Fourth Quarter 2023 Highlights:
- Closure of the
MacKellar Group ("MacKellar") acquisition onOctober 1, 2023 , a seamless change in control, and three months of strong equipment utilization provided a full quarter of operating results inAustralia , and a step change in geographic diversification. - The allocated purchase price of
MacKellar was$369.7 million , net of cash acquired, along with growth capital spending of$35.9 million incurred in the quarter was fully funded with senior and vendor-provided debt and establishes a strong platform for opportunities inAustralia . - Combined revenue of
$403.4 million is a company quarterly record based on the transformative acquisition ofMacKellar . Revenue of$326.3 million , compared to$233.4 million in the same period last year, includes this step-change increase along with steady and consistent operations in theFort McMurray region. - Our net share of revenue from equity consolidated joint ventures was
$77.1 million , compared to$86.7 million in the same period last year. Quarter-over-quarter increases at theFargo -Moorhead project were offset by the successful 2023 Q3 completion of the construction project at the gold mine inNorthern Ontario . - Adjusted EBITDA of
$101.1 million , also a company record, and EBITDA margin of 25.1% compared to the prior period metrics of$85.9 million and 26.8%, respectively. Margins were impacted by project losses posted by theNuna Group of Companies ; restructuring efforts are well underway to resolve temporary challenges. - Cash flows generated from operating activities of
$160.9 million in the quarter, compared to$78.1 million in the prior year quarter, resulting from higher earnings and changes in working capital balances when comparing to the same period in the prior year. - Free cash flow ("FCF") of
$110.6 million in the quarter was the result of strong revenues, steady and consistent margins, modest capital spending, and positive changes in working capital balances. - Net debt was
$720.9 million atDecember 31, 2023 , an increase of$325.6 million fromSeptember 30, 2023 , resulting from the debt-funded purchase price and growth spending inAustralia offset by free cash flow directed to debt reduction during the quarter.
NACG President and CEO,
As we've geographically diversified, I continue to closely monitor our various regions. In
Consolidated Financial Highlights
Three months ended | Year ended | |||||||||||||||
(dollars in thousands, except per share amounts) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
Revenue | $ | 326,298 | $ | 233,417 | $ | 957,220 | $ | 769,539 | ||||||||
Cost of sales | 218,853 | 154,967 | 671,684 | 548,723 | ||||||||||||
Depreciation | 41,990 | 35,860 | 131,319 | 119,268 | ||||||||||||
Gross profit | $ | 65,455 | $ | 42,590 | $ | 154,217 | $ | 101,548 | ||||||||
Gross profit margin | 20.1 | % | 18.2 | % | 16.1 | % | 13.2 | % | ||||||||
General and administrative expenses (excluding stock-based compensation)(i) | 18,702 | 6,648 | 41,016 | 25,075 | ||||||||||||
Stock-based compensation expense | (496 | ) | 4,910 | 15,828 | 4,780 | |||||||||||
Operating income | 45,779 | 31,565 | 95,714 | 71,157 | ||||||||||||
Interest expense, net | 14,007 | 7,774 | 36,948 | 24,543 | ||||||||||||
Net income | 17,646 | 26,081 | 63,141 | 67,372 | ||||||||||||
Adjusted EBITDA(i) | 101,136 | 85,875 | 296,963 | 245,352 | ||||||||||||
Adjusted EBITDA margin(i)(ii) | 25.1 | % | 26.8 | % | 23.3 | % | 23.3 | % | ||||||||
Per share information | ||||||||||||||||
Basic net income per share | $ | 0.66 | $ | 0.99 | $ | 2.38 | $ | 2.46 | ||||||||
Diluted net income per share | $ | 0.58 | $ | 0.84 | $ | 2.09 | $ | 2.15 | ||||||||
Adjusted EPS(i) | $ | 0.87 | $ | 1.10 | $ | 2.83 | $ | 2.41 |
(i) See "Non-GAAP Financial Measures".
(ii)Adjusted EBITDA margin is calculated using adjusted EBITDA over total combined revenue.
Three months ended | Year ended | |||||||||||||||
(dollars in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
Consolidated Statements of Cash Flows | ||||||||||||||||
Cash provided by operating activities | $ | 160,870 | $ | 78,099 | $ | 270,391 | $ | 169,201 | ||||||||
Cash used in investing activities | (137,756 | ) | (17,524 | ) | (244,879 | ) | (97,469 | ) | ||||||||
Effect of exchange rate on changes in cash | 3,167 | (94 | ) | 1,705 | 304 | |||||||||||
Add back of growth and non-cash items included in the above figures: | ||||||||||||||||
Acquisition of | 51,671 | — | 51,671 | — | ||||||||||||
Acquisition costs | 5,934 | — | 7,095 | — | ||||||||||||
Growth capital additions(ii) | 35,941 | — | 40,416 | — | ||||||||||||
Acquisition of ML Northern(iii) | — | 7,207 | — | 7,207 | ||||||||||||
Non-cash changes in fair value of contingent consideration | (8,268 | ) | — | (8,268 | ) | — | ||||||||||
Capital additions financed by leases(ii) | (931 | ) | (236 | ) | (28,159 | ) | (8,931 | ) | ||||||||
Free cash flow(i) | $ | 110,628 | $ | 67,452 | $ | 89,972 | $ | 70,312 |
(i)See "Non-GAAP Financial Measures".
Results for the Three Months Ended
Combined revenue of
Combined gross profit margin of 18.4% was up from 17.8% in the prior year. The improvement in combined gross profit in the current period was driven by the acquisition of
General and administrative expenses (excluding stock-based compensation expense) were
Cash related interest expense of
Net income of
Free cash flow in the quarter was
Liquidity
Including equipment financing availability and factoring in the amended Credit Facility agreement, total available capital liquidity of
Business Updates
Strategic Focus Areas for 2024
- Safety - now on a global basis, maintain our uncompromising commitment to health and safety while elevating the standard of excellence in the field;
- Execution - enhance equipment availability in
Canada andAustralia through in-house fleet maintenance, reliability programs, technical improvements, and management systems; - Operational excellence - with a specific focus on
Nuna Group of Companies , put into action practical and experienced-based protocols to ensure predictable high-quality project execution; - Integration - implement ERP and best practices at
MacKellar , including identification of opportunities to better utilize our capital and equipment inAustralia ; - Diversification - pursue diversification of customers and resources through strategic partnerships, industry expertise and investment in Indigenous joint ventures; and
- Sustainability - further develop and deliver into our environmental, social, and governance targets as disclosed and committed to in our annual reporting.
Outlook for 2024
The following table provides projected key measures for 2024 and actual results of 2023 and 2022. The measures for 2024 are predicated on contracts currently in place, including expected renewals and the heavy equipment fleet that we own and operate.
Key measures | 2022 Actual | 2023 Actual | 2024 Outlook | |||||
Combined revenue | ||||||||
Adjusted EBITDA(i) | ||||||||
Sustaining capital(i) | ||||||||
Adjusted EPS(i) | $2.83 | |||||||
Free cash flow(i) | ||||||||
Capital allocation | ||||||||
Growth spending | ||||||||
Net debt leverage(i) | 1.5x | 1.7x | Targeting 1.5x |
(i)See "Non-GAAP Financial Measures".
(ii)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 three months and year ended
The call can be accessed by dialing:
Toll free: 1-888-886-7786
Conference ID: 29416987
A replay will be available through
Toll Free: 1-877-674-7070
Conference ID: 29416987
Playback Passcode: 416987
A slide deck for the webcast will be available for download the evening prior to the call and will be found on the company’s website at www.nacg.ca/presentations/
The live presentation and webcast can be accessed at:
https://onlinexperiences.com/scripts/Server.nxp?LASCmd=AI:4;F:QS!10100&ShowUUID=E7B12076-0168-45B4-8211-E024A0E31C5D
A replay will be available until
Basis of Presentation
We have prepared our consolidated financial statements in conformity with accounting principles generally accepted in
Change in significant accounting policy - Basis of presentation
During the first quarter of 2023, the Company updated the presentation of finance lease obligations within the Consolidated Balance Sheets to be included in long-term debt. Within the long-term debt note, finance lease obligations, financing obligations, and promissory notes have been combined as equipment financing. Finance lease obligations are the finance lease liabilities recognized in accordance with the Company's lease policy which is disclosed in our Annual Report. Financing obligations arise when the Company finances its owned equipment. There has been no change in the Company’s accounting policy for finance lease obligations or change in the recognition or measurement of the related balances now recognized within long-term debt. The change in presentation had no effect on the reported results of operations. The comparative period has been updated to reflect this presentation change.
Recent accounting pronouncements not yet adopted
Joint venture formations
In
Segment reporting
In
Income taxes
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 guidance with respect to financial metrics provided in our outlook for 2024.
The material factors or assumptions used to develop the above forward-looking statements include, and the risks and uncertainties to which such forward-looking statements are subject, are highlighted in the MD&A for the three months and year ended
Non-GAAP Financial Measures
This press release presents certain non-GAAP financial measures, non-GAAP ratios, and supplementary financial measures that may be useful to investors in analyzing our business performance, leverage, and liquidity. 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. A "non-GAAP ratio" is a ratio, fraction, percentage or similar expression that has a non-GAAP financial measure as one or more of its components. Non-GAAP financial measures and ratios do not have standardized meanings under GAAP and therefore may not be comparable to similar measures presented by other issuers. They should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. A "supplementary financial measure" is a financial measure disclosed, or intended to be disclosed, on a periodic basis to depict historical or future financial performance, financial position or cash flows that does not fall within the definition of a non-GAAP financial measure or non-GAAP ratio. The non-GAAP financial measures and ratios we present include, "adjusted EBIT", "adjusted EBITDA", "adjusted EBITDA margin" "adjusted EPS", "adjusted net earnings", "backlog", "capital additions", "capital expenditures, net", "capital inventory", "capital work in progress", "cash provided by operating activities prior to change in working capital", "combined gross profit", "combined gross profit margin", "equity investment depreciation and amortization", "equity investment EBIT", "free cash flow", "general and administrative expenses (excluding stock-based compensation)", "gross profit", "growth capital", "invested capital", "net debt", "sustaining capital", "total capital liquidity", "total combined revenue", and "total debt". We also use supplementary financial measures such as "gross profit margin" and "total net working capital (excluding cash and current portion of long-term debt)" in our MD&A. Each non-GAAP financial measure used in this press release is defined under "Financial Measures" in our Management's Discussion and Analysis filed on EDGAR on the
Reconciliation of total reported revenue to total combined revenue
Three months ended | Year ended | |||||||||||||||
(dollars in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
Revenue from wholly-owned entities per financial statements | $ | 326,298 | $ | 233,417 | $ | 957,220 | $ | 769,539 | ||||||||
Share of revenue from investments in affiliates and joint ventures | 169,662 | 183,006 | 686,299 | 596,033 | ||||||||||||
Elimination of joint venture subcontract revenue | (92,522 | ) | (96,315 | ) | (369,891 | ) | (311,307 | ) | ||||||||
Total combined revenue(i) | $ | 403,438 | $ | 320,108 | $ | 1,273,628 | $ | 1,054,265 |
(i) See "Non-GAAP Financial Measures".
Reconciliation of reported gross profit to combined gross profit
Three months ended | Year ended | |||||||||||
(dollars in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||
Gross profit from wholly-owned entities per financial statements | $ | 65,455 | $ | 42,590 | $ | 154,217 | $ | 101,548 | ||||
Share of gross profit from investments in affiliates and joint ventures | 8,670 | 14,541 | 49,638 | 49,581 | ||||||||
Combined gross profit(i) | $ | 74,125 | $ | 57,131 | $ | 203,855 | $ | 151,129 |
(i) See "Non-GAAP Financial Measures".
Reconciliation of net income to adjusted net earnings, adjusted EBIT and adjusted EBITDA
Three months ended | Year ended | |||||||||||||||
(dollars in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
Net income | $ | 17,646 | $ | 26,081 | $ | 63,141 | $ | 67,372 | ||||||||
Adjustments: | ||||||||||||||||
Loss (gain) on disposal of property, plant and equipment | 1,470 | (533 | ) | 1,659 | 536 | |||||||||||
Stock-based compensation (benefit) expense | (496 | ) | 4,910 | 15,828 | 4,780 | |||||||||||
Acquisition costs | 5,934 | — | 7,095 | — | ||||||||||||
Loss on equity investment customer bankruptcy claim settlement | — | — | 759 | — | ||||||||||||
Loss (gain) on derivative financial instruments | 916 | (778 | ) | (6,063 | ) | (778 | ) | |||||||||
Equity investment (gain) loss on derivative financial instruments | (713 | ) | 364 | (1,362 | ) | (4,776 | ) | |||||||||
Tax effect of the above items | (1,589 | ) | (1,006 | ) | (5,829 | ) | (1,222 | ) | ||||||||
Adjusted net earnings(i) | $ | 23,168 | $ | 29,038 | $ | 75,228 | $ | 65,912 | ||||||||
Adjustments: | ||||||||||||||||
Tax effect of the above items | 1,589 | 1,006 | 5,829 | 1,222 | ||||||||||||
Change in fair value of contingent consideration | 4,681 | — | 4,681 | — | ||||||||||||
Interest expense, net | 14,007 | 7,774 | 36,948 | 24,543 | ||||||||||||
Income tax expense | 10,930 | 6,889 | 22,822 | 17,073 | ||||||||||||
Equity earnings in affiliates and joint ventures(i) | (2,401 | ) | (8,401 | ) | (25,815 | ) | (37,053 | ) | ||||||||
Equity investment EBIT(i) | 1,787 | 9,363 | 25,545 | 42,148 | ||||||||||||
Adjusted EBIT(i) | $ | 53,761 | $ | 45,669 | $ | 145,238 | $ | 113,845 | ||||||||
Adjustments: | ||||||||||||||||
Depreciation and amortization | 42,277 | 36,094 | 132,516 | 120,124 | ||||||||||||
Equity investment depreciation and amortization(i) | 5,098 | 4,112 | 19,209 | 11,383 | ||||||||||||
Adjusted EBITDA(i) | $ | 101,136 | $ | 85,875 | $ | 296,963 | $ | 245,352 | ||||||||
Adjusted EBITDA margin(i)(ii) | 25.1 | % | 26.8 | % | 23.3 | % | 23.3 | % |
(i) See "Non-GAAP Financial Measures".
(ii)Adjusted EBITDA margin is calculated using adjusted EBITDA over total combined revenue.
Reconciliation of equity earnings in affiliates and joint ventures to equity investment EBIT
Three months ended | Year ended | ||||||||||||||
(dollars in thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||
Equity (earnings) loss in affiliates and joint ventures | $ | 2,401 | $ | 8,401 | $ | 25,815 | $ | 37,053 | |||||||
Adjustments: | |||||||||||||||
Interest expense, net | (268 | ) | 688 | (1,183 | ) | 2,589 | |||||||||
Income tax expense | (324 | ) | 275 | 970 | 2,442 | ||||||||||
(Gain) loss on disposal of property, plant and equipment | (22 | ) | (1 | ) | (57 | ) | 64 | ||||||||
Equity investment EBIT(i) | $ | 1,787 | $ | 9,363 | $ | 25,545 | $ | 42,148 | |||||||
Depreciation | 4,983 | 3,936 | 18,555 | 10,679 | |||||||||||
Amortization of intangible assets | 115 | 176 | 654 | 704 | |||||||||||
Equity investment depreciation and amortization(i) | $ | 5,098 | $ | 4,112 | $ | 19,209 | $ | 11,383 |
(i) See "Non-GAAP Financial Measures"
About the Company
For further information contact:
Chief Financial Officer
(780) 960.7171
ir@nacg.ca
www.nacg.ca
Consolidated Balance Sheets
As at
(Expressed in thousands of Canadian Dollars)
2023 | 2022 | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash | $ | 88,614 | $ | 69,144 | ||||
Accounts receivable | 97,855 | 83,811 | ||||||
Contract assets | 35,027 | 15,802 | ||||||
Inventories | 64,962 | 49,898 | ||||||
Prepaid expenses and deposits | 7,402 | 10,587 | ||||||
Assets held for sale | 1,340 | 1,117 | ||||||
295,200 | 230,359 | |||||||
Property, plant and equipment | 1,142,946 | 645,810 | ||||||
Operating lease right-of-use assets | 12,782 | 14,739 | ||||||
Intangible assets | 6,971 | 6,773 | ||||||
Investments in affiliates and joint ventures | 81,435 | 75,637 | ||||||
Other assets | 7,144 | 5,808 | ||||||
Deferred tax assets | — | 387 | ||||||
Total assets | $ | 1,546,478 | $ | 979,513 | ||||
Liabilities and shareholders' equity | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 146,190 | $ | 102,549 | ||||
Accrued liabilities | 94,726 | 43,784 | ||||||
Contract liabilities | 59 | 1,411 | ||||||
Current portion of long-term debt | 81,306 | 42,089 | ||||||
Current portion of operating lease liabilities | 1,742 | 2,470 | ||||||
324,023 | 192,303 | |||||||
Long-term debt | 611,313 | 378,452 | ||||||
Operating lease liabilities | 11,307 | 12,376 | ||||||
Other long-term obligations | 134,357 | 18,576 | ||||||
Deferred tax liabilities | 108,824 | 71,887 | ||||||
1,189,824 | 673,594 | |||||||
Shareholders' equity | ||||||||
Common shares (authorized – unlimited number of voting common shares; issued and outstanding – | 229,455 | 229,455 | ||||||
(16,165 | ) | (16,438 | ) | |||||
Additional paid-in capital | 20,739 | 22,095 | ||||||
Retained earnings | 123,032 | 70,501 | ||||||
Accumulated other comprehensive (loss) income | (407 | ) | 306 | |||||
Shareholders' equity | 356,654 | 305,919 | ||||||
Total liabilities and shareholders' equity | $ | 1,546,478 | $ | 979,513 |
Consolidated Statements of Operations and Comprehensive Income
For the years ended
(Expressed in thousands of Canadian Dollars, except per share amounts)
2023 | 2022 | |||||||
Revenue | $ | 957,220 | $ | 769,539 | ||||
Cost of sales | 671,684 | 548,723 | ||||||
Depreciation | 131,319 | 119,268 | ||||||
Gross profit | 154,217 | 101,548 | ||||||
General and administrative expenses | 56,844 | 29,855 | ||||||
Loss on disposal of property, plant and equipment | 1,659 | 536 | ||||||
Operating income | 95,714 | 71,157 | ||||||
Equity earnings in affiliates and joint ventures | (25,815 | ) | (37,053 | ) | ||||
Interest expense, net | 36,948 | 24,543 | ||||||
Change in fair value of contingent consideration | 4,681 | — | ||||||
Gain on derivative financial instruments | (6,063 | ) | (778 | ) | ||||
Income before income taxes | 85,963 | 84,445 | ||||||
Current income tax expense | 6,841 | 1,627 | ||||||
Deferred income tax expense | 15,981 | 15,446 | ||||||
Net income | 63,141 | 67,372 | ||||||
Other comprehensive income | ||||||||
Unrealized foreign currency translation loss (gain) | 713 | (304 | ) | |||||
Comprehensive income | $ | 62,428 | $ | 67,676 | ||||
Per share information | ||||||||
Basic net income per share | $ | 2.38 | $ | 2.46 | ||||
Diluted net income per share | $ | 2.09 | $ | 2.15 |
Source:
2024 GlobeNewswire, Inc., source