North American (NYSE:NOA) released second-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below.

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Summary

North American Construction Group reported a strong first half of 2026 with a total combined revenue of $456 million for Q2, supporting a revenue midpoint target of $1.7 billion for 2026.

Australia remains a significant growth engine, contributing a 31% compound annual growth rate in revenue from the first half of 2024 through the first half of 2026.

The acquisition of IMC has positively impacted EBITDA and EBIT, with the company planning to reduce net debt leverage from 2.9x to 2.6x.

Adjusted EPS for Q2 was $0.32, with an increase in interest expense due to strategic expansions.

The company raised its full-year revenue guidance to $1.6 billion to $1.8 billion, reflecting a 14% increase over the prior year.

The strategic focus includes scaling operations in Australia, expanding mining services in North America, and enhancing fleet efficiency.

Operational highlights include a $3.8 billion contractual backlog and a diverse $12 billion bid pipeline, with significant opportunities in mining and infrastructure.

Management expressed strong confidence in continued growth and operational execution, with plans to announce a new CEO shortly.

Full Transcript

Jason

Million from last year with IMC contributing $91 million of revenue in the quarter. Excluding IMC, Australia was up organically 15% in the quarter on commission, growth assets and strong execution. Offsetting these increases was the year-over-year impact of the divestiture of the ultra class haul trucks in Canada. The $456 million of total combined revenue finished off a strong first half foundation of over $875 million, supporting our 2026 combined revenue midpoint of $1.7 billion.

Moving to slide 5, Australia posted a 13.6% gross profit margin and Canada delivered a combined adjusted margin of approximately 7% despite difficult seasonal conditions early in the quarter in both regions. These results reflected disciplined project execution, improved internal maintenance capability, lower repair costs and the implementation of continued fleet efficiency initiatives, and importantly are trending in the right direction heading into the second half of 2026.

Moving to slide 6, Q2 EBITDA and EBIT were both up meaningfully from the prior-year quarter on the acquisition of IMC and a more typical quarter from the Fargo joint ventures. Direct adjusted G&A was $15 million, or 3.8% of reported revenue, well below our 5% targeted threshold, demonstrating operating leverage on stronger revenue. Depreciation as a percent of combined revenue dropped to 13% from 16% last year as IMC's lower capital intensity resulted in the combined number being lower than our expected range midpoint of 15%.

All told, adjusted EPS of $0.32 was generated by solid operational performance. Interest expense increased to $18.9 million from $14.1 million last year, reflecting the financing of our strategic expansions in Australia. Our average cost of debt for the quarter remained consistent at 6.4%. Moving to slide 7, the business produced $78 million of operating cash flow before working capital, generated by EBITDA performance. Net of cash interest, free cash flow generation was $23 million after a $13 million positive working capital change in the quarter.

Moving to slide 8, net debt increased $191 million to $1.1 billion, reflecting the acquisition of IMC and growth capital equipment purchased during the quarter. Trailing twelve-month net debt leverage is reported as 2.9 times but, importantly, is not yet benefiting from 12 months of IMC EBITDA. Based on our second half run-rate, we are operating at a 2.6x leverage ratio with the plan to decrease that moving forward. Senior secured debt remains steady at 1.7 times based on the $200 million of senior unsecured notes we raised in the quarter and the impact of unsecured debt that partially funded the IMC acquisition.

With those comments on the financials, I'll pass the call to Barry.

Barry

Thanks, Jason, and good morning everyone. As Jason just outlined, our first half performance was stronger than expected entering the year and gives us the confidence to raise our full year revenue outlook. More importantly, the quarter reinforced that North American Construction Group is at an inflection point. The strategic groundwork we have put in place is increasingly translating to measurable growth, stronger earning visibility and a more resilient operating profile.

Our operating platform continues to evolve and there's even more opportunity ahead of us. We are now seeing clear evidence that our broader geographic reach, expanded capabilities and operating discipline are working together. Our focus is to convert that opportunity into quality earnings and free cash flow through consistent execution across all operations. Slide 11 summarizes the three strategic building blocks supporting our growth: first, scaling toward a national Tier 1 contractor platform in Australia; secondly, securing infrastructure awards across North America; and third, expanding mining services in Canada and the United States. These are distinct markets, but the underlying model is consistent. We establish a position where our equipment, people and execution capabilities create the right to win. We then deepen our customer relationships, expand the scope of work and allocate capital where we can earn attractive returns. The regional updates that follow are proof that this strategy is gaining further traction.

On slide 12, Australia remains our primary growth engine. Revenue has increased at approximately a 31% compound annual rate from the first half of 2024 through the first half of 2026, and first half 2026 revenue was 14% above the second half of 2025. This momentum reflects the scale we have added through McKellar and IMC, supported by favorable operating conditions and strong market demand. Together, McKellar and IMC give us a broader national presence and the capability to pursue larger, more comprehensive scopes across all of Australia.

IMC's new 8-bay Machia workshop is another important step. It expands our maintenance capacity and supports our equipment rebuild program as well as the larger projects we expect to pursue over time. The strategic value extends beyond scale. We are increasing our exposure to lower-capital unit rate work and diversifying across gold, lithium, iron ore, nickel and other critical minerals. This combination will support more consistent utilization and a better balance of growth and returns.

This integration is also benefiting from a close alignment in safety, culture, core values and maintenance capabilities, which is critical to sustaining performance as the business expands. As of June 30, our Australian operations had approximately $3.4 billion of contractual backlog and a further $3.9 billion bid pipeline supported by approximately $278 billion of public infrastructure spending and a $242 billion major project pipeline. This gives us meaningful runway as we continue building the platform.

Turning to slide 13 in Northern Canada, where I want to focus on our infrastructure discussion for today's call. Our strategy is to position capital and capabilities where our operating experience provides a clear advantage. NUNA is a strong example with a fleet of approximately 230 heavy equipment assets. New equipment is arriving in Nunavut during the third quarter, increasing capacity and mechanical availability at an established mine site. We expect that expansion to drive approximately 20% site-level revenue growth, with our ownership stake providing North American exposure to NUNA's growing earnings contribution.

At the same time we are executing a land-and-expand strategy across priority mining regions. The Yukon infrastructure award and three initial projects in Ontario establish footholds from which we can pursue larger follow-on scopes. Our ability to safely deliver on time, on budget, with zero deficiencies is how we earn the opportunity to do more for these customers. NUNA's deep remote operating expertise, established infrastructure and Indigenous partnerships are difficult to replicate.

Those capabilities position us well as critical minerals, defense and nation-building investment advances across Northern Canada. With approximately $5 billion of opportunities in the regional pipeline we see a significant pathway to long-term growth while remaining disciplined in how we pursue it. Turning to slide 14, in the oil sands, customer demand is shifting towards more equipment-intensive work as haul distances lengthen and operating requirements broaden.

This creates an attractive opportunity for North American that can provide reliable fleet availability and consistent service, but it has also required a disciplined operating plan. During the second quarter we formally identified 260 multi-life heavy equipment assets as our target fleet and aligned our maintenance and operations team around clear objectives. Mechanical availability is a primary operating measure with a medium-term target of 70%.

Improving reliability reduces downtime, provides greater schedule certainty and allows us to capture visible demand more efficiently. This is not simply about increasing activity, it's about improving the quality of earnings. We are concentrating on investment for assets and scopes that meet our return thresholds, with incremental investments targeting IRRs above 40% and a clear line of sight towards gross profit margins in the 15% range. Better fleet performance, selective capital allocation and operating discipline are the levers that we will translate strong customer demand into resilient margins.

Turning to slide 15, this shows the depth of our diversity and the opportunity set. Our total bid pipeline exceeds $12 billion with approximately $3.6 billion currently in active tender and procurement. The active pipeline is balanced geographically with approximately $1.8 billion in Australia and $1.8 billion in North America. It is also balanced by type with 54% in mining services and 46% in infrastructure across 14 resource categories. Expected award timing is weighted across the second half of 2026 and into 2027 with additional opportunities beyond that period.

We do not need every project to move forward to create meaningful growth. Our priority is to convert the opportunities where our capabilities provide a clear advantage and where the risk-adjusted returns meet our standards. Turning to slide 16, our outlook. Record contractual backlog of approximately $3.8 billion as of June 30 underpins our full-year expectations. Based on stronger than expected revenue in the first half, including a quarterly revenue record for Q2, we are raising our combined revenue guidance to a range of $1.6 billion to $1.8 billion.

The new midpoint of $1.7 billion is $100 million above our prior midpoint and approximately 14% above our full-year 2025 result. We are growing. We continue to expect adjusted EBITDA of $380 million to $420 million and free cash flow of $110 million to $130 million. At the midpoints, that represents $400 million of adjusted EBITDA and $120 million of free cash flow. In Australia, we expect optimal dry seasonal conditions in Queensland to support McKellar while IMC activity ramps up in Western Australia.

In the oil sands, utilization should improve following the spring breakup, supported by fleet optimization and incremental project scopes. At NUNA, we expect the seasonally strong third quarter to be followed by fourth quarter uplift from the Nunavut fleet expansion. Taken together, our first half performance, record backlog and identifiable second half operating drivers support the raised revenue outlook and our continued confidence in the adjusted EBITDA and free cash flow ranges.

Our job is now straightforward: safely execute with discipline, improve the quality of earnings and convert the opportunity embedded across the platform into sustainable shareholder value. Lastly, I'm extremely pleased to announce that our Chairman, Martin Ferrin, has confirmed that our CEO search is going very well and we plan to announce our new CEO in the coming weeks. That concludes the Q2 presentation and we would be happy to take any questions you may have.

OPERATOR

Thank you, ladies and gentlemen. To ask a question, please press star one on your touchtone 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 again. After a brief pause, we will begin the Q&A session. Your first question is from Joseph Rigor from Ross Capital Partners. Your line is now open.

Joseph Rigor, Analyst at Ross Capital Partners

Hey, guys, thanks for taking the questions and congrats on a strong quarter.

Barry

Thanks, Joe.

Joseph Rigor, Analyst at Ross Capital Partners

So on the increased revenue guide, is this, like, is part of it that there's some flow-through costs that have raised revenue but have in turn also raised costs, which is why the EBITDA guide didn't change, or is there something else we should read into there?

UNKNOWN, Analyst

Okay. And then follow up on that with higher diesel costs right now. Is that something that'll flow through your model? It won't, like, you know, press too hard on your margins, but would potentially push you guys towards the higher end of the revenue guide? Okay, all right, thanks for the clarity there. I'll turn it over.

OPERATOR

Thank you. Your next question is from Adam Palmer from Thompson Davis. Your line is now open.

Adam Palmer, Analyst at Thompson Davis

Hey, good morning, guys. Congrats on a nice quarter. Hey, the fuel services contract that you won in July, can you give some more color on that and comment if you see additional opportunities similar to that award?

Jason

Yeah, it's great. And, you know, I mean, that was a great win for us. I mean, you know, that business has been up till now solely servicing our own gear with odds and ends with different other contractors’ truck here or there. And we've been looking to win something like that for a while. So that's very—you know, it was very exciting to win that. And what we see going forward is there's other opportunities coming up where some of these contracts are nearing the end of what was contracted out four or five years ago.

And we're in a very good position to certainly take advantage of some of that. And we look forward to, you know, winning one, two, or maybe even three more of these as they come online.

Adam Palmer, Analyst at Thompson Davis

And that was—so that's not included in the Q2 backlog, correct?

Jason

Actually, it is, Adam. It is part of the 3.8.

Adam Palmer, Analyst at Thompson Davis

Okay, well, still 5 million of spend for 135 million backlog.

Jason

And as Barry mentioned, it definitely is opening doors for additional ones. And it's a lot less capital intensive, as you alluded, with the 5 million.

Adam Palmer, Analyst at Thompson Davis

And then quick update. Can you just give a quick update on IMC integration, how that's going and how you think the margin profile of that business is going to trend over time?

Jason

Yeah, I mean the IMC integration is going really well. I mean the beauty about IMC is they're so like-minded of how we do business here in Canada. They're very good operators. I mean, I guess that's what attracted us to them is that they're so much like us on how they view equipment rebuilds. You know, they're very, very, very structured. They've been executing unit-rate work for many, many years. As far as the margins go, they're not quite as high as what we would expect on the equipment rental side in the Queensland business because a lot of the work that they do is unit-rate work.

However, there is opportunity to go higher because of the unit-rate style contract. You know, the better we perform, the better the margin is.

Adam Palmer, Analyst at Thompson Davis

Interesting. Okay, perfect. Thanks, guys.

Jason

Thanks, Adam.

OPERATOR

Thank you. And your next question is from Tim Monticello from ATB Cormark Capital Markets. Your line is now open.

Tim Monticello, Analyst at ATB Cormark Capital Markets

Hey, good morning, guys. I'm just wondering if you can dig in a little bit more on the equipment optimization strategy in the oil sands. So you've identified 260 fleet assets. What are you doing with the remainder? And you talked about some capital investments within that fleet. What type of investments need to be made there? And I guess how do you expect that in terms of CapEx in 26 and 27 coming through?

Jason

Morning, Tim.

Barry

Yeah. So on the fleet we've identified, and just to clarify, that's on multi-life assets. So that's the large assets, so that's the fleet that we see vision for active work in the oil sands where we can take advantage of some of this additional work that's coming out. As for the remainder of this, look, we're in no rush to say we're going to sell this stuff or whatever we're going to do. Some of these assets we've set aside are smaller assets that were underutilized.

But with the activity that's going on in the oil sands, with some of these exciting opportunities that we're seeing through Nuna, we feel that we'll have the ability to bring some of those units back in because they're the smaller nature and actually put those things to work. And if somebody come along and we didn't have a use for some of these units and they offered the right price, obviously we'd look at taking advantage of that. And I mean there is opportunities too.

You know, I've said this in the past with moving some units to Australia. It's not, it's not front and center but because of the way IMC is structured and their rebuild philosophy—and it's something that we've already done—we've sent half a dozen units that way because it made good sense as far as the capital spend. What's required this year—it's probably on the fleet that we want to focus on and get our availability up above that 70% range. We're probably in the $50 million range for 2026 to get us where we need to be.

Tim Monticello, Analyst at ATB Cormark Capital Markets

Okay, what has to happen with those assets? I was under the impression that they're all in pretty good working conditions, so a little bit surprised you have to invest more in them. So just maybe if you could provide some context.

Barry

Yeah, I mean, it's just—I mean because they're multi-life assets, you know, these things, we run them for, you know, these things, they’ve got 20-plus-year lives and they come up, you know, when the schedule hits on component change-outs. And these aren't small dollar items, you know, I mean some of these things are million-dollar items. So it's just in the cycle of where we're at with them and we just need to focus and make sure that we're doing the proper thing here and replacing components as they need and making sure these things are in tip-top shape so that when we win work, we go in there and we execute as we planned and we satisfy the client's needs and to meet our margin targets.

Tim Monticello, Analyst at ATB Cormark Capital Markets

And then more generally in the oil sands, are you seeing an inflection in demand? We've seen higher crude prices.

Barry

Yeah, absolutely. I mean there's a lot of excitement in the oil sands. I mean there's, you know, we're getting more offers every day of can you do this, can you do that, there's this scope and so and so. You know, we're pricing stuff every day out there right now and it's an exciting time in the oil sands. I mean, look, I've been in the oil sands since the mid-80s and this is one of these times where over the last couple years it's been kind of a bit of a lull and, you know, where there's insourcing and stuff, but it's full steam ahead and there's capital projects going on in the sites and there's volume to be moved.

And as we said in the deck, the haul distances are lengthening, which means you have to add more trucks to move the same amount of volume. So yeah, we're extremely excited about the oil sands right now.

Tim Monticello, Analyst at ATB Cormark Capital Markets

Okay, fantastic. And then last one, just in Australia, understand that it's a pretty large and diverse market, but we did see a decline, fairly meaningful decline, in your stated bid pipeline quarter over quarter. So maybe you can talk a little bit about what's going on there.

Jason

Yeah, so I mean, you know, there was one large project on there that we missed on, and the funny thing is we still have opportunity on that. So we were shortlisted. It was between us and the incumbent, and I think obviously the owner thought that replacing the incumbent was far too expensive at this point in time, so they went with the incumbent. That said, they've come back to us already asking if there's opportunity or we can see the possibility of putting a fleet or two onto that site.

So we still see opportunity there. We're actively working on that site, always have been. We won a fairly good contract there a couple years ago or a year ago. So yeah, we see great opportunities still there, and maybe it's a blessing in a way because that was a large amount of capital investment to get to win that work. So this will be less capital and yet still have opportunity to increase our revenue and margins on that site. We also missed one in IMC on the west side, but we have another one right in our pipeline right now that we're shortlisted for, and again we think that we have a very good opportunity at winning.

So we'll see where that goes.

Tim Monticello, Analyst at ATB Cormark Capital Markets

Okay, I appreciate it. I'll turn it back.

Jason

Thanks. Thanks, Tim.

OPERATOR

Thank you. Your next question is from Ramon Chinichi from National Bank of Canada. Your line is now open.

Ramon Chinichi, Analyst at National Bank of Canada

Good morning, Jason. Good morning, Barry. And congrats on the very good quarter. I just had a quick one. I just had a quick question on the pro forma FCF profile. So you've right-sized the fleet, you bought a much less capital-intensive asset in IMC. Could you maybe give us some color on what the conversion looks like going forward?

Jason

Sorry, Ramon, can you repeat that?

Ramon Chinichi, Analyst at National Bank of Canada

Oh, sorry. Was just looking for more color on free cash flow generation and conversion going forward given that IMC is a lower capital-intensity asset.

Jason

Oh yeah, I think given IMC is 15% of our business, the conversion target of 30% remains. That's still where we think—when our business is, you know, at a run rate that we can operate at. We've been there before and we expect to be there this year when working capital is neutral, and so we don't think IMC will have a meaningful impact on that ratio target—conversion target.

Ramon Chinichi, Analyst at National Bank of Canada

Sir, just as a follow up, do you see the 30% conversion holding for next year as well? I know it's a bit hard to predict working capital, so just curious.

Jason

There's—yeah, there's no reason why we can't. You know, with our margin initiatives we should hopefully be able to actually increase that ratio next year. But I think it's a good placeholder for your models.

Ramon Chinichi, Analyst at National Bank of Canada

Perfect. Thank you so much. Appreciate it.

OPERATOR

Thank you once again. That is star 1 should you wish to ask a question, and your next question is from Sean Jack from Raymond James. Your line is now open.

Sean Jack, Analyst at Raymond James

Hey, good morning, guys. Just wanted to ask a quick question for Australia. Wondering with this increasing unit-rate work from IMC, like should we be expecting that this type of contract might become, like, more popular in the broader segment, or is this just going to be isolated in IMC?

Barry

No, I would say I don't know if it's more popular. I mean it's been very prevalent anyway in Western Australia for a lot of the work. The majority of the work that IMC does has been unit-rate style work because a lot of their scopes are mine site civil. So, you know, it's more than just load, haul, and place, it's, you know, it's more detailed type work. So that is pretty typical with that type of work anyway. I mean you'll see it also in some of the remediation on mine sites and stuff.

But I would say it'll kind of stay pretty much the status quo as it's been.

Sean Jack, Analyst at Raymond James

Okay, perfect. Good to know. Next question for me would just be—so obviously, you know, nation-building projects, et cetera, et cetera, like there seems to be a big heat-up of demand and especially sentiment in Canada. You guys have touched upon a growing bid pipeline in Canada. But I just wanted to hear from you guys, like, any other sort of commentary on levels of excitement, level of demand that's kind of swelling in Canada or in the United States? Anything beyond stuff that's already captured in your bid pipeline?

Barry

Oh, I don't know. I mean that's—yeah, I mean we've captured most of what we see that excites us in the bid pipeline. What I would say though on that is, you know, I'm extremely excited about the opportunities that are in front of Nuna. Nuna has—I mean just because of where they're positioned, how they're positioned, you know, they

Barry Palmer, President and CEO

Picked up some small wins over the last, you know, three to six months. And this puts us and them in very good light of follow-on projects that will be the bigger projects. And I mean this is scattered across Nunavut, Northern Quebec, Ontario, Northwest Territories. I mean it's exciting times for them and we just need these things to come to RFP, the bigger projects, and to be let out there so that we have the opportunity to win them and then get in there and start executing.

Sean Jack, Analyst at Raymond James

Perfect. Okay. Yeah, that's all from me, guys. Congrats on the quarter. Thanks.

Barry Palmer, President and CEO

Thanks again, Shawn.

OPERATOR

Thank you. Your next question is from Chris Thompson from CIBC. Your line is now open.

Chris Thompson, Analyst at CIBC

Hey, guys, good morning. Just a couple questions here for you. On the salaries and wages quarter-over-quarter increase, could you provide a bit more color on what's behind that?

Jason

Yeah, primarily that would be IMC. They, you know, have a G&A function. I'm assuming you're looking at G&A and cost of sales as well, but that's primary IMC related.

Chris Thompson, Analyst at CIBC

Got it. Okay. And then I take it the third-party rentals piece meaningfully higher in Q2, and both those and salaries and wages in your COGS, is that a run rate that we should expect going forward?

Jason

No. I mean on the salaries are one thing, but the third-party rentals, the third-party rentals, typically what that is, Chris, is some of the jobs we take on, they come to us quicker than anticipated. So we end up having third-party rentals to start out with as we bring our own fleet in and then those costs somewhat disappear. So that's where we get the margin improvement. You'll see on some jobs where we start out and the margin isn't exactly as stated and as the project progresses along those margins come back, and that's when that third-party rentals disappear and we get our own fleet actively engaged.

Chris Thompson, Analyst at CIBC

Okay, so was that a primarily an Australia-driven increase then? Got it. Okay. And then the capital spend in Australia on the growth side, does that include the IMC piece?

Jason

Yes. Yeah, that definitely. So IMC, acquired on April 7, came with the balance sheet as disclosed. And then growth at that lithium mine came through our growth capital spending.

Chris Thompson, Analyst at CIBC

Okay, got it. And then just in terms of sustaining capital, back late last year you guys guided to 60, $70 million of sustaining in 2026 and H1's already at $84 million. Granted you've had some growth activity in the business, but how should we expect that sustaining number to trend through the balance of the year?

Jason

Yeah, we're still, you know, just a little north of $200 million, as Barry alluded to on that oil sands slide. You know, given the inflection of demand and our strategy to really run efficiently in the oil sands with mechanical availability well north of 70% MA, that's really why we're seeing going from, say, a little bit under $200 to above $200 for the year. Australia is exactly on track, as we, you know, agreed on back in December with those operating teams.

So the change is really a reflection in commitment to the oil sands and getting that operation running more efficiently.

Chris Thompson, Analyst at CIBC

Okay, thank you. I'll hand it back.

Jason

Thanks, Chris.

OPERATOR

Thank you. There are no further questions at this time. I will now pass the call back over to Barry Palmer, President and CEO, for closing comments.

Barry Palmer, President and CEO

Thanks, Jenny. And thanks again, everyone, for joining us today. As always, we remain focused on discipline, execution and look forward to providing our next update with our third quarter results.

OPERATOR

Thank you. This now concludes the North American Construction Group conference call regarding the second quarter ended 6-30-20. You may now disconnect your lines.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.