Mr. Joseph Lambert reports

NORTH AMERICAN CONSTRUCTION GROUP LTD. ANNOUNCES RESULTS FOR THE FOURTH QUARTER AND YEAR ENDED DECEMBER 31, 2023

North American Construction Group Ltd. has released its results for the fourth quarter and year ended Dec. 31, 2023. Unless otherwise indicated, figures are expressed in Canadian dollars with comparisons to prior periods ended Dec. 31, 2022.

Fourth Quarter 2023 Highlights:

• Closure of the MacKellar Group ("MacKellar") acquisition on October 1, 2023, a seamless change in control, and three months of strong equipment utilization provided a full quarter of operating results in Australia, 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 in Australia.
• Combined revenue of $403.4 million is a company quarterly record based on the transformative acquisition of MacKellar. 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 the Fort 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 the Fargo-Moorhead project were offset by the successful 2023 Q3 completion of the construction project at the gold mine in Northern 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 the Nuna 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 at December 31, 2023, an increase of $325.6 million from September 30, 2023, resulting from the debt-funded purchase price and growth spending in Australia offset by free cash flow directed to debt reduction during the quarter.

NACG President and CEO, Joseph Lambert, commented: "The acquisition of the MacKellar Group is a milestone moment for our company and I'd like to thank all the employees for the hard work that has been put in to make these first few months in Australia such a success. In both Queensland and Western Australia, we are excited by the many prospects we have in front of us and look forward to sharing best practices and in-house maintenance expertise, as well as equipment where appropriate, to facilitate these growth opportunities.

As we've geographically diversified, I continue to closely monitor our various regions. In North Dakota and based on a recent trip there, construction at Fargo-Moorhead is progressing well into this most important period for the project. In northern Canada, we are undergoing a restructuring initiative within the Nuna Group of Companies which will return it to its legacy of operational excellence. In Fort McMurray, our fleet continues to operate day-in day-out as we work with our customers in their goal to achieve low-cost operations in the oil sands region. 2024 will be a busy year for us and we are looking forward to executing and delivering another record year."

Results for the Three Months Ended December 31, 2023

Combined revenue of $403.4 million, compared to $320.1 million in the same period last year, and revenue from wholly-owned entities was $326.3 million, up from $233.4 million in the same period last year. The majority of the quarter-over-quarter increase in revenue was driven by the October 2023 acquisition of MacKellar. MacKellar generated a full quarter of revenue totaling $122.5 million. Aside from MacKellar, revenue was down over the same period in 2022 as a result of changes in timing of reclamation projects beginning later than the previous year and certain construction scopes concluding earlier in 2023, relative to the same period in 2022.

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 MacKellar. MacKellar generated gross profit of 23.7% in the quarter.

General and administrative expenses (excluding stock-based compensation expense) were $18.7 million, or 5.7% of revenue for the three months ended December 31, 2023, up from $6.6 million, or 2.8% of revenue in the same period last year. General and administrative expenses in the quarter include one-time costs of $5.9 million related to the acquisition of MacKellar. MacKellar's administrative cost profile is similar to the Canadian and U.S. operations.

Cash related interest expense of $13.2 million represents an average cost of debt of 8.8% (compared to $7.5 million and 7.1%, respectively, for the three months ended December 31, 2022). The increase in interest expense is primarily attributed to the higher balance on the Credit Facility and increases in the variable rate.

Net income of $17.6 million in Q4 2023 compared to $26.1 million in the same period last year as higher gross profit was more than offset by increased interest expense, increased general and administrative expenses from the one-time acquisition costs, and lower equity earnings from our joint ventures.

Free cash flow in the quarter was $110.6 million driven primarily by adjusted EBITDA of $101.1 million less sustaining capital spending of $40.8 million and cash interest paid of $13.2 million.

Liquidity

Including equipment financing availability and factoring in the amended Credit Facility agreement, total available capital liquidity of $292.6 million includes total liquidity of $217.9 million, $60.1 million of unused finance lease borrowing availability, and $14.6 million of unused other borrowing availability as at December 31, 2023. Liquidity is primarily provided by the terms of our $478.0 million credit facility which allows for funds availability based on a trailing twelve-month EBITDA as defined in the agreement, and is now scheduled to expire in October 2026.

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 and Australia 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 in Australia;
• 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.

O utlook 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.

Conference Call and Webcast

Management will hold a conference call and webcast to discuss our financial results for the three months and year ended December 31, 2023, tomorrow, Thursday, March 14, 2024, at 9:00 am Eastern Time (7:00 am Mountain Time).

The call can be accessed by dialing:

• Toll free: 1-888-886-7786
• Conference ID: 29416987

A replay will be available through April 12, 2024, by dialing:

• 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. A replay will be available until April 12, 2024.

About the Company

North American Construction Group Ltd. is a premier provider of heavy civil construction and mining services in Canada, the U.S. and Australia. For 70 years, NACG has provided services to the mining, resource and infrastructure construction markets.

We seek Safe Harbor.