Orbit Garant Drilling (TSX:OGD) reported fourth-quarter financial results on Friday. The transcript from the company’s fourth-quarter earnings call has been provided below.
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Summary
Orbit Garant Drilling reported record quarterly and annual revenue for fiscal 2026, driven by strong demand in Canada and South America, achieving 70% drill utilization, the highest since 2012.
Profitability was affected by lower drilling efficiency in Canada due to increased trainee drillers, legacy contract pricing, and inflation in production costs. The company has revised contract pricing to offset these costs, expecting improved profitability in fiscal 2027.
A new specialized drilling contract in Northern Canada, worth over $100 million, requires significant capital expenditure, partially funded through credit facilities, leading to increased debt. This aligns with the company’s strategy to focus on well-financed mining customers.
Fiscal 2026 saw a net loss of $1.5 million compared to a net profit in 2025, attributed to lower margins during contract ramp-up phases, cost inflation, and a credit loss related to West Africa asset sales.
Management is optimistic about returning to profitability in fiscal 2027, with improved contract pricing, ongoing project advancements, and strong industry fundamentals supported by high commodity prices.
Full Transcript
OPERATOR
Good morning, ladies and gentlemen, and welcome to this Orbit Garant Drilling fiscal 2026 fourth quarter and year-end results conference call and webcast. At this time, all lines are in a listen-only mode. Following management’s remarks, we will conduct a question-and-answer session. Please be aware that certain information discussed today may be forward-looking in nature. Such forward-looking information reflects the Company’s current views with respect to future events.
Any such information is subject to risks, uncertainties, and assumptions that could cause actual results to differ materially from those projected in the forward-looking information. For more information on the risks, uncertainties, and assumptions relating to forward-looking information, please refer to the Company’s latest MD&A and Annual Information Form, which are available on SEDAR+. Management may also refer to non-IFRS financial measures. Although Orbit Garant believes these measures provide useful supplemental information about financial performance, they are not recognized measures and do not have standardized meanings under IFRS.
Please refer to the Company’s latest MD&A for additional information regarding non-IFRS financial measures. This call is being recorded today, Friday, Sept. 25, 2026. It is now my pleasure to turn the floor over to President and CEO of Orbit Garant Drilling, Mr. Daniel Maheu. Welcome, sir.
Daniel Maheu, President & CEO
Thank you, Jim, and good morning, ladies and gentlemen. With me on the call today is Pier-Luc Laplante, Chief Financial Officer. Following my opening remarks, Pier‑Luc will review our financial results in greater detail, and I will conclude with comments on our outlook. We recorded record quarterly revenue in our fourth quarter this year and record annual revenue in fiscal 2026, reflecting the strong demand for our drilling services in both Canada and South America.
We also reached 70% drill utilization in the quarter, which represents our highest level since fiscal 2012. Reaching this threshold was a key objective for us at the start of the year. Our profitability for the quarter was negatively impacted by lower drilling efficiency in Canada due to the higher drilling utilization rate, which resulted in an increase in the number of trainee drillers; also lower revenue per meter on certain legacy drilling contracts in Canada that were signed in the first half of the year; and inflation in production costs and drilling consumables; and investment in workforce training and development. We have recently been able to revise contract pricing to offset our cost inflation, and this includes the implementation of price increases on most of the lower-priced contracts that we were awarded during the first half of the year. While there has been a temporary lag between this cost inflation and price adjustments, these pricing adjustments should progressively be reflected in our profitability during fiscal 2027.
Our new large specialized drilling contract in Northern Canada that we secured during the quarter, which we expect to generate in excess of $100 million over its initial five-year term, requires U.S. capital expenditures and substantial inventory. This cost was partially funded through draws on our credit facilities and a new term loan. This resulted in an increase of debt at fiscal year-end. Our focus on debt reduction over prior years provided us with the financial flexibility to…
Our focus on debt reduction when this project is running at full capacity. This new specialized drilling contract further strengthens our position as an industry leader in Northern Canada and is in line with our strategy of focusing on senior and well-financed intermediate mining customers. I will now turn the call over to Pier‑Luc to review our financial results.
Pier-Luc Laplante, Chief Financial Officer
Thank you, Daniel, and good morning, everyone. Revenue for the quarter totaled $57.2 million, an increase of 21.3% compared to Q4 last year. Canada revenue was $39.4 million in the quarter, an increase of 16.8% compared to Q4 last year, offset by lower average revenue per meter drilled on certain legacy contracts that were signed during the first half of fiscal 2026. International revenue totaled $17.8 million, an increase of 32.7% compared to Q4 a year ago, reflecting increased drilling activity in both Chile and Guyana.
Gross profit was $4.6 million, or 8.2% of revenue, compared to $7.6 million, or 16.0% of revenue in Q4 last year. Adjusted gross margin, excluding depreciation expenses and a gain on disposal of property, plant and equipment, was 13.6% in the quarter compared to 20.2% in Q4 last year. The decrease in gross profit, gross margin, and adjusted gross margin was attributable to lower drilling efficiency in Canada due to a higher number of trainee drillers, lower revenue per meter on certain legacy drilling contracts in Canada, and inflation in production costs and drilling consumables, and investments in workforce training and development.
Our increased depreciation expenses of $0.7 million due to increased capital expenditures incurred in fiscal 2026 and fiscal 2025 in Canada and South America negatively impacted gross profit and margin. Adjusted EBITDA totaled $3.6 million compared to $5.5 million in Q4 last year. The decrease was primarily attributable to the factors already discussed, partially offset by a favorable foreign exchange variation of $0.7 million in the quarter. Our net loss for the quarter was $1.9 million, or $0.05 per share diluted, compared to net earnings of $2.2 million, or $0.06 per share diluted, in Q4 last year.
Our net loss reflects the factors already discussed as well as a $1.4 million expected credit loss, net of interest revenue, on the long-term receivable related to the sale of our assets in West Africa, partially offset by the favorable variation in foreign exchange. For fiscal 2026, we generated record annual revenue of $203.2 million, an increase of 7.5% compared to fiscal 2025. Canada revenue totaled $143.2 million, an increase of 5.3% compared to fiscal 2025, reflecting slightly higher revenue per meter drilled and increased drilling activity, partially offset by client-initiated project delays and project completions during Q1, the ramp-up of new drilling projects in both Q1 and Q3, and the negative impact of more severe winter weather conditions in Q3 this year. International revenue for fiscal 2026 totaled $60.0 million, an increase of 13.2% compared to fiscal 2025, reflecting increased drilling activity in both Chile and Guyana, partially offset by modifications to a certain drilling program in Chile during the first nine months of fiscal 2026 and customer decisions to temporarily delay certain drilling programs during the first half of fiscal 2026.
Gross profit for fiscal 2026 was $19.7 million, or 9.7% of revenue, compared to $28.3 million, or 15.0% of revenue, in fiscal 2025. Adjusted gross margin, excluding depreciation expenses and a gain on disposal of property, plant and equipment, was 14.7% in fiscal 2026 compared to 19.5% in fiscal 2025. The decline in gross profit, gross margin, and adjusted gross margin reflects the mobilization of several major long-term drilling contracts during fiscal 2026.
These contracts typically generate lower margins during their initial ramp-up phase before reaching normalized productivity levels. Inflation in production costs, drilling consumables, and investments in workforce training and development also impacted gross profit and margins. The more severe winter weather conditions in Canada during Q3 this year also negatively impacted productivity on surface drilling projects. Continued modifications to a drilling program and a decline in certain specialized drilling activities in South America also negatively impacted profitability.
Additionally, increased depreciation expenses of $1.4 million due to increased capital expenditures incurred in fiscal 2026 and fiscal 2025 negatively impacted gross profit and margins. Adjusted EBITDA totaled $13.7 million in fiscal 2026 compared to $21.7 million in fiscal 2025. The decline was attributable to the factors already discussed, partially offset by a $0.5 million favorable foreign exchange gain. Net loss for fiscal 2026 was $1.5 million, or $0.04 per share diluted, compared to net earnings of $7.5 million, or $0.20 per share diluted, in fiscal 2025.
Our net loss for the year was attributable to the factors already discussed and also reflects an expected credit loss of $1.2 million, net of interest revenue, on the long-term receivable related to our sale of assets in West Africa, partially offset by an income tax recovery of $0.3 million and a favorable foreign exchange gain of $0.5 million in fiscal 2026. Turning to our balance sheet, we withdrew a net amount of $9.7 million on our credit facility in fiscal 2026, mostly related to net capital expenditures of $17.5 million, compared to a repayment of $7.5 million in fiscal 2025.
Our long-term debt under the credit facility, including the current portion, was $23.7 million at fiscal year-end compared to $14.0 million at our fiscal 2025 year-end. During the year, pursuant to our normal course issuer bid, we repurchased and canceled approximately 162,000 shares at a weighted average price of $1.36 per share. Our working capital was $48.7 million at year-end compared to $50.4 million at the end of fiscal 2025. I’ll turn the call back to Daniel for closing comments.
Daniel, thank you.
Daniel Maheu, President & CEO
The demand for our drilling services in both Canada and South America remains strong, supported by historically high gold and copper prices and a robust financing environment for mining companies. In the first eight months of 2026, mining companies listed on the TSX and TSX Venture completed aggregate equity financings totaling more than $11.4 billion, an increase of approximately 78% compared to the same period in 2025. Most of our customers are increasing their spending on mining exploration and development, and this is an industry-wide trend.
While we are experiencing favorable industry fundamentals and strong customer demand, we have had challenges this year, many of which were out of our control, including an unusually high level of project delays due to customer decisions, particularly in the first half of our fiscal year; severe winter weather in Q3 that impacted productivity on surface drilling in Canada; prolonged customer modification to a drilling program in Chile; pricing pressure in the first half of our fiscal year; and cost inflation. We were also ramping up operations on several new projects during fiscal 2026. While we expected our profitability to improve more in our fourth quarter, this did not materialize to the extent we expected. Credit loss of $1.4 million net of interest revenue in the quarter. However, we believe we are positioned to return to profitability in fiscal 2027 as a result of improving pricing on new and existing contracts, the continued advancement of several projects that were in their ramp-up phase during fiscal 2026, and improved productivity from our new burning tool.
That concludes our formal remarks this morning. We will now welcome any questions. Jim, begin the question period.
OPERATOR
Gentlemen, thank you for your remarks today. And to our phone audience, that is star and one on your telephone keypad. If you would like to ask a question, pressing star and one will place your line into a queue and I will open your lines one at a time. Once again, ladies and gentlemen, that is star and one. We will hear first from Karim Aksoi at Leisure Pass.
Karim Aksoi, Analyst at Leisure Pass
Hi, guys, thanks for hosting the call today and the results. Definitely appreciate it. I had a couple questions, if it’s okay. So Daniel, in the release you mentioned that you’d renegotiated your contracts during the first half of the calendar year. I was wondering what’s the timing of that flowing through to the business? Do you expect to see benefits in the second half of calendar year ’26, or do you think it could maybe take a little longer?
Daniel Maheu, President & CEO
Yes, we renegotiated some of these contracts, and that progressively came in Q1 and Q2 of fiscal 2027. Yes, by the end of December, almost all contracts will be with the new price, each of them.
Karim Aksoi, Analyst at Leisure Pass
Okay, that makes sense. That’s great. And then so sequentially in fiscal year ’27, do you expect adjusted gross margins to increase in aggregate?
Daniel Maheu, President & CEO
We don’t provide guidance like that. But for sure our target is to, with the new contract renewal and price adjustment, we expect to have an increase of our margin. If we compare this year with 2025, where the margins are around 19% of adjusted gross margin, we think this year with 15% we have place to increase for sure, but we can’t provide any guidance about that.
Karim Aksoi, Analyst at Leisure Pass
Gotcha. But then, I mean, do you think it’s realistic to get back to fiscal year ’25, 20% gross margins, or is there some reason, you know, you wouldn’t be able to get back to those numbers?
Daniel Maheu, President & CEO
That’s exactly where we want to go. And we focus on, first, on the price adjustment to cover the cost inflation. But also we will focus on control of our costs. And definitively the target is to increase our margin, and we expect the actual market, with the demand we have. And also don’t forget we have a new contract in Northern Canada which is progressively starting. We have two rigs there right now working, and eventually, until let’s say June 2027, these two rigs we will add six extra rigs on this contract, and that should help us to increase our gross margin for sure.
Karim Aksoi, Analyst at Leisure Pass
No, that makes sense, and maybe just the question on that contract. I think you mentioned that, you know, maybe there’s a lot of ramp-up costs and startup costs associated with it. In the next 12 months, you know, do you think there’ll be loss-making the first year? I was wondering if you can kind of quantify what the impact of that might be in the next fiscal year or how we should think about that contract and the profitability of it over time.
Daniel Maheu, President & CEO
Hard to quantify, but that’s clear that in fiscal 2026 we have a lot of ramp-up, maybe five, six large contracts, and we still have one big contract in Northern Canada to ramp up progressively until Q3 of 2027. But it’s clear we have less cost of ramp-up, and that’s why we think the actual contracts we got in 2026 will be more profitable in 2027 because all these costs are now behind us.
Karim Aksoi, Analyst at Leisure Pass
Gotcha. So in this year there’s some costs. The first half of next fiscal year there’ll be some cost, and then maybe Q3 it sounds like those costs will be behind you, the ramp-up costs.
Daniel Maheu, President & CEO
Yeah, yeah, exactly.
Karim Aksoi, Analyst at Leisure Pass
And then is there any way you could maybe, like, help us think about that or quantify it at all, just so we can think about the impact on the business.
Pier-Luc Laplante, Chief Financial Officer
It’s like Daniel said, it’s difficult to evaluate the entirety of the impact because there’s a lot going on with these contracts. It’s a specialized drilling contract in remote locations, so that means a lot of investment, and that means a lot of hiring as well. Because staffing eight drills—eight additional drills—is a challenge in and of itself. So the timing of how everything is going to work out is difficult to figure out. But we know, we expect, typically, that the first, I don’t know, 10 to 12 months of the contract is going to generate lower margins than anticipated, or that is typical of a specialized drilling contract.
Karim Aksoi, Analyst at Leisure Pass
Okay, I appreciate the color. That’s helpful. And then maybe just one last question. As you look at the next fiscal year, I know that in Q4, you know, CapEx is elevated. What are you guys expecting for total CapEx in fiscal year ’27—maybe total CapEx and then, like, working capital as well, you know, a source or a use?
Pier-Luc Laplante, Chief Financial Officer
The amount that was in our AIF was around $19.3 million CapEx, with an expected $6.3 million dedicated to the new long-term contract.
Karim Aksoi, Analyst at Leisure Pass
I’m sorry, I missed that. So in the next year, in 2027, fiscal year ’27, CapEx will be $19 million, correct?
Pier-Luc Laplante, Chief Financial Officer
With $6.3 million dedicated to the new long-term contract.
Karim Aksoi, Analyst at Leisure Pass
Okay, so total CapEx in fiscal year ’27 will be $19 million and $6.3 of that is related to the contract. Sorry for asking. Okay, and then do you expect working capital to be positive or negative?
Pier-Luc Laplante, Chief Financial Officer
We expect working capital to go up with the amount of inventory that we’re going to need to service all of our projects, including that one.
Karim Aksoi, Analyst at Leisure Pass
And then is there any kind of early thought you have on what that might look like for the whole year, in terms of the cash use in working capital?
Pier-Luc Laplante, Chief Financial Officer
We expect to use… Let me think about it. Another, probably another $10 million on that, or something along those lines.
Karim Aksoi, Analyst at Leisure Pass
Okay, that makes sense. Yeah. With a contract that large. Those are my questions. Thanks for taking them. I really appreciate it, guys, and wishing the best of luck and the start of the new year.
Daniel Maheu, President & CEO
Thank you very much.
Thank you.
OPERATOR
And ladies and gentlemen, we’ll pause for another moment to give our audience an opportunity to press star and one if you have a question or comment at this time. And we’ll move next to the line of Paul Dahanic, private investor.
Paul Dahanic, Private Investor
Oh, hi, good morning. I just have a question about your South American contracts that were, sort of, needed some delay or some sort of technical modifications. Has the company already worked through that? Is that now, sort of, on stream, sort of, you know, coming through?
Pier-Luc Laplante, Chief Financial Officer
Well, there’s two things that occurred in that one. One of them was these projects had resumed by the end of fiscal year ’20. And another one that’s a factor that occurs in our industry is that we are at the mercy of the client’s drilling program, and if the client decides to change the number of drills or how they want to go about a certain drilling program, we basically have to follow the drilling program of the client. And that resulted in a lower number of drills on a certain program.
Paul Dahanic, Private Investor
Okay, thanks for that. And the second question I had: in your last conference call, you mentioned a utilization rate target of above 70%. Can you tell me what the utilization rate for the last quarter was?
Daniel Maheu, President & CEO
Yes, we achieved that. So actually we have exactly 70% here and also in South America. So that’s the target we put at the beginning of fiscal 2026, and exactly where we are, because at Q1 this year we had approximately 56%. We came to 62% of drilling utilization at Q2 and 67% at Q3. So now we are at 70%. And this is a kind of, let’s say, high level of utilization for our rigs. And also we have a lot of challenge with the manpower to fill these, especially in Canada.
In South America it’s less a problem, but in Canada we have to get manpower for this increase of utilization. So that’s exactly where we are. And for fiscal 2027 our main focus will be to keep this rate of utilization and fill up all these contracts. And eventually, if the market’s still strong like this, we will look for any other new opportunity. But technically we want to focus on this high level of income. And with the new contract that we get in Northern Canada for eight new rigs, that will be a great challenge for us.
And this is exactly where we want to be.
OPERATOR
Anything further, Mr. Dahanek?
Okay. We presently have no further signals from our phone audience. Mr. Maheu, I will turn it back to you, sir, for any additional or closing remarks that you have.
Paul Dahanic, Private Investor
Yes, just saying that as a longer-term investor, keep on going. Understand you have to spend money to make money. So, you know, great. I hope this year’s a great year for you guys. Appreciate it.
Daniel Maheu, President & CEO
Thank you very much. We appreciate that. Thank you, Jim. Thank you to everyone for participating today. We look forward to speaking with you again soon. Thank you.
OPERATOR
Ladies and gentlemen, this does conclude today’s Orbit Garant Drilling fiscal 2026 fourth quarter and year-end results conference. Thank you all for your participation, and 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.
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