Third Quarter 2023 Highlights:
- Reported revenue of
$194.7 million , compared to$191.4 million in the same period last year, was generated primarily by the heavy equipment fleet in the oil sands region. Equipment utilization of 56%, compared to 62% in Q3 2022, was impacted by changes in work scope and the time required to move heavy equipment into theFort Hills mine ahead of the winter season. When comparing to Q3 2022, revenue included full quarter impacts of updated equipment rates and the acquisition ofML Northern Services Ltd. - Our net share of revenue from equity consolidated joint ventures of
$168.7 million compared favourably to$161.8 million in the same period last year. TheFargo -Moorhead project posted its strongest quarter to date but was offset by Nuna which experienced permitting delays and the impacts of wildfires in northernCanada . - Combined revenue of
$272.6 million compared consistently to$269.6 million in the same period last year reflecting both consistent demand for our heavy equipment fleet and a strong quarter from theFargo -Moorhead project offset by Nuna's top-line performance. - Adjusted EBITDA of
$59.4 million and margin of 21.8% compared consistently to the prior period metrics of$60.1 million and 22.3%, respectively, on similar revenue levels as cost effective operation of the heavy equipment was more than fully offset by costs impacts incurred by Nuna. - Cash flows generated from operating activities of
$37.5 million , compared to$31.4 million in the same period last year due to lower distributions received from joint ventures in Q3 2022. - Free cash flow generated in the quarter was
$10.0 million , compared to$3.4 million in the same period last year, as adjusted EBITDA was primarily used for sustaining capital maintenance and cash interest. - Net debt was
$395.3 million atSeptember 30, 2023 , an increase of$1.0 million fromJune 30, 2023 , as free cash flow generation funded growth spending, dividends and trust activity during the quarter. - Effective
October 1, 2023 , we closed our acquisition ofMacKellar Group ("MacKellar"), a privately-owned heavy earthworks company based inAustralia . As disclosed onJuly 26, 2023 , total expected consideration remains$395 million and the transaction was fully funded by bank secured and vendor provided financing.MacKellar adds approximately 450 mobile heavy equipment assets; 1,000 employees, including over 375 maintenance personnel; and 15 operating projects across a variety of service offerings including contract mining, civil earthworks, dry and maintained equipment rentals and component rebuilds.
"Closing the
Consolidated Financial Highlights
Three months ended | Nine months ended | |||||||||||||||
(dollars in thousands, except per share amounts) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
Revenue | $ | 194,744 | $ | 191,383 | $ | 630,922 | $ | 536,122 | ||||||||
Total combined revenue(i) | 272,620 | 269,617 | 870,190 | 734,157 | ||||||||||||
Gross profit | 26,312 | 24,567 | 88,762 | 58,958 | ||||||||||||
Gross profit margin(i) | 13.5 | % | 12.8 | % | 14.1 | % | 11.0 | % | ||||||||
Combined gross profit(i) | 37,798 | 39,651 | 129,730 | 93,998 | ||||||||||||
Combined gross profit margin(i)(ii) | 13.9 | % | 14.7 | % | 14.9 | % | 12.8 | % | ||||||||
Operating income | 14,138 | 17,649 | 49,935 | 39,592 | ||||||||||||
Adjusted EBITDA(i)(iii) | 59,371 | 60,110 | 195,827 | 159,499 | ||||||||||||
Adjusted EBITDA margin(i)(iii) | 21.8 | % | 22.3 | % | 22.5 | % | 21.7 | % | ||||||||
Net income | 11,387 | 20,220 | 45,495 | 41,291 | ||||||||||||
Adjusted net earnings(i) | 14,295 | 17,558 | 52,060 | 36,875 | ||||||||||||
Cash provided by operating activities | 37,512 | 31,432 | 109,521 | 91,102 | ||||||||||||
Cash provided by operating activities prior to change in working capital(i) | 41,666 | 39,810 | 134,646 | 118,037 | ||||||||||||
Free cash flow(i) | 10,040 | 3,390 | (20,355 | ) | 2,462 | |||||||||||
Purchase of PPE | 39,295 | 31,205 | 114,210 | 83,591 | ||||||||||||
Sustaining capital additions(i) | 42,290 | 30,578 | 127,792 | 87,158 | ||||||||||||
Growth capital additions(i) | 1,727 | — | 4,475 | — | ||||||||||||
Basic net income per share | $ | 0.43 | $ | 0.75 | $ | 1.72 | $ | 1.49 | ||||||||
Adjusted EPS(i) | $ | 0.54 | $ | 0.65 | $ | 1.96 | $ | 1.33 |
(i)See "Non-GAAP Financial Measures".
(ii)Combined gross profit margin is calculated using combined gross profit over total combined revenue.
(iii)Adjusted EBITDA margin is calculated using adjusted EBITDA over total combined revenue.
Three months ended | Nine months ended | |||||||||||||||
(dollars in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
Cash provided by operating activities | $ | 37,512 | $ | 31,432 | $ | 109,521 | $ | 91,102 | ||||||||
Cash used in investing activities | (26,970 | ) | (28,042 | ) | (107,123 | ) | (79,945 | ) | ||||||||
Capital additions financed by leases | (2,229 | ) | — | (27,228 | ) | (8,695 | ) | |||||||||
Add back: | ||||||||||||||||
Growth capital additions(i) | 1,727 | — | 4,475 | — | ||||||||||||
Free cash flow(i) | $ | 10,040 | $ | 3,390 | $ | (20,355 | ) | $ | 2,462 |
(i)See "Non-GAAP Financial Measures".
Declaration of Quarterly Dividend
On
Financial Results for the Three Months Ended
Revenue of
Combined revenue of
Adjusted EBITDA and the associated margin of
Depreciation of our equipment fleet was 14.7% of revenue in the quarter, compared relatively consistently to the 13.8% in Q3 2022. Our internal maintenance programs continue to produce low-cost and longer life components allowing for depreciation rates to remain in this range.
General and administrative expenses (excluding stock-based compensation) were
Cash related interest expense (See "Non-GAAP Financial Measures") for the quarter was
Adjusted EPS of
Free cash flow was
BUSINESS UPDATES
2024 Strategic Focus Areas
- Safety - maintaining our uncompromising commitment to health and safety while elevating the standard of excellence in the field.
- Integration - focus on integration of
MacKellar Group , including identification of opportunities to better utilize our capital and equipment on Australian opportunities. - Execution - enhance our equipment availability through operational excellence with respect to fleet maintenance, reliability programs, technical improvements and management systems.
- Diversification - continue to pursue further diversification of customers and resources through strategic partnerships, industry expertise and/or investment in Indigenous joint ventures.
- Sustainability - commitment to the continued development of sustainability targets and consistent measurement of progress to those targets.
Liquidity
Our current liquidity positions us well moving forward to fund organic growth and the required correlated working capital investments. Including equipment financing availability and factoring in the amended Credit Facility agreement, total available capital liquidity of
2023 | 2022 | |||||||
Credit Facility limit | $ | 300,000 | $ | 300,000 | ||||
Finance lease borrowing limit | 175,000 | 175,000 | ||||||
Other debt borrowing limit | 20,000 | 20,000 | ||||||
Total borrowing limit | $ | 495,000 | $ | 495,000 | ||||
Senior debt(i) | (277,356 | ) | (265,931 | ) | ||||
Letters of credit | (32,037 | ) | (32,030 | ) | ||||
Joint venture guarantees | (71,887 | ) | (53,744 | ) | ||||
Cash | 40,441 | 69,144 | ||||||
Total capital liquidity(i) | $ | 154,161 | $ | 212,439 |
(i)See "Non-GAAP Financial Measures".
Subsequent to
NACG’s Outlook
Our expectation that our projected free cash flows for the full year 2023, in the range of
Key measures | 2023 | 2024 | ||
Combined revenue(i) | ||||
Adjusted EBITDA(i) | ||||
Sustaining capital(i) | ||||
Adjusted EPS(i)(ii) | ||||
Free cash flow(i) | ||||
Net debt leverage(i)(ii)(iii) | Less than 1.8x | Less than 1.4x | ||
Capital allocation | ||||
Deleverage | ||||
Shareholder activity(iv) | ||||
Growth spending(i) |
(i)See "Non-GAAP Financial Measures".
(ii)For clarity, the outlook for adjusted EPS and net debt leverage excludes the potential conversion of debentures.
(iii) Leverage ratio is based on the amended and restated Credit Facility effective as of
(iv)Shareholder activity includes common shares purchased under a NCIB, dividends paid and the purchase of treasury shares.
Conference Call and Webcast
Management will hold a conference call and webcast to discuss our financial results for the quarter ended
The call can be accessed by dialing: | |
Toll free: 1-888-886-7786 | |
Conference ID: 81053277 | |
A replay will be available through | |
Toll Free: 1-877-674-7070 | |
Conference ID: 81053277 | |
Playback Passcode: 053277 | |
The Q3 2023 earnings presentation for the webcast will be available for download on the company’s website at www.nacg.ca/presentations/
The live presentation and webcast can be accessed at:
https://viavid.webcasts.com/starthere.jsp?ei=1640181&tp_key=810f9fb3e6
A replay will be available until
Basis of Presentation
We have prepared our consolidated financial statements in conformity with accounting principles generally accepted in
Forward-Looking Information
The information provided in this release contains forward-looking statements. Forward-looking statements include statements preceded by, followed by or that include the words "anticipate", "believe", "expect", "should" or similar expressions and include all information provided under the above heading "NACG's Outlook".
The material factors or assumptions used to develop the above forward-looking statements and the risks and uncertainties to which such forward-looking statements are subject, are highlighted in the MD&A for the three and nine months ended
Non-GAAP Financial Measures
This press release presents certain non-GAAP financial measures because management believes that they may be useful to investors in analyzing our business performance, leverage and liquidity. The non-GAAP financial measures we present include "adjusted EBIT", "adjusted EBITDA", "adjusted EPS", "adjusted net earnings", "cash provided by operating activities prior to change in working capital", "combined gross profit", "equity investment depreciation and amortization", "equity investment EBIT", "free cash flow", "growth capital", "margin", "net debt", "senior debt", "sustaining capital", "total capital liquidity", and "total combined revenue". A non-GAAP financial measure is defined by relevant regulatory authorities as a numerical measure of an issuer's historical or future financial performance, financial position or cash flow that is not specified, defined or determined under the issuer’s GAAP and that is not presented in an issuer’s financial statements. These non-GAAP measures do not have any standardized meaning and therefore are unlikely to be comparable to similar measures presented by other companies. They should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. Each non-GAAP financial measure used in this press release is defined and reconciled to its most directly comparable GAAP measure in the "Non-GAAP Financial Measures" section of our Management’s Discussion and Analysis filed concurrently with this press release.
Reconciliation of total reported revenue to total combined revenue
Three months ended | Nine months ended | |||||||||||||||
(dollars in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
Revenue from wholly-owned entities per financial statements | $ | 194,744 | $ | 191,383 | $ | 630,922 | $ | 536,122 | ||||||||
Share of revenue from investments in affiliates and joint ventures | 168,667 | 161,823 | 516,637 | 413,027 | ||||||||||||
Elimination of joint venture subcontract revenue | (90,791 | ) | (83,589 | ) | (277,369 | ) | (214,992 | ) | ||||||||
Total combined revenue(i) | $ | 272,620 | $ | 269,617 | $ | 870,190 | $ | 734,157 |
(i)See "Non-GAAP Financial Measures".
Reconciliation of reported gross profit to combined gross profit
Three months ended | Nine months ended | |||||||||||
(dollars in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||
Gross profit from wholly-owned entities per financial statements | $ | 26,312 | $ | 24,567 | $ | 88,762 | $ | 58,958 | ||||
Share of gross profit from investments in affiliates and joint ventures | 11,486 | 15,084 | 40,968 | 35,040 | ||||||||
Combined gross profit(i) | $ | 37,798 | $ | 39,651 | $ | 129,730 | $ | 93,998 |
(i)See "Non-GAAP Financial Measures".
Reconciliation of net income to adjusted net earnings, adjusted EBIT, and adjusted EBITDA
Three months ended | Nine months ended | |||||||||||||||
(dollars in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
Net income | $ | 11,387 | $ | 20,220 | $ | 45,495 | $ | 41,291 | ||||||||
Adjustments: | ||||||||||||||||
(Gain) loss on disposal of property, plant and equipment | (311 | ) | (95 | ) | 189 | 1,069 | ||||||||||
Stock-based compensation expense (benefit) | 5,583 | 437 | 16,324 | (129 | ) | |||||||||||
Acquisition costs | 1,161 | — | 1,161 | — | ||||||||||||
Loss on equity investment customer bankruptcy claim settlement | — | — | 759 | — | ||||||||||||
Net realized and unrealized gain on derivative financial instruments | (2,618 | ) | — | (6,979 | ) | — | ||||||||||
Equity investment net realized and unrealized loss (gain) on derivative financial instruments | 572 | (2,925 | ) | (649 | ) | (5,140 | ) | |||||||||
Tax effect of the above items | (1,479 | ) | (79 | ) | (4,240 | ) | (216 | ) | ||||||||
Adjusted net earnings(i) | 14,295 | 17,558 | 52,060 | 36,875 | ||||||||||||
Adjustments: | ||||||||||||||||
Tax effect of the above items | 1,479 | 79 | 4,240 | 216 | ||||||||||||
Interest expense, net | 8,119 | 6,522 | 22,941 | 16,769 | ||||||||||||
Income tax expense | 1,733 | 4,983 | 11,892 | 10,184 | ||||||||||||
Equity earnings in affiliates and joint ventures | (4,483 | ) | (14,076 | ) | (23,414 | ) | (28,652 | ) | ||||||||
Equity investment EBIT(i) | 4,189 | 15,676 | 23,758 | 32,785 | ||||||||||||
Adjusted EBIT(i) | 25,332 | 30,742 | 91,477 | 68,177 | ||||||||||||
Adjustments: | ||||||||||||||||
Depreciation and amortization | 28,884 | 26,592 | 90,239 | 84,051 | ||||||||||||
Equity investment depreciation and amortization(i) | 5,155 | 2,776 | 14,111 | 7,271 | ||||||||||||
Adjusted EBITDA(i) | $ | 59,371 | $ | 60,110 | $ | 195,827 | $ | 159,499 |
(i) See "Non-GAAP Financial Measures".
Reconciliation of equity earnings in affiliates and joint ventures to equity investment EBIT
Three months ended | Nine months ended | |||||||||||||
(dollars in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||
Equity earnings in affiliates and joint ventures | $ | 4,483 | $ | 14,076 | $ | 23,414 | $ | 28,652 | ||||||
Adjustments: | ||||||||||||||
Interest (income) expense, net | (742 | ) | 589 | (915 | ) | 1,901 | ||||||||
Income tax expense | 448 | 997 | 1,294 | 2,167 | ||||||||||
Loss (gain) on disposal of property, plant and equipment | — | 14 | (35 | ) | 65 | |||||||||
Equity investment EBIT(i) | $ | 4,189 | $ | 15,676 | $ | 23,758 | $ | 32,785 | ||||||
Depreciation | $ | 4,976 | $ | 2,600 | $ | 13,572 | $ | 6,743 | ||||||
Amortization of intangible assets | 179 | 176 | 539 | 528 | ||||||||||
Equity investment depreciation and amortization(i) | $ | 5,155 | $ | 2,776 | $ | 14,111 | $ | 7,271 |
(i)See "Non-GAAP Financial Measures".
About the Company
About
Established in 1966 based on humble family values
For further information contact:
Chief Financial Officer
(780) 960-7171
IR@nacg.ca
www.nacg.ca
Interim Consolidated Balance Sheets
(Expressed in thousands of Canadian Dollars)
(Unaudited)
2023 | 2022 | ||||||||
Assets | |||||||||
Current assets | |||||||||
Cash | $ | 40,441 | $ | 69,144 | |||||
Accounts receivable | 78,570 | 83,811 | |||||||
Contract assets | 13,482 | 15,802 | |||||||
Inventories | 57,086 | 49,898 | |||||||
Prepaid expenses and deposits | 7,582 | 10,587 | |||||||
Assets held for sale | 501 | 1,117 | |||||||
197,662 | 230,359 | ||||||||
Property, plant and equipment, net of accumulated depreciation of | 695,176 | 645,810 | |||||||
Operating lease right-of-use assets | 13,151 | 14,739 | |||||||
Investments in affiliates and joint ventures | 85,713 | 75,637 | |||||||
Other assets | 11,198 | 5,808 | |||||||
Intangible assets | 5,881 | 6,773 | |||||||
Deferred tax assets | 284 | 387 | |||||||
Total assets | $ | 1,009,065 | $ | 979,513 | |||||
Liabilities and shareholders’ equity | |||||||||
Current liabilities | |||||||||
Accounts payable | $ | 76,173 | $ | 102,549 | |||||
Accrued liabilities | 41,017 | 43,784 | |||||||
Contract liabilities | 69 | 1,411 | |||||||
Current portion of long-term debt | 39,357 | 42,089 | |||||||
Current portion of operating lease liabilities | 1,767 | 2,470 | |||||||
158,383 | 192,303 | ||||||||
Long-term debt | 392,648 | 378,452 | |||||||
Operating lease liabilities | 11,761 | 12,376 | |||||||
Other long-term obligations | 25,924 | 18,576 | |||||||
Deferred tax liabilities | 80,713 | 71,887 | |||||||
669,429 | 673,594 | ||||||||
Shareholders' equity | |||||||||
Common shares (authorized – unlimited number of voting common shares; issued and outstanding – | 229,455 | 229,455 | |||||||
(16,052 | ) | (16,438 | ) | ||||||
Additional paid-in capital | 19,329 | 22,095 | |||||||
Retained earnings | 108,060 | 70,501 | |||||||
Accumulated other comprehensive (loss) income | (1,156 | ) | 306 | ||||||
Shareholders' equity | 339,636 | 305,919 | |||||||
Total liabilities and shareholders’ equity | $ | 1,009,065 | $ | 979,513 |
See accompanying notes to interim consolidated financial statements.
Interim Consolidated Statements of Operations and
Comprehensive Income
(Expressed in thousands of Canadian Dollars, except per share amounts)
(Unaudited)
Three months ended | Nine months ended | ||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||
Revenue | $ | 194,744 | $ | 191,383 | $ | 630,922 | $ | 536,122 | |||||||||
Cost of sales | 139,840 | 140,440 | 452,831 | 393,756 | |||||||||||||
Depreciation | 28,592 | 26,376 | 89,329 | 83,408 | |||||||||||||
Gross profit | 26,312 | 24,567 | 88,762 | 58,958 | |||||||||||||
General and administrative expenses | 12,485 | 7,013 | 38,638 | 18,297 | |||||||||||||
(Gain) loss on disposal of property, plant and equipment | (311 | ) | (95 | ) | 189 | 1,069 | |||||||||||
Operating income | 14,138 | 17,649 | 49,935 | 39,592 | |||||||||||||
Interest expense, net | 8,119 | 6,522 | 22,941 | 16,769 | |||||||||||||
Equity earnings in affiliates and joint ventures | (4,483 | ) | (14,076 | ) | (23,414 | ) | (28,652 | ) | |||||||||
Net realized and unrealized gain on derivative financial instruments | (2,618 | ) | — | (6,979 | ) | — | |||||||||||
Income before income taxes | 13,120 | 25,203 | 57,387 | 51,475 | |||||||||||||
Current income tax expense | 1,495 | 701 | 3,198 | 1,198 | |||||||||||||
Deferred income tax expense | 238 | 4,282 | 8,694 | 8,986 | |||||||||||||
Net income | $ | 11,387 | $ | 20,220 | $ | 45,495 | $ | 41,291 | |||||||||
Other comprehensive income | |||||||||||||||||
Unrealized foreign currency translation loss (gain) | 1,100 | (382 | ) | 1,462 | (398 | ) | |||||||||||
Comprehensive income | $ | 10,287 | $ | 20,602 | $ | 44,033 | $ | 41,689 | |||||||||
Per share information | |||||||||||||||||
Basic net income per share | $ | 0.43 | $ | 0.75 | $ | 1.72 | $ | 1.49 | |||||||||
Diluted net income per share | $ | 0.39 | $ | 0.65 | $ | 1.51 | $ | 1.33 |
See accompanying notes to interim consolidated financial statements.
Source:
2023 GlobeNewswire, Inc., source