North American Construction (NOA) Tops Q3 EPS by 36c, Revenues Beat; Offers FY20 & FY21 EPS Guidance

North American Construction (NYSE: NOA) reported Q3 EPS of $0.26, $0.36 better than the analyst estimate of ($0.10). Revenue for the quarter came in at $94.02 million versus the consensus estimate of $54.97 million.

Third Quarter 2020 Highlights:

• Adjusted EBITDA of $37.1 million is consistent with Q3 2019 reflecting both the wide reaching operational impacts of the COVID-19 pandemic and above average rainfall in the quarter offset by cost discipline to limit indirect project costs and general and administrative spending.
• Gross profit margin of 16.3% reflected a difficult operational quarter with July & August rainy conditions compounding already complex mine site environments.
• COVID-19 related safety protocols and mine site access restrictions imposed in late Q1 continued to have pervasive temporary impacts on all aspects of operations.
• Diversification efforts led to over half of adjusted EBIT being generated outside of the Fort McMurray region. Nuna Group of Companies achieved a strong three months during their busiest quarter contributing approximately 45% of adjusted EBIT for the quarter.
• Free cash flow ("FCF") in the quarter was a use of cash of $17.0 million and was impacted by timing of cash collection and spending. In addition, cash flow was used for capital inventory and work in process related to our component rebuilding program.
• Subsequent to period end, on October 8, 2020, we extended our credit facility agreement to October 8, 2023 and increased the available borrowings permitted under our revolving facility by $25.0 million to $325.0 million.
• On October 22, 2020, we announced the award of a major earthworks contract. The contract was awarded to a newly formed joint venture owned and operated equally by us and Nuna. This is a two-year project in Northern Ontario valued at over $250 million and is expected to commence immediately, ramp up through Q1 2021, achieve peak volumes in Q3 2021 and be completed in the fall of 2022.

NACG Chairman and CEO, Martin Ferron, commented: “A second successive year of well above average summer rainfall in the Fort McMurray area, combined with continued, but easing, pandemic related site access restrictions, severely curtailed our revenues, compared with the same quarter last year. However, a steadfast control of costs primarily enabled us to put up similar EBITDA and EPS numbers to those achieved in the year before quarter.

Mr. Ferron added, “Looking forward, we anticipate that the COVID-19 associated site access limitations will continue to ease, such that activity levels could be back to near normal by year end. Q4 is also the period when we generate most of our annual free cash flow and we expect the same pattern this year.

We also introduce financial ranges for 2021 in the slide deck, used to illustrate the earnings call. At the midpoint of those ranges we foresee 15% and 45% increases in EBITDA and FCF respectively, compared with the full year numbers we expect for 2020. Our confidence in these projections was boosted last week with the diversifying and substantial award of a construction project, related to a gold mine in Northern Ontario.”

GUIDANCE:

North American Construction sees FY2020 EPS of $1.60-$1.70, versus the consensus of $0.30.

North American Construction sees FY2021 EPS of $1.60-$1.90, versus the consensus of $0.47.

For earnings history and earnings-related data on North American Construction (NOA) click here.

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