North American Construction Group (NOA) Q2 2024 earnings summary

Executive summary

• Achieved record Q2 adjusted EBITDA of $86.9M (26.3% margin), up 70% year-over-year, with strong operational performance and diversification, highlighted by the MacKellar acquisition and John T. Ryan National Safety Award.

• Combined Q2 revenue reached $329.7M, up 18% year-over-year, with Australian operations delivering record results and utilization at 82%, while Canadian operations faced weather-related disruptions and lower utilization.

• Net income for Q2 was $14.0M, up from $12.3M, with adjusted EPS of $0.78, a 66% increase year-over-year.

• Free cash flow was a use of $1.5M in Q2, mainly due to working capital changes and capital work in progress.

Financial highlights

• Combined gross profit margin improved to 18.3% (19.6% adjusted for one-time loss), up from 13.0% in Q2 2023.

• Adjusted EBITDA margin was 26.3%, with operating income rising to $38.7M from $10.3M year-over-year.

• Net debt ended at $832.7M, with leverage ratios at 2.2x net debt/EBITDA and 1.7x senior secured debt/EBITDA.

• Cash provided by operations before working capital was $69M; total capital liquidity was $189M.

• General and administrative expenses were $12.8M, 4.6% of revenue.

Outlook and guidance

• 2024 combined revenue projected at $1.4–$1.5B, adjusted EBITDA at $395–$415M, and adjusted EPS at $3.95–$4.15, with H2 2024 and 2025 expected to benefit from growth capital and improved utilization.

• Free cash flow expected at $100–$120M; net debt leverage targeted at 1.8x.

• Backlog stands at $2.85B, with anticipated contract awards in late Q3 or early Q4 in Canadian oil sands, Australian coal, and other resource markets.

• Utilization targets for Australia are on track, while Canada aims to reach 75% utilization by early 2025, contingent on asset reallocation and new project wins.