Morning, ladies and gentlemen. Welcome to the North American Construction Group conference call regarding the third quarter ended September 30, 2026. At this time, all participants are in 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 partic ipant 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 forward-looking information.
Additional information about those material factors is contained in the company's most recent management discussion and analysis, which is available on SEDAR or EDGAR, as well as on the company's website at nacg.ca. I will now turn the conference over to Jason Veenstra, CFO.
Thanks, Ray, and good morning, everyone. I'll start today's call with brief commentary on the financials, then pass the call to Barry for his operational and forward-looking remarks, and we'll conclude as per usual with Q&A. Starting on slide four, we delivered a consistent CAD 100 million of EBITDA in the third quarter on combined revenue of CAD 438 million, which was CAD 47 million up from last year's third quarter. IMC, which was acquired in the second quarter, contributed CAD 74 million of revenue and drove the year-over-year increase. Excluding IMC, Australia was up organically 5% in the quarter on commissioned growth assets. Canada was up over 20% on a like-for-like basis on much improved mechanical availability and strong demand in the oil sands region.
Year to date, we've generated solid and expected combined revenue of CAD 1.3 billion, which has allowed us to increase our revenue guidance for the year to a midpoint of CAD 1.75 billion. From a top-line perspective, the business is exceeding revenue generation expectations. Unfortunately, during the quarter, we also booked a significant life-to-date project adjustment for Fargo, which I'll outline in detail on slide six. Moving to slide five, Australia posted a gross profit margin of 11.9%, down from 14% we posted in Q2, and below expectations of between 15%-20% for the region. Two primary events drove this approximate CAD 15 million cost increase. In Queensland, we incurred approximately CAD 10 million in additional parts and labor to both improve and sustain equipment utilization at our largest site in that region.
In Western Australia, a pit wall failure at our largest site in that region caused various operational inefficiencies, given the impact to overall mine production, as well as the reconstruction of and inaccessibility to mine site haul roads. Canada posted a 10.5% gross profit margin, which was in line with expectation and a solid increase from the 7% posted in Q2, reflecting disciplined project execution, improved maintenance capability, lower repair costs, and the implementation of continued fleet efficiency initiatives. Moving to slide six, Q3 EBITDA was consistent with prior year, but EBIT was down given higher depreciation on higher revenue. Depreciation as a percentage of combined revenue came in at 16%, being a little higher than our expected range midpoint of 15%, primarily on MacKellar component depreciation.
Looking at G&A, when removing the Fargo and acquisition impacts, direct adjusted administrative costs were CAD 20 million, or 4.6% of combined revenue, in line with our 5% targeted threshold, and demonstrating operating leverage and discipline on stronger revenue. All told, adjusted EPS was CAD 0.25 for the quarter. Interest expense increased to CAD 21.3 million from CAD 15.3 million last year, reflecting the financing of our strategic expansion in Australia. Regarding the aforementioned impact of the Fargo project, we received a revised forecast in early October from the joint venture executive committee, which included a 9% increase in total project cost, which had a follow-on impact to us of approximately CAD 50 million to earnings before tax. This is represented in our financials as a CAD 30 million increase in G&A and a CAD 20 million impact in equity loss.
The project is now in a contract loss position, which requires 100% of the loss to be booked. The project is approaching physical completion, and the estimate we have received is not expected to have a further downward revision. We have added back the loss for adjusted purposes, as this type of project is considered non-core in nature, and as we have discussed previously, we will only enter arrangements in the future which provide operational control, consistent with the other joint ventures in which we are partners. Moving to slide seven, the business generated CAD 52 million of operating cash flow before working capital, supported by EBITDA performance net of cash interest. Free cash flow was an outflow of CAD 28 million due to the intentional capital spending investment in Canada and an approximate CAD 24 million impact from changes to working capital balances in our core businesses. Moving to slide eight.
Net debt remained consistent at CAD 1.1 billion. Trailing 12 net debt leverage is reported at 3.0 times, but is not yet benefiting from a full 12 months of IMC EBITDA. Based on the Q3 run rate, we are operating at a 2.8 times leverage ratio, with the plan to decrease that moving forward. Slide nine provides context on our debt structure. We are focused on debt reduction through free cash flow generation over the short term and medium term, and during that time, the majority of our debt is at fixed rates and not subject to changes in posted interest rates. In addition, the majority of our maturities are 2029 and later, giving us the stability and flexibility we need during this phase after significant growth. With those brief comments on the financials, I will pass the call to Barry.
Thanks, Jason, and good morning, everyone. As Jason just outlined, our third quarter performance highlights both the growth across our platform, with a record for Q3 combined revenue, and the work we need to do to translate that growth into more consistent earnings. We have a broader Australian platform, with IMC continuing on its growth trajectory during Q3. Our priority is to convert that activity into improved margins and cash generation, as operational challenges in Australia affected the quarter. We also saw our Canadian fleet gain early traction with improved mechanical availability and utilization. New awards in Northern Canada and stronger equipment demand in the oil sands were a true highlight of Q3. Unfortunately, the Fargo project had a major negative impact in the quarter, with delayed completion, schedule impacts, rework, and last-minute cost complete escalation, leading to a financial loss.
Thankfully, this project is in the final completion stages and one not to be repeated in the future. Moving to slide 11. Looking forward to what's to come, the opportunity has remained significant. On slide 12, it sets out our priorities for the remainder of the year. Our focus is on execution and delivering the operating improvements that support the fourth quarter expectations. Safety comes first, as it always does. Across all operations, our objective remains the same: everyone gets home safe. In Australia, we are further optimizing our workforce mix, building on improvements we recently implemented. Following significant growth in Queensland, we are also reducing discretionary operating costs while fully maintaining customer requirements. In Western Australia, our focus is on integrating IMC and commissioning its expanded fleet to support the work ahead.
In the oil sands, improving mechanical availability and fleet reliability remains central to our operating plan and to our ability to capitalize on the growing momentum we see in the region. We are also preparing for an orderly CEO transition, with continuity in our strategy, customer relationships, and capital allocation. These are practical priorities, and our teams are focused on carrying them through into the day-to-day performance. Moving on to slide 13. Our three strategic building blocks are central to our growth ambitions. First, scaling our tier 1 contractor platform in Australia. Second, securing infrastructure awards in Northern Canada. And third, expanding our mining services in Canada and the U.S. Across our 23 global operating sites, the approach is consistent. We position our people and equipment where our capabilities give us an advantage, deliver for the customer, and earn the opportunity to take on additional work.
Growth creates value when we execute it well and achieve an appropriate return on the capital we commit. Moving to slide 14. Australia remains our largest growth opportunity. Revenue has grown at a compound annual rate of 36% from the first quarter of 2024 through the third quarter of 2026. As of September 30, the Australian platform had approximately CAD 2.6 billion of contractual backlog and an AUD 8.2 billion bid pipeline. MacKellar and IMC give us scale and capabilities to execute larger, more comprehensive scopes across Eastern and Western Australia. They also broaden our exposure to copper, gold, lithium, iron ore, and nickel, while increasing our participation in lower capital unit rate projects. That opportunity is supported by a substantial market, including approximately AUD 280 billion of public infrastructure spending and an AUD 240 billion major project pipeline over the next five years.
Our incoming CEO brings deep Australian and international mining experience to help us build on this position. Further strengthening our Australian leadership, our incoming Managing Director of MacKellar brings significant market experience and relationships. The immediate task is to improve operating performance as the platform grows. Workforce efficiency, cost control, and the continued ramp-up of IMC are central to our expectation for a stronger fourth quarter. We need to demonstrate that the scale we have built can deliver more consistent margins and cash returns. Moving to slide 15. Turning to Northern Canada, Nuna continues to demonstrate the value of delivering well on an initial scope to earning follow-on work. In Ontario, successful completion of earlier work led to an additional award that extends our site presence from the fourth quarter of 2026 well into the second quarter of 2027.
Nuna also secured a multi-year extension at a project in Nunavut, as well as a new project in the Yukon. Our Indigenous partnerships remain fundamental to this business. A new Yukon community collaboration agreement supports training, employment, and business opportunities, adding to Nuna's established relationships across the region. With over 250 heavy equipment assets and a CAD 4.6 billion pipeline, Nuna is also pursuing larger infrastructure opportunities. These include dedicated subcontractor roles on teams pursuing a port and road project and defense infrastructure, as well as a four-way partnership advancing a northern corridor opportunity. These remain pursuits with procurement, government, and First Nations processes still to advance. Our role is to position the business carefully and continue earning customer confidence through execution. Moving to slide 16. In the oil sands, longer haul distances and broader customer requirements continue to support equipment demand.
Canadian utilization increased 30% year-over-year in the third quarter. The priority is to translate that activity into improved operating margins through reliable fleet, availability, and disciplined project execution. Our plan remains centered on our vast multi-life heavy equipment assets with clear objectives for maintenance and operations. Improved availability reduces schedule risk, allows us to serve visible demand more effectively. We will continue to be selective about work and investment, with returns guiding those decisions. We are now expanding our heavy equipment maintenance and services business. A recent CAD 135 million five-year contract creates additional near-term service opportunities with modest growth capital of approximately CAD 5 million for 25 on-highway units and support equipment alongside our existing fleet. This is a useful example of how we can grow by extending our capabilities without a proportionate increase in capital requirements. Moving on to slide 17.
Our bid pipeline shows a total of more than CAD 15 billion, including approximately CAD 4.5 billion in active tender and procurement. The opportunities span 14 resource categories, providing a broad range of potential work across our markets. The size of the pipeline gives us options. Our focus is on converting bids where the scope fits our area of expertise, the risks are understood, and the expected returns meet our standards. We do not need to win every opportunity. We will remain disciplined as projects move through the award process. On slide 18, I am excited to welcome Brad Rogers, who will join us as President and Chief Executive Officer and a Director effective December 1st. Brad brings more than 30 years of experience across mining services, infrastructure, and finance, including as CEO of Jupiter Mines and BBis Industries.
He is also a chartered accountant and former CFO with extensive commercial and corporate development experience. I know Brad is very eager to get started in his new role. His priorities outlined here build on the platform already in place, advancing North American growth opportunities, embedding operational excellence in daily performance, and maximizing the value of our Australian investment. Progress will be measured through contract awards and backlog conversion, fleet availability, margins, cash conversion, and returns on invested capital. The objective is clear, stronger cash generation to support deleveraging and total shareholder returns. Our focus through this transition is to maintain operating momentum and continuity for our customers and teams. Moving to slide 19, turning now to our outlook. Contractual backlog of approximately CAD 3.2 billion on September 30th underpins our full-year guidance.
We now expect combined revenue of CAD 1.7 billion-CAD 1.8 billion, with a midpoint of CAD 1.75 billion, compared to our prior midpoint of CAD 1.7 billion. We have also narrowed adjusted EBITDA guidance to CAD 370 million-CAD 400 million, lowering the midpoint from CAD 400 million to CAD 385 million. This reflects operational challenges in the third quarter while retaining expectations for a strong fourth quarter. Delivering that outlook requires the operating improvements that we have discussed today. Our updated guidance is focused on revenue and adjusted EBITDA, which we believe provides the clearest view of our operating performance and execution. Free cash flow can be difficult to forecast consistently given the timing of customer receipts and project expenditures. We remain focused on disciplined cash management and will continue to report our cash flow as part of our quarterly results.
The principal drivers in Australia, where we expect the continued ramp-up of IMC activity in Western Australia and a return to historical profit margins. In the oil sands, we anticipate a busy winter season supported by improved utilization, fleet optimization, and incremental project scopes. At Nuna, fleet expansion in Nunavut is expected to provide fourth-quarter uplift. We have clear priorities to finish the year. Our responsibility is to execute safely, improve margins, and convert the growth across our platform into cash generation and sustainable shareholder value. That concludes our Q3 presentation. We would be happy to take your questions.
Thank you. To ask a question, please press star one on your touch-tone phone. If you wish to withdraw a question, then press the pound sign. Once you have completed your questions and would like to return to the queue, please press star one. After the brief pause, we will begin the Q&A section. The first question is from Adam Thalhimer of Thompson, Davis & Co. Your line is open. Please go ahead.
Hey, good morning, guys. Thanks for taking the questions. Barry, just wanted to say it's been nice working with you during this interim period. Hoping you guys could expand a little bit on slide 17. It's a pretty decent size increase, CAD 900 million increase in the pipeline. The total opportunity went up a couple billion dollars. Hoping you could just comment on where that strength is coming from.
Well, thanks, Adam. Jason here to take that question. Yeah, we see the bid pipeline as very strong, just like you, primarily coming out of Australia, but also good momentum in the oil sands.
Yeah, I would just jump on that as well, Adam. I mean, there's all kinds of opportunity in the oil sands. I mean, our fleet is getting fully engaged with work in front of us, and we see great things coming there. There's all kinds of reclamation programs. There's pit expansions, increased overburden movement demand. Yeah, I mean, we just see that as being a great spot. Through Jason's point in Australia, there's some big projects we're looking at with some existing customers as well as new customers, both in the east and the west, that give us great opportunity into the future.
Feels like there's enough there to possibly drive a record backlog in the coming quarters. Is that fair?
Yeah, I think that's fair.
Absolutely.
Real quick on Australia, the issues you had in the quarter, I'm just wondering how much those are contained, and the gross margin preferred range of 15%-20%, if you can get back there in Q4, or is that a 2027 event?
Yeah, I mean, the increased cost, obviously, that was on one of our big sites in Australia and Queensland. What that is that's a bunch of maintenance costs that were brought forward in the period that'll likely extend into the end of the year. It's component change-outs, defect elimination on a large fleet on our largest site there, and that's what drove those costs. I mean, we see that likely lasting into the end of the year here, and beyond that, we should be caught up with that, and things should normalize to where our margins get back to where they belong.
Just to clarify, Adam, our expectation implied in the guidance is that we get to about 13.5% in Q4, leading into getting back into that 15%-20% range for 2027 when we issue guidance on 2027.
Okay, perfect. And, since you had the number, do you have the number for Canada, Q4?
That is at 12%, correct.
Great. Okay. All right, I will turn it over. Thanks, guys.
Thanks, Adam.
The next question is from Yuri Lynk of Canaccord Genuity. Please go ahead.
Hey there, good morning, guys.
Morning, Yuri.
Just wanted to pick up on the comments around debt reduction, and trying to get a gauge as to how committed you are to debt reduction. How is management thinking about balancing some of these growth opportunities, which likely require some growth capital to pursue them, with the stated objective of paying down debt?
Yeah, I can take that one, Yuri. We are fully committed. Given the statements we have made in some of the slides here, you can see the conviction on debt reduction. As it relates to the bid pipeline, given we do not need to invest in platforms anymore in G&A, it is all incremental, our number one threshold when looking at opportunities now is the debt leverage impact they have. So, the criteria is less than 2.0 times, and so we think we can accomplish debt reduction through leveraging our platforms in the three key regions, Western and Eastern Australia and Canada, and then at the same time directing free cash flow towards debt. So, the goal remains to get into the low twos, and to get to 2.0 in the medium term.
Okay. That is helpful. I understand the pipeline for Nuna is improving, but the fact remains we have got a situation here where the Fargo revenues rolled off. How do we think about some of the revenue puts and takes over the next couple of quarters, given that that is a big chunk of revenue that is rolling off and has not been replaced yet?
Yeah. So we see Nuna, barring a big win, which we are bidding on some three quite large wins in Nuna, which would be step changes back to the Côté level revenues out of Nuna. But we see about a 10% year-over-year increase in 2027 on revenues, and similar type increases in the other three regions. So, we will be providing 2027 guidance with Brad in the coming months, but I would expect organically, without step change wins, us to be up kind of 10% year-over-year in revenue.
That is just on-
That is excluding the Fargo impact. That is on organic wins and just the ramp-up that we are having still in Australia and benefiting from that on a year-over-year basis.
Okay. Good to hear. Okay. Thanks, guys.
Thanks, Yuri.
Our next question is from Sean Jack of Raymond James Limited. Please go ahead.
Morning, guys.
Morning, Sean.
I just wanted to drill into the maintenance overage with the Queensland client a little bit more. I am wondering if there is any intention to maybe adjust contract structures there, or just maybe change, go back to the client and change how things are done just to see, kind of mitigate the potential for something like this happening in the future, or are you guys pretty locked into your obligations?
No, it is a good point, Sean. Yes, absolutely, we are looking at that, at how we can, I mean, better smooth that sort of thing out. I mean, with the new Managing Director we have coming in through MacKellar, that will be his main task. Obviously, it is our biggest client is where we are dealing with this cost increase and just the way we do business with them. So yes, that is absolutely something that is on our radar and that we are in the midst of putting a plan together to do so.
Okay, perfect. That's good color. Then just on the Canada side, and I apologize if this is stated somewhere in the deck, but would you guys be able to kind of give us some color of like where theoretically Canada utilization sits today and potentially, given with what you guys are seeing, where we could kind of see utilization rates return to?
Yeah. I mean, presently, I think we're in that 55% range. I mean, obviously, we'd like to get Our aspirations are to get to 70. And that's what we're focused on with our fleet as far as focusing on that physical availability and making sure that our units are available to run and utilize to the utmost. So yeah, that's really where we're trying to get to, but we're presently around that 55 range.
Okay, perfect. That's all for me, guys. Thanks.
Thanks, Sean.
Thanks, Sean.
Our next question is from John Gibson of BMO Capital Markets. Please go ahead.
Morning, all. Thanks for taking my questions. Most of them have been answered. I just had a few follow-ups. Wondering, you typically put out 2027 guidance, I believe, towards year-end. Will this still be the case this year, or are you still kind of gathering all the pieces to, especially based on your strong bid pipeline, or guidance maybe early next year?
Well, with Brad starting on December 1, clearly going to blow through that role. I would expect potentially early in 2027, John.
Okay, appreciate it. Could you maybe just expand on some of the infrastructure projects in Canada outside the oil sands that you are bidding on, maybe end markets, geographies, that sort of thing? Thank you.
Yeah, I mean, they are scattered kind of all over the place. Ring of Fire is one we are really keyed in on, up in the Mackenzie Valley area. Yeah, they are pretty much coast to coast in Canada.
All right, guys. Thanks a lot. I will turn it back to you.
Thanks.
Our next question is from Tim Monachello of ATB Capital Markets. Please go ahead.
Hey, good morning.
Morning, Tim.
Quickly on just the backlog. You saw a pretty meaningful decline quarter-over-quarter. In the financials, it shows, I think, CAD 775 million came out of the backlog, which was higher than the combined revenue estimate. There was a contract in Western Australia that came off the board in the slide deck. So there's some rescoping or contract eliminations between Q3 and Q2?
Yeah, obviously the one project that come off in IMC is one that we had hoped to win, and then we didn't win, so that's come off there. There's others that we hope to replace it with, obviously. But yeah, that was the major hit in Australia.
On the backlog, Tim, we did have one contract which we had an early mutual agreement to exit, and we reflected that through backlog. That was just the mine site conditions were different than what was originally expected, and there was just an agreement to part ways. That kind of drove that mismatch that you are seeing there.
Got it. Okay. The capital spending year-to-date in Q3 was higher than I expected. Can you provide maybe some bookends on where you think total capital spending for 2026 will land and how you are thinking about 2027?
We expect to be in the kind of the CAD 225 million-CAD 230 million range for 2026 for all-in CapEx. I would say we are looking at 2027 being very similar to depreciation. If you see our depreciation run rate of 15%, 16% of combined revenue. That is where I would expect. As you identified, we made a very intentional decision in Canada to really support the fleet heading into a very busy winter season and what we think will be very busy years ahead. Q3 will be the high watermark of the year for CapEx.
Got it. Then, just to qualify your comments on the CapEx range, is that excluding, I guess, lease finance CapEx?
No, that includes lease finance additions. I do not have that number in front of me, but we just include that as a regular run rate. If we bring in something on a lease basis, we bring it into our sustained CapEx. That is inclusive of that.
Okay. To follow up on Yuri's comment, when you think about deleveraging and the scale of growth that you have in your opportunity set, when you think about deploying capital towards some of these growth opportunities, is there an upper end that you would say, "We are not going to spend more than X in 2027?" Or is that just a function of the cash flows that will come off these projects or expected cash flows?
No, it is really the ratios. Obviously, the larger the opportunity, the bigger impact it can actually have on our objectives. We have not given our business development functions a maximum they can look for. It is more about the ratio and the predictability of the EBITDA that comes with the opportunity. Again, to the response we gave Yuri, we really are focused on that ratio and what it can do for our business. We want to leverage the platforms we have, and to do that, if the scale is bigger, the math just gets better.
Okay. Can you just talk a little bit about, I guess, the change in demand that you are seeing in the oil sands, and what your expectations are for growth in oil sands in 2027 versus 2026?
Yeah, I think that, if you heard what Suncor put out, you can tell there is great excitement and capital spending on the way. We have seen this since early in the year, where they are looking at just upping their throughput in the plant, and as they said, their haul roads or their haul lengths are getting longer. So, it just means more demand for overburden to be moved and the capital projects that support the mine. We are seeing that. That has been ongoing, and we are just going to maximize that with making sure our fleet is fully available, ready to be put into work and bid and win these opportunities. We see more of the same into the new year. 2027 looks like a great year from everything we are hearing from our clients in the oil sands. It is blue skies ahead for opportunities for us.
Got it. Then, as you think about growth in the oil sands and deploying more capital there, in the context of returns being sort of below where your thresholds have been over the last little while in the oil sands, and the fact that you still have MSAs outstanding that sort of dictate pricing, how do you I guess maybe you could talk a little bit about the strategic initiatives you are doing to improve returns within a sort of a constrained pricing environment, or maybe you are seeing an improving pricing on the margin.
Yeah, first of all, what I would say is that, we would not look at bringing in more units into the oil sands unless we could sign something that was longer term. We do not want to go out and spend a bunch of capital and bring in fleet to the oil sands, and two years down the track, we are trying to look for spots to put that equipment. I think the way we improve our position in the oil sands is to try and do more unit rate work, where the better we perform, the margin increases with it, and we control that. That is kind of what we would see is, you take more risk, but at the same time, we understand the scope, and we feel that we can probably do better than we would if we were on simple time and material.
That is where we see the growth and the margin opportunities.
Okay, appreciate it. I will send it back.
Thanks.
Thank you. Our next question. We do not have any questions on the line at the moment. Ladies and gentlemen, if you would like to ask any questions, please press star one on your touchtone phone. If you wish to withdraw a question, you can press the pound sign. Once you have completed your questions and would like to return to, please press star one. There are no more questions on the line, so this concludes the Q&A section of the call, and I will pass the call over to Barry Palmer, President and CEO, for closing remarks.
Thanks, Ray. Today will be my final call as President CEO, and I am proud of the capabilities our team has built and the company that North American Construction Group has grown into over my almost 45 years with the company. I can say with confidence that our company is being left in good hands with our existing executive team under the leadership of our incoming President and CEO, Brad Rogers. Our teams remain focused and continue disciplined execution, disciplined growth, and ensuring that everyone gets home safe. Thanks again, everyone, for joining us today.
Thank you. This concludes the North American Construction Group conference call regarding the third quarter ended September 30.