Earnings call transcript: Orbit Garant Drilling Q4 2025 reports strong revenue growth

Orbit Garant Drilling Inc. (OGD) reported its financial results for the fourth quarter of 2025, showcasing a robust performance with fiscal year revenue reaching $189 million, a 4.3% increase from the previous year. The company’s shares, however, fell by 7.57% in the aftermath of the earnings release, reflecting investor reactions to the financial outcomes. According to InvestingPro data, the company maintains strong financial health with a Current Ratio of 2.59, indicating solid liquidity position. The stock has delivered an impressive 208% return over the past year.

Key Takeaways

• Fiscal 2025 revenue rose by 4.3% to $189 million.
• Net earnings reached $7.5 million, equivalent to $0.20 per share.
• Adjusted EBITDA increased significantly by 47.6% compared to 2024.
• The company exited the West African market, focusing on Canada and South America.
• Shares dropped by 7.57% following the earnings announcement.

Company Performance

Orbit Garant Drilling demonstrated a strong financial performance in fiscal 2025, driven by increased revenue and improved margins. The company saw a notable rise in international revenue, particularly from South America, which grew by 9.0%. This growth was supported by high gold and copper prices, as well as increased exploration spending by mining companies.

Financial Highlights

• Revenue: $189 million, up 4.3% from 2024.
• Net Earnings: $7.5 million, or $0.20 per share.
• Adjusted Gross Margin: 19.5%, improved from 15.9% in 2024.
• Adjusted EBITDA: $21.7 million, a 47.6% increase year-over-year.

Market Reaction

Following the earnings release, Orbit Garant’s stock fell by 7.57%, closing at $1.71. This decline comes despite the company’s improved financial performance, suggesting investor concerns over future growth prospects or market conditions. Based on InvestingPro analysis, the stock is currently trading near its Fair Value, with an RSI indicating overbought territory. The company’s market capitalization stands at $46.44 million, with a modest P/E ratio of 10.75, suggesting reasonable valuation metrics. For deeper insights into OGD’s valuation and 10+ additional ProTips, consider exploring InvestingPro’s comprehensive analysis tools.

Outlook & Guidance

Looking ahead, Orbit Garant is optimistic about continued demand from the mining sector, particularly in Canada and South America. The company plans to capitalize on high gold and copper prices and anticipates further operational improvements. Minimal capital expenditure is expected for expansion, allowing for potential growth in key regions. InvestingPro analysts project continued net income growth this year, with an EV/EBITDA ratio of 4.68 suggesting attractive valuation metrics. Get access to the full Pro Research Report, part of InvestingPro’s coverage of 1,400+ stocks, for comprehensive analysis and actionable insights.

Executive Commentary

Daniel Maheu, President and CEO, highlighted, "2025 marks our best financial performance over the last 10 years," emphasizing the company’s strategic focus on well-financed mining customers. CFO Pier-Luc Laplante added, "We believe that our capital allocation initiatives... will help drive further value creation for shareholders."

Risks and Challenges

• Volatility in commodity prices, particularly gold and copper, could impact revenue.
• Economic downturns or reduced exploration spending by mining companies may affect growth.
• Political and regulatory changes in key operating regions could pose challenges.

Q&A

The earnings call concluded without any questions from analysts, indicating a straightforward presentation of the company’s financial results and strategic outlook.

Full transcript - Orbit Garant Drilling Inc. (OGD) Q4 2025:

Regina, Conference Call Operator, Orbit Garant Drilling: Good morning, ladies and gentlemen, and welcome to Orbit Garant Drilling’s fiscal 2025 year-end and fourth quarter results conference call and webcast. At this time, all lines are in listen-only mode. Following management’s remarks, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. Please be aware that certain information discussed today may be forward-looking and that actual results could differ materially. Certain non-IFRS financial measures will also be discussed. Please refer to the company’s CDAR filings for additional information on both risk factors and non-IFRS measures. This call is being recorded on Thursday, September 25, 2025. I would now like to turn the conference over to Mr. Daniel Maheu, President and CEO of Orbit Garant Drilling. Please go ahead, sir.

Daniel Maheu, President and CEO, Orbit Garant Drilling: Thank you, Regina, and good morning, ladies and gentlemen. With me on the call today is Pier-Luc Laplante, Chief Financial Officer. Following my opening remark, Pier-Luc will review our financial results in greater detail, and I will conclude with comments on our outlook. We will then welcome questions. I’m extremely proud of our financial performance for the fiscal year 2025, as we generate our highest net earnings in more than 10 years. I want to take the opportunity to thank all the employees that contribute to deliver this solid performance. Our performance reflects our continued focus on our strategic plan. We continue to benefit from our focus on senior and well-financed intermediate mining customers in Canada and South America, our disciplined business strategy, and continuous operational improvement program, as well as our exit from West Africa in Q2 last year.

We finished this year with a solid fourth quarter with revenue growth of 3.9% compared to Q4 last year and net earnings of $0.06 per share. This reflects six consecutive quarters of year-over-year increase in net earnings. Our adjusted gross margin was in excess of 20% in the quarter, achieving an adjusted gross margin of 20% or more is one of our primary objectives. Our solid revenue in the quarter reflects higher revenue per meter drilled in Canada and increased drilling activity in South America. Our performance is also supported by a strong customer demand. The price of gold is currently at a historically high level, and the price of copper also remains strong, which provides a strong incentive for mining companies to continue to invest in mine exploration and development activities. We expect demand to remain positive from senior and intermediate companies despite the highly competitive environment.

Demand from junior companies has been constrained due to the financing conditions, but we are starting to see increased financing activities on the junior side. We have a strong relationship in the junior mining sector and are well-positioned to selectively pursue business with juniors when demand picks up again. We still have significant available drilling capacity in Canada and the potential to expand our regional presence, and we can easily mobilize drill rigs with minimal CapEx as opportunities present themselves. I will now turn the call over to Pier-Luc to review our results for the fourth quarter and fiscal 2025 in greater detail. Pier-Luc?

Pier-Luc Laplante, Chief Financial Officer, Orbit Garant Drilling: Thank you, Daniel, and good morning, everyone. Revenue for our fiscal fourth quarter totaled $47.2 million, up from $45.3 million in Q4 last year. Canada revenue was $33.8 million in the quarter, an increase of 2.7% from $32.8 million in Q4 a year ago, reflecting higher revenue per meter drilled. International revenue totaled $13.4 million, an increase of 7.0% from $12.5 million in Q4 a year ago, reflecting increased drilling activity in South America. Gross profit was $7.6 million, or 16.0% of revenue, compared to $7.5 million, or 16.6% of revenue in Q4 2024. Adjusted gross margin, excluding depreciation expenses and a gain on disposal of property, plants, and equipment, was 20.2% in the quarter compared to 17.8% in Q4 2024.

The increases in gross profit and adjusted gross margin were primarily attributable to higher revenue per meter drilled in Canada, increased drilling activity in South America, and the cessation of drilling activities in West Africa during Q2 2024, which were unprofitable. Adjusted EBITDA totaled $5.5 million, down from $6.7 million in Q4 last year. The decrease was primarily attributable to an unfavorable foreign exchange variance and startup costs for a new project in South America, partially offset by increased operating earnings in Canada. Net earnings for the quarter were $2.2 million, or $0.06 per share diluted, compared to a net loss of $2.3 million, or $0.06 per share diluted in Q4 last year.

Our net earnings in Q4 this year were primarily attributable to the effect of the substantial modification of a receivable and expected credit loss and the reclassification of cumulative translation adjustments in Q4 a year ago related to our exit from West Africa, partially offset by a slight reduction in consolidated operating earnings, a reduced income tax recovery, and an unfavorable foreign exchange movement. For fiscal 2025, we generated revenue of $189 million, an increase of 4.3% compared to fiscal 2024. Canada revenue totaled $136.1 million for fiscal 2025, an increase of 2.6% compared to fiscal 2024, reflecting higher revenue per meter drilled. International revenue for fiscal 2025 totaled $53.0 million, an increase of 9.0% compared to fiscal 2024, reflecting increased drilling activity in South America. Gross profit for fiscal 2025 was $28.3 million, or 15.0% of revenue, compared to $21.2 million, or 11.7% of revenue in fiscal 2024.

Adjusted gross margin, excluding depreciation expense and a gain on disposal of property, plants, and equipment, was 19.5% in fiscal 2025 compared to 15.9% in fiscal 2024. The increases in gross profit and adjusted gross margin were primarily attributable to higher revenue per meter drilled in Canada, increased drilling activity in South America, and the cessation of our drilling activities in West Africa during Q2 2024. Adjusted EBITDA totaled $21.7 million in fiscal 2025 compared to $14.7 million in fiscal 2024. The increase reflects higher operating earnings in both Canada and South America and a favorable foreign exchange variation. Net earnings for fiscal 2025 were $7.5 million, or $0.20 per share diluted, compared to a net loss of $2.4 million, or $0.06 per share diluted in fiscal 2024.

Our net earnings in fiscal 2025 were primarily attributable to increased operating earnings in both Canada and South America, the effect of a substantial modification of our receivable and expected credit loss, and the reclassification of cumulative translation adjustments in Q4 2024, interest revenue on the long-term receivable related to the sale of our assets in West Africa, and a favorable foreign exchange variation partially offset by increased income tax expense. Turning to our balance sheet, we repaid a net amount of $7.5 million on our credit facility in fiscal 2025 compared to a net repayment of $0.7 million in fiscal 2024. Our long-term debt under the credit facility, including an undrawn $5.0 million U.S. dollar revolving credit facility and the current portion, was $14.0 million at year-end compared to $21.5 million at year-end fiscal 2024.

Pursuant to our normal course issuer bid, we repurchased and canceled $68,916 of our common shares at a weighted average price of $0.82 per share during fiscal 2025. Our issuer bids formally terminate on October 30 this year. We believe that our capital allocation initiatives in paying down debt and buying back shares during fiscal 2025 will help drive further value creation for shareholders. Our working capital at year-end totaled $50.4 million compared to $48.6 million at the end of fiscal 2024. I will now turn the call back to Daniel for closing comments. Daniel.

Daniel Maheu, President and CEO, Orbit Garant Drilling: Thank you, Pier-Luc. Let me close by reiterating that we embarked on an important strategic shift a few years ago, and I’m extremely pleased with how the company has responded to this plan, and we are seeing the result of these efforts. 2025 marks our best financial performance over the last 10 years and highlights the dedication of the entire Orbit Garant team. Our strategic focus on Canada and South America, disciplined business strategy, and continuous operational improvement program are working well for us, and we are going to stick on it as we continue to work hard to strengthen our market position and profitability. Metal prices are also trending positively for us, with gold prices spiking to record levels this year. Gold miners are highly motivated to increase their mineral reserves and resources, but they need to spend money on drilling to prove them up.

We generate more than 60% of our revenue from gold drilling operations in fiscal 2025, and we are therefore well-positioned to benefit from gold exploration and development spending. Copper prices have also been strong this year, even with economic concerns related to tariffs. We believe this reflects the strong demand outlook for copper, a mineral that is necessary for the ongoing electrification of the global economy. We are well-positioned to benefit from increased exploration and development spending related to copper, with our presence in Chile the largest copper-producing country in the world. With the right strategic focus and supportive industry fundamentals, we believe that we are well-positioned to drive enhanced profitability on a substantial basis and build long-term value for our shareholders. That concludes our formal remarks for today. We will now welcome any questions. Regina, please begin the question period.

Regina, Conference Call Operator, Orbit Garant Drilling: We will now begin the question and answer period. In order to ask a question, simply press star followed by the number one on your telephone keypad. Again, for any questions, please press star one. We’ll pause for just a moment to compile the Q&A roster. As a reminder, to ask a question, that is star followed by the number one on your telephone keypad. We have no questions at this time. Daniel, are there any closing remarks?

Daniel Maheu, President and CEO, Orbit Garant Drilling: Yes, thank you, Regina. Thank you, everyone, for participating today. We look forward to speaking with you again soon. Bye-bye.

Regina, Conference Call Operator, Orbit Garant Drilling: This concludes our call today. Thank you all for joining. You may now disconnect.

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