more upside. EBITDA margin is quite different because it's much less capital intensive. Where Eastern Australia could be north of 30%, IMC will be in the kinda low 20s from an EBITDA percentage. Gross margin, very consistent. EBITDA, lower due to the less capital intensive nature.
Okay. All right, that's helpful. Thanks. I'll turn it over.
Thanks, Joe.
Thank you. The next question comes from Sean Jack with Raymond James. Please go ahead.
Morning, guys. You kinda touched on it just earlier. Just a question on IMC. Thinking about, how should we expect, you know, the year to kind of trend from a seasonality perspective. Are we gonna see similar, kind of behavior to the rest of Australia? Is there anything to point out?
Yeah. It's pretty consistent with the East. You know, the weather patterns are similar. Yeah, I wouldn't see it being much different. Like I said, they're busy. They're looking at lots of opportunities. I just see that being similar to the East.
Okay. Awesome. Just wondering, if you could give a little bit more color on the opportunities that you guys are seeing in the domestic market right now, like from an end market perspective. Like, you know, it looks like, from the new updated bid pipeline, a lot of this opportunity hangs in mining. Yeah, if you could just kinda speak specifically to the North American markets and what sort of jobs are on your radar, et cetera, that'd be great.
Well, I mean, it's quite expansive. I mean, obviously, you know, the recent announcement on the Ring of Fire, there's opportunities there. They're not necessarily mining-based because before they get into the mining, there's obviously all the infrastructure that's got to be built, whether it's roads, bridges, all that sort of stuff. I mean, that's on our radar. You know, critical minerals as well. A lot of that is there's infrastructure before that stuff goes ahead. Yeah, I mean, that's really between the two of them. It's the mine sites, that one, it's the infrastructure to get to the mine. As well as, you know, that stuff in the north with, you know, the likes of Grays Bay and opportunities there.
You know, a lot of road to build. There's deep ports. There's all kinds of things that we're tracking very closely.
Awesome. Last question would just be around, you know, with what we're seeing with energy prices right now, are you guys seeing a tonal shift or kind of a posturing shift at all from any of your oil sands relationships? Or are you guys expecting any things are trending?
Yeah. I think it's gonna be very, very busy this year in the oil sands, where that's everything we're hearing from our clients. I mean, we just met with them here, you know, our two major clients last week. You know, by all accounts, it's full steam ahead and, you know, there's ramping up on productions and that just equates to more opportunity for us. You know, like I said earlier on in the call is we just need to be poised and ready to go and support them however we can in the most cost-efficient manner, and we will.
Okay. Thanks so much, guys. Appreciate it.
Thanks, Sean.
Thank you, ladies and gentlemen. As a reminder, if you have any questions, please press star one now. Next question comes from Akshato, an investor. Please go ahead.
Hi. Good morning, team.
Morning.
Net debt stands at about CAD 896 million, which is almost 2 x the current market cap of the company. Yet I don't see any commentary from the team on leverage or net debt. In the past, team used to focus on reducing leverage post-acquisitions, and there was a constant focus on bringing down net debt over the quarters and even in the quarterly calls and the presentations, which I don't see no more. I guess my question is the team focused on leverage? Is that a priority for the team? If so, can you comment on how you plan to reduce the absolute net debt levels? You know, keeping in mind this is a business wherein the depreciation is real.
Thanks.
Yeah. It remains a significant focus of our company. We have communicated that and, you know, it remains a key focus. We're currently at about 2.5 x, that 896, as you mentioned, equates to 2.5 x. Our goal is to be 2.0x by the end of 2027, through the direction of free cash flow, to net debt. We understand enterprise value and how it's profiled between market cap and net debt right now, and we'd like market cap to be a bigger component of enterprise value.
Yeah, we expect with the growth investments we've made and the free cash flow that's gonna come from that, to direct that to get that CAD 900 million down on an absolute basis and on a ratio basis. All of our opportunities that we look to moving forward need to be less than 2.0 x as we invest in capital should opportunities arise. Over the past eight years, as we've grown this company to the size it has been, it's all been done with debt financing. That's where the CAD 900 million has come from. Yeah, it remains a focus. The board has provided a longer-term target of 1.5x .
That's the board-endorsed target. That will take longer than 2027, but that's where our ideal leverage ratio would be.
Okay, thanks. A follow-up would be like of the free cash flow that is forecasted, CAD 120 million, how much of that would you be moving towards reducing debt?
Dividends are the ones that, you know, we were looking to make sure that there's no disruption there. We may look to increase the dividend. That's an option to us. But outside of the dividend, you know, free cash will be directed to debt repayment.
Thank you, team.
Thank you.
Thank you.
Thank you. This concludes the Q&A section of the call. I will pass the call over to Barry Palmer, President and CEO, for closing comments.
Yeah. Thanks again, everybody, for your time today, hearing our news, and we look forward to talking again next quarter.
Thank you. This concludes the North American Construction Group conference call regarding the first quarter ended March 31st, 2026. You may now disconnect.