Good morning, ladies and gentlemen. Welcome to the North American Construction Group Conference Call regarding the Second Quarter ended June 30, 2024. 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 a 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 conclusions, forecasts or projections contained in the 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 Joe Lambert, President and CEO.

Thanks Ray. Good morning, everyone, and thanks for joining our call today. I'm going to start with a few slides showing our Q2 operational performance before handing it over to Jason for the financial overview. And then I'll conclude with our 2024 operational priorities, bid pipeline, backlog and finish up with our updated outlook for this year before taking your questions. On slide 3, our Q2 trailing 12-month recordable injury rate remains below our industry leading target frequency of 0.5 and we continue to advance our safety programs, including timely training on wildfires and air quality, and advancements in increasing training access and coverage in regards to mental health. It's easy to gloss over this quickly, but this consistency below a target that few in our industry could hit, even for one year, is one of our most meaningful and proudest achievements. Our workforce hours have grown 340% since the wildfire lows of 2016 and are up 60% from the 2020 pandemic lows. And as we approach the 6 million annual man hour mark, we continue to maintain our focus to get everyone home safe. Although as a company we see this as simply our core value and an inherent moral obligation to our workforce, it's nice to have the hard work and efforts of our employees recognized, and on the following slide you can see we were recently awarded the John T. Ryan National Safety Award, which was presented at this year's CIM in Vancouver. This is the second time we have won this award and I'm tremendously proud of our workforce and their continued focus on keeping themselves and their coworkers safe. On slide 5, we highlight some of the major achievements of our Q2. Our Australian business continues to deliver strong and consistent results, including MacKellar's best…

Thanks, Joe. And good morning, everyone. Starting with slide 8, the headline EBITDA numbers of CAD 87 million and a 26% margin were driven by a third consecutive successful quarter from Australia since the change of control on October 1, 2023. Our overall margin of 26% correlates to the combined gross profit margin of over 18% and illustrates strong operational performance. We included a comment on this slide about our oil sands business, which, although it did not post the top line revenue we had expected, did experience more consistency from Q1 to Q2 than we've historically had. This is due to the nature of the contracts in the oil sands, which are now less seasonal and focused on more steady time of material and rental arrangements. Moving to slide 9 and our combined revenue and gross profit. As we will have for one more quarter, MacKellar provided a step change in quarter-over-quarter variances. On a total combined basis, we were up CAD 52 million quarter-over-quarter, a very similar mark to Q1 which was up CAD 53 million over 2023. MacKellar and DGI, which we combine as Australia in our results, were up CAD 138 million on a steady, consistent quarter, during which MacKellar posted an impressive 82% equipment utilization peaking in May at 88%. This encouraging top line positive variance was offset by lower equipment utilization in the oil sands region, which was hampered by poor weather conditions in both May and June. Our share of revenue generated in Q2 by joint ventures and affiliates was a net CAD 30 million lower than Q2 2023. The Fargo-Moorhead project had a strong operational quarter, was up CAD 15 million quarter-over-quarter, and achieved the progress metrics and milestones required of the project schedule. More than offsetting this positive was the variance…

Thanks, Jason. Turning to slide 14, our priorities for this year are unchanged. We continue to progress the overall MacKellar integration as planned, with ERP go-live scheduled for the end of Q3. Several projects to improve operational reporting and management systems are being implemented in the second half of the year with those requiring ERP systems data scheduled later in Q4. The timing of these systems improvements plans coincides with further growth and additional assets coming from Canada, and we remain confident that MacKellar will be fully integrated heading into what we believe will be its best year ever with continued opportunities to grow the business in 2025. The second half of the year continues to include plans to win a large-scale mining or civil construction project to provide work for our remaining underutilized assets and also to qualify with our partners on a major infrastructure project, which we believe could provide a smooth transition as our current major infrastructure project in Fargo, North Dakota ramps down in a few years. We have already submitted tenders and have additional active tenders soon to be submitted that give us confidence in winning and qualifying for this work. We continue to advance our maintenance systems and processes to increase our uptime and achieve utilization targets. As mentioned earlier, our Australian business looks to achieve equipment utilization targets earlier than planned, with Canadian targets planned for Q1 2025. We may still achieve the 75% Canadian target in the month of December if successful in of reclamation work than last winter, and the potential to do that has improved, as this year's reclamation volume is being tendered and increased significantly year-over-year. The final priority of returning Nuna to profitability and operational excellence advanced meaningfully with Q2 demonstrating a return to profitability and June, in…

[Operator Instructions]. The first question comes from Yuri Lynk from Canaccord Genuity.

Joe, just to clarify, does the guidance for the back half of the year require you to win one of the ex oil sands awards that you're targeting or that's more going to bolster 2025?

More 2025. We don't have them forecasted in there. There's some potential that we get some early reclamation work in Q4, but that's not what's in the forecast.

And how has the bid funnel kind of shifted around the last few months? I see there's a large oil sands extension in there that's included in early 2025. I know you were chasing some work in Ontario. Just maybe a quick update on what's new and what's kind of dropped out of the bid funnel.

There were three projects in Ontario we were bidding and we're actively bidding. One really big one and two smaller ones. One of the smaller ones, we were unsuccessful on. That's one that came off of that. We've received some increased interest in a couple of other opportunities. I think what I would say is, outside of oil sands, we've pretty much added to the bid pipeline from what was either lost, awarded, or deferred. And inside of oil sands, we have a lot of active tenders with the regional contract and then winter reclamation. During the quarter Q2, I'd say we saw – we'd originally anticipated a bit more summer civil construction for smaller equipment. And it was really slow on that front. There was very little work that was done this summer in oil sands for civil construction.

Last one for me, just on the write down of the assets held for sale, are those the 12 trucks that were auctioned off? And can you just confirm that that CAD 4 million is in your adjusted EBITDA, i.e., if we were to add that back, it would be more around CAD 91 million?

Yeah, we confirm those are the trucks, but no, it is already added back as part of the – from reported to adjusted earnings. So it's already in the CAD 87 million.

And those were the 100 ton trucks I was talking about, Yuri. So, unfortunately, that particular asset class is just an oversaturated market with very small demand. It is the only rigid frame truck class we have that's like that. And as such, even when we went to sell them, there was lots of trucks on the market. So the pricing was very much established already. So we got what the market was giving. And if we didn't sell them for that, somebody else would have.

Our next question comes from Aaron MacNeil from TD Cowen.

Joe, just to follow up to Yuri's question. You mentioned Canada hitting the utilization target by early 2025. I know you walked through the equipment transfers, the sales, the bids, but do you expect to hit that target just seasonally or on an annual basis? And do you need to win that additional work to hit the goal?

We expect to hit it annually starting in 2025. We originally thought we'd get there by the end of this year, pretty much Q4. Because we do start – as you saw in Jason's comments, we're starting to get a bit more normalized in oil sands. The seasonality of oil sands was the smaller assets, and those are the underutilized ones that we're moving out. So a lot of that goes away as those assets go away. I'll give you an example. Several of the 100 ton trucks we moved to Australia were in water truck configurations, so they had a big water tank on the back of them. Those trucks only get used for six months in Canada, but they get used year round in Australia. So those are some of the things that – although there's a bit of timing in getting stuff over, it will start to normalize the quarters. And you'll see more consistency in both utilization and revenue between quarters.

And do you need that additional work to get there, or do you think you can get there with the work you have?

Whether it's in oil sands or somewhere else, we need work for those smaller assets. Or, worst case scenario, we need to get rid of some more.

Jason, obviously, some debt maturities in 2026. I can appreciate most of it's the credit facility, but you've got the converts in there too. You've got the exit leverage guidance with the quarter, you did the MacKellar transactions. So, I guess, what's sort of the capital allocation priority into 2025 and what sort of in your job jar over the next 6 to 12 months as you think about planning the capital structure?

Obviously, free cash flow is paramount. We've communicated that free cash flow is coming in the second half and that that will increase liquidity. We clearly have the liquidity available to us already as far as dealing with the convertible debentures if required. And yeah, we're in the routine of extending our credit facility every year, so keeping it three years out in the future. So those are kind of the key focuses, but we'll continue to look at alternatives. But the base plan is – move the credit facility ahead one more year, in this calendar year, and then keep tracking the debentures.

Our next question comes from Adam Thalhimer from Thompson Davis.

Joe, you said you were surprised by the amount of winter reclamation work in the oil sands. Can you just expand on that?

We usually get the tenders, the RFPs for winter reclamation about this time and we have several of them. We've submitted some actually and there's some that are still to be submitted. And just the volumes, overall volumes we see, because you basically get tenders from everybody. So you know what the whole market volume is and this year looks to be about 25% higher than last year. And there's some unique opportunities. Reclamation is usually – this is boreal forest muskeg that's usually soggy and it's usually only mined in the winter because it's easier to remove when it's frozen. And this year, there's some high ground, which is more sandy soils, which we think could be done year round. So there's some opportunities to get some more month-to-month stability and some of that reclamation work with some of the bids that are out there.

Did you ever break out an EBITDA contribution anticipated from the trucks that you sent to Australia once they get to work?

I don't have it memorized. I don't know if Jason does. We do have that.

Yeah, I would put it at about CAD 5 million in Q4. So meaningful and at good margins, so incremental margins. I don't know if we've broadcast that in the MD&A, but I would put that at about CAD 5 million, Adam.

Last one for me, the trucks – the 12 trucks you sold, was that in Q2 or Q3, and what were the proceeds?

Yeah, it's a good question. Proceeds came in early July, so it was reflected in Q2 financials, but the free cash flow of that CAD 8 million will come in in Q3.

Our next question comes from Tim Monachello from ATB Capital Markets.

Could you talk a little bit about the utilization of the oil sands fleet so far in Q3? Have you seen a nice uptick there?

Well, certainly from the low points of Q2, yes. I think we're projecting somewhere in the low 60s. May in particular, June wasn't great, but May was probably the worst month since the wildfires of 2016. We started the month with a week's worth of fire and evacuations in Fort McMurray, which were remnant of the May fires of 2016, but thankfully only lasted a week in that case because we got some great rain after that. Unfortunately, great for the fires, but unfortunately for the rest of the operations, it rained for the bulk of the remaining part of the month of May. So we had double our rainfall and just some unusual weather events in the particular quarter there.

The MD&A mentioned some scope reductions for overburden removal at Fort Hills and Syncrude. Can you elaborate on that? Is that, I guess, an expectation going forward? Is that sort of a Q2 specific impact? Or how should we be thinking about your go-forward role at Fort Hills and Syncrude compared to what it was under the old contract?

Yeah, I'm not sure I follow all that. Tim, I didn't catch the first part.

Just in the MD&A, it said that one of the reasons for the weakness in Q2 was scaled productions for overburden removal at Fort Hills and Syncrude. So I'm just curious what your expectation for activity at those two sites is compared to what it would have been under your previous contract.

I think we mentioned the reallocation fleet during Q1. When we look at the overall overburden agreement, it's called the heavy civil regional services contract now that covers off the five mine sites that are managed by the one client, year-on-year, they look – we just got the RFP in, but the initial volumes look very similar to what was awarded this year. And with a slight change in that, there was a unit rate overburden bid at two different sites last year. And the rest was bid as rental agreements for trucks and shovels. And this RFP only has unit rate work at one site, but it has more rental volumes. So, it looks like they're switching one of the sites from unit rate work to rental hourly, but the overall dollars look about the same. I actually think this gives us an advantage because the one site with remaining unit rate work is the site we're at doing that unit rate work right now.

Can you talk a little bit about your consolidated EBITDA expectations in terms of the split between Q3 and Q4?

I've just said Q4 is slightly higher than Q3. It's like a slight increase in Q4 from Q3.

In terms of free cash flow, Q4 has always been a pretty big free cash flow quarter, but you're expecting pretty substantial uptick in free cash in the second half of the year. Is that the expectation that it's going to be heavily weighted to Q4? Or is Q3 also going to be expected to be a fairly substantial free cash quarter?

I believe we have a slight positive in Q3, but almost everything comes in Q4.

Our next question comes from a private investor. Atin Kumar, your line is open.

I had a couple of questions. So, when the MacKellar acquisition was announced last year, you had a slide up with the free cashflow impact, with the 2023 combined outlook, assuming the acquisition was completed in Q4, of a free cash flow of CAD 100 million to CAD 220 million and then there was another one which showed the incremental impact in 2024 with the acquisition of MacKellar, incremental impact of free cash flow of about CAD 55 million to CAD 75 million. So I just wanted to ask, so far, is that estimate holding true with the acquisition in terms of free cash flow generation for Australia?

What I would say is that this is the third quarter post-acquisition of MacKellar and they pretty much slightly exceeded all expectations financially every quarter. I don't know of a metric that's down from what we forecasted for MacKellar since we projected those in July when the acquisition was announced.

My name is Prem [ph]. The other question I had is on the equipment utilization. So for the Canadian fleet, it ended Q2 at 42%. The target is 75%. Maybe can you expand on the difference from the target of 75% to 42%? How much of that maybe is due to the weather conditions, the fire, and the rain? And also, the reduction in the overburden scope at Fort Hills or by Suncor. Maybe can you give a breakdown as to how much of that reduction in overburden scope is affecting utilization?

I don't have the exact numbers, but I get a pretty good guess, Prem, in that if you just look at what we're expecting in Q3 and Q4 from Q2, it's about a 20% increase. So I would say the weather and the fires in Q2 were probably around a 20% impact on our utilization. And then when we look at how we're going to get from that 60s, low 60s to 75% by Q1 next year, we think there's some increased demand in winning some work outside of oil sands. And the other side of that is reallocating or even selling some assets like we did this quarter. And that's kind of that addition by subtraction I was talking to in the slides there. So those are the two major parts of it. And that 20% difference in Q2 is all about weather.

My question around the utilization. So if I just look at the slide, slide 6 on utilization, the target for Canada is 75%, and then we haven't hit that utilization target consistently in a while, all the way into 2021. And then even if I look further back into like 2015, there may be a couple of quarters in 2019 that we've maybe hit 70%, but not 75%. So I'm just curious on like, how confident are you in that target of 75% of us hitting that consistently? Or is that target mostly like two quarters in a year if you hit that, that's the 75% target. Kind of similarly, if I look at the Australian utilization too, it's at 85%. I look at the graph, we've hit that maybe twice in the last three years. So how confident is the team on hitting that target consistently and is the target consistent?

That's a big question. I'll tell you how it works overall, though, and splitting it into countries. Just starting with Australia versus Canada, this is really two factors that play into this. And obviously, you have to have demand first before you have utilization. So if you have strong demand, then your utilization is basically functioning off of your maintenance and your mechanical availability. So Australia starts with a benefit just in weather, in the fact that they can operate more days of the year unaffected by weather than we can in Canada, as we had exaggerated in Q2. But the big difference in Australia and how they've gotten there and what they're doing is they've had extremely strong, consistent demand from their clients and long-term commitments in five-year contracts, so that everything else is really in their hands, which is the mechanical availability. And that's why we're already able to get up into that range two of the last four months. In Canada, our demand wavered. We saw a change in demand, especially in our smaller assets, starting last year, and probably going back even further than that. So, we need to get the fleet reallocated such that the demand matches the supply and then it's up to us on a mechanical availability side that we can maintain it to achieve that 75%. And we see that opportunity in Q1 of next year. In other words, right now, we continue to have more assets in oil sands than we have demand that needs them, but we're reallocating those and we believe with winter work in oil sands or other potential resource bid wins outside of oil sands or in Australia, we believe that demand is going to match our fleet sizing. Kind of like I used the example of the 100 ton trucks in the presentation earlier, we see that happening in Q1 of next year.

I had a last question. So I was really happy to see the total return swaps that the company has taken, about 213,000 shares, about CAD 6 million worth. Just curious what's stopping the company from going harder at these wonderful prices? Clearly, you've mentioned in your letter as well that it starts below the intrinsic value. Is that more liquidity? I could understand from an NCIB perspective that we need to pay down debt. That's understandable. But for the TRS, I was hoping maybe the company would go a little bit more deeper into the amount of shares that you have the TRS on. Can you maybe comment on that one, why it's at just CAD 6 million?

Prem, I think the best correlation I can give you for that is if you look at our free cash flow, our aggressiveness coincides with our free cash flow. So I don't think we're in a situation where we'd go out and get debt to conduct an NCIB. The total return swap was something we can do without pulling cash out of our pockets. And in the second half of the year, as our cash flow comes in, I believe you'll see us being a lot more aggressive on that front.

The next question comes from Maxim Sytchev from National Bank Financial.

Most questions have been already asked, so I just have two kind of small readouts. In terms of ERP implementation, Jason, do you mind maybe talking about the potential benefits and how should we be thinking about that on a prospective basis?

We see it coming through in both G&A and potentially in operating margins. So we've guided people to kind of a 1% on EBITDA basis improvement in 2025. It's no one single silver bullet that is going to drive that. But we see improvements in back office processes as well as better tracking on sites of inventory, work in the shops. and just overall better tracking of costs and accountability. So it likely doesn't show up in Q4 results. That'd be premature, but we expect it to be in our 2025 outlook.

The system will apply to the DGI assets as well or is it just MacKellar?

Just MacKellar. It's a good question, but DGI is a different business model and will carry on with its existing ERP. We may look at that in mid-2025, but this ERP is just for the MacKellar acquisition, which is basically like-for-like and we can install our instance there.

Do you mind maybe commenting a little bit around the visibility on kind of non-commodity related work outlook just to replace Fargo-Moorhead project at some point in the future as you're still have a couple of – I guess, a year or two of work left on that.

It's probably got three to four odd years there, Max. We would figure major infrastructure project in the – we haven't bid a huge amount. We've been site C and we were shortlisted, but were unsuccessful. That was about a two, two odd year process. Fargo was about four year process because it got deferred once. Right now, we're working with a partner to pre-qualify on a major infrastructure project in Northern California, which is a big earthworks project. And it's damming up some water that was – it's an area of California which has gone through cycles of flood and drought. And so, they want to retain some of the water during the flooding times to use it during drought. And we believe that prequel is going to occur right at the end of Q4. And that's what we think is our replacement project. It really fits into our wheelhouse and we're very comfortable with our partner on these big infrastructure projects.

Joe, I guess it's too early to contemplate anything in Australia, right, as you are still kind of focusing on the core business for the time being, right?

With the same partner, who's also one of the largest infrastructure contractors in Australia, we've just started initial discussions again on several big earth infrastructure projects. Most of them are kind of EV or transitional kind of related, in that they're big solar farms. There's some pumped hydro where they dam up a mountain valley and pump the water up. So really, really initial. I think we're probably 6 to 12 months from getting more visibility on a reasonable project down there.

Next question comes from Kevin Schilling (sic) [Devin Schilling] from Ventum Financial.

Just real quick here. Just on the wildfire situation near the Kearl mine, are you guys currently impacted? And if so, can you quantify it?

We were impacted about a week and a half ago and we went back to site over the last weekend. So it was about five days, but it only affected that one site, which is maybe 10% or 15% of our overall revenues for one week. Devin, that would be like what we would expect in the normal summer, that a regional fire would affect one mine site or so. Like, that one affected one SAGD and then that one oil sands mining site.

So, not really expecting much of an impact for Q3.

No, none. The other four sites we're on that constitute 80-odd plus percent of our revenue were unaffected by the fire last week.

There are no further questions. This concludes the Q&A section of our call. And I will pass the call over to Joe Lambert, President and CEO, for closing comments.

Thanks, Ray. And thanks again, everyone, for joining us today. We look forward to providing next update upon our closing of our Q3 2024 results.

Thank you. This concludes the North American Construction Group conference call on second quarter 2024.