Orbit Garant Drilling (TSX:OGD) reported first-quarter financial results on Thursday. The transcript from the company’s first-quarter earnings call has been provided below.
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View the webcast at https://app.webinar.net/N0385M2dvOA
Summary
Orbit Garant Drilling reported record quarterly revenue of $60.1 million, marking a 28.9% increase from Q1 last year, driven by strong demand in Canada and South America.
The company is investing significantly in workforce expansion and training, as well as capital expenditures for equipment to fulfill a new specialized drilling contract in Northern Canada expected to generate $100 million over five years.
Gross profit was negatively impacted by lower productivity due to new trainees, inflation and higher depreciation expenses, although these factors were somewhat offset by increased drilling activity and improved contract pricing.
Net loss for the quarter was $0.9 million, influenced by higher interest costs and foreign exchange variations.
The company anticipates continued strong drilling utilization rates and improved profitability throughout fiscal 2027, supported by favorable market conditions and strategic investments.
Management highlighted a focus on improving productivity and margins, with expectations to achieve long-term adjusted gross margins of 20% or higher within the next 12 months.
Full Transcript
OPERATOR
Ladies and gentlemen, and welcome to Orbit Garant Drilling’s Fiscal 2027 First Quarter 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 these 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 certain 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 November 12, 2026. I would now like to turn the conference over to Mr. Daniel Maheu, President and CEO of Orbit Garant Drilling. Welcome, sir.
Daniel Maheu (President and Chief Executive Officer)
Thank you, Jim, and good morning, ladies and gentlemen. With me on the call is Pierre‑Luc Lapland, Chief Financial Officer. Following my opening remarks, Pierre‑Luc will review our financial results in greater detail and I will conclude with comments on our outlook. We will then welcome questions. Our strong revenue growth record in recent quarters continued in Q1 as we surpassed $60 million in quarterly revenue for the first time in the Company’s history and we reached a drill utilization rate of 72%, our highest quarterly level since fiscal 2012, reflecting the strong demand for our drilling services in both Canada and South America. Starting from Q1 last year, we have now achieved four consecutive quarters of sequential revenue growth.
To meet this demand and position Orbit Garant for its next phase of development, we have been making significant investments in expanding our workforce and training new drillers, as well as increased capital expenditures on equipment and inventory to ramp up and service new projects, including our new specialized drilling contract in Northern Canada, which is expected to generate $100 million in revenue over the initial five-year term. The majority of the initial required investment in equipment and inventory to service this large new contract has been made at the end of our fiscal first quarter.
Our gross profit and margin for the quarter were negatively impacted by lower drilling productivity in Canada due to an increased number of trainee drillers, inflation in production costs and drilling consumables, and investment in workforce training and development. Additionally, a $1.1 million increase in depreciation expense in Q1 this year compared to Q1 last year negatively impacted gross profit and gross margin. The increase in depreciation expense reflects increased capital expenditures incurred over the past two fiscal years in Canada and South America.
These factors were partially offset by increased drilling activity in both Canada and South America and improved contract pricing. We expect our recent pricing adjustments on certain legacy contracts and the improved pricing we have secured on new contracts, combined with gradual productivity improvement from our less experienced drillers, will be progressively reflected in our profitability during the remainder of fiscal 2027. I will now turn the call over to Pierre‑Luc to review our financial results in greater detail. Pierre‑Luc.
Pierre-Luc Lapland (Chief Financial Officer)
Thank you, Daniel, and good morning everyone. Revenue for the quarter totaled $60.1 million, an increase of 28.9% from Q1 last year. Canada revenue was $43.1 million in the quarter, an increase of 27.8% compared to Q1 last year, reflecting increased drilling activity and improved contract pricing. International revenue totaled $17.0 million, an increase of 31.5% compared to Q1 a year ago, primarily reflecting increased drilling activity in Guyana, as Chile was relatively stable year over year.
Gross profit was $5.1 million, or 8.5% of revenue, compared to $5.7 million, or 12.1% of revenue in Q1 last year. Adjusted gross profit and margin, excluding depreciation expenses and gain on disposal of property, plant and equipment, was $8.5 million and 14.1%, respectively, in the quarter, compared to $8.0 million and 17.0% in Q1 last year. Adjusted EBITDA totaled $3.9 million compared to $3.8 million in Q1 a year ago. The increase was primarily due to increased drilling activity and improved contract pricing, partially offset by lower drilling productivity in Canada due to an increased number of trainee drillers, inflation in production costs and drilling consumables, and increased investments in workforce training and development.
Our net loss for the quarter was $0.9 million, or $0.02 per share, diluted, compared to net earnings of $0.3 million, or $0.01 per share, diluted, in Q1 last year. Our net loss reflects the factors already discussed, as well as higher interest costs and a $0.4 million unfavorable variation in foreign exchange, partially offset by a $0.2 million tax recovery for the quarter. Turning to our balance sheet, we withdrew a net amount of $10.3 million on our credit facility in the quarter, mostly related to net capital expenditures of $11.7 million, compared to a withdrawal of $5.3 million in Q1 a year ago. Our long-term debt under the credit facility, including the current portion, was $34.0 million at quarter end compared to $23.7 million as at our fiscal 2026 year end. Our increased debt is primarily attributable to increased drawdowns to fund startup costs for our new long-term specialized drilling contract in Northern Canada.
As Daniel mentioned previously, the majority of the initial startup costs have now been absorbed. Our working capital was $52.0 million at quarter end compared to $48.7 million at the end of fiscal 2026. Subsequent to quarter end, on October 28, 2026, we announced that the Toronto Stock Exchange accepted our notice of intention to make a normal course issuer bid. Pursuant to the NCIB, we may purchase from time to time in aggregate up to 500,000 common shares over a 12‑month period commencing on October 31, 2026 and terminating on October 30 next year. We repurchased and cancelled 246,100 common shares at a weighted average price of $1.28 per share pursuant to our previous normal course issuer bid from October 31, 2025 to October 30, 2026.
We continue to view the NCIB as a useful tool to enhance shareholder value when the underlying value of Orbit Garant is not reflected in our share price. I will now turn the call back to Daniel for closing comments. Daniel.
Daniel Maheu (President and Chief Executive Officer)
Thank you, Pierre‑Luc. 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 nine months of 2026, mining companies listed on TSX and TSX Venture completed aggregate equity financings totaling more than $12.7 billion, an increase of approximately 67% compared to the same period in 2025. Supported by these favorable industry fundamentals, most of our customers are increasing their spending on mining exploration and development, and this is an industry‑wide trend.
Our outlook for the remainder of fiscal 2027 is positive. We expect continued strong drilling utilization rates throughout the year. It is likely that we will approach 75% utilization by year end. As we continue to ramp up projects and add drills to existing projects, we will remain focused on retaining our key personnel and supporting the training and development of our less experienced drillers. We are well positioned to benefit from improved contract pricing, the continued advancement of several projects that were in the ramp‑up phase during fiscal 2026, strong drill utilization rates, improving productivity from our new drilling crews, and strong market demand. Our adjusted gross margin has increased for two consecutive quarters, and we are committed to steadily improve our margin performance as the year progresses.
We are now entering a new phase. The resources needed to maintain our level of activity are largely in place, and our priority is now clear: to improve productivity, increase our margins, and transform our revenue growth into earnings growth. That concludes our formal remarks this morning. We will now welcome any question. Jim, please begin the question period.
OPERATOR
Ladies and gentlemen, thank you for your remarks. To our phone audience joining today, if you would like to ask a question, simply press star followed by the digit one on your telephone keypad. Pressing star and one will place your line into a queue and I will open your lines individually and you’ll be invited to pose your question. Once again, ladies and gentlemen, that is star one. We’ll hear first from Karim Aksoy with Glacier Pass.
Karim Aksoy (Analyst)
Hi Daniel, hi Pierre‑Luc, how are you guys? Thanks for hosting the call.
Daniel Maheu (President and Chief Executive Officer)
Good, thank you.
Karim Aksoy (Analyst)
It’s great to see the top line picking up and then your comments about it, I guess, continuing throughout the rest of the year to pick up. I was just wondering if you could talk a little bit more about that, maybe just in terms of revenue or number of rigs working just over the next couple quarters. What should we expect? Should the top line continue to grow from this level? Any thoughts would be appreciated.
Daniel Maheu (President and Chief Executive Officer)
Thank you, Karim. If you look at our top line since December 2025, we came from $47 million to progressively $51 million, $57 million, and now at $60 million. It’s roughly an increase of 28% of our revenue in the last nine months. So that’s exactly what we expect by increasing our utilization rate from 56–60, now at 72% of our fleet. So we invested in a lot of things to bring this level of income. We invested in our workforce training, recruiting; we invested to increase our inventory level of supply. We manufactured new rigs for the new contract in Northern Canada. So right now I think we are in a new phase. We entered in the phase of, as I mentioned, everything is in place to improve our productivity. Now, if we improve productivity, we should be able to increase our margin, and with that, growing in earnings for the next quarter.
And that’s exactly the focus we have. Altogether we brought the level of employees in Canada since December 2025 from approximately 700–750 employees to near 900 as at September 2026. So it’s a huge performance, I think. And we achieved that right now, and that’s exactly where we want to be. And with that it will be now time to increase productivity and earnings for the next quarter.
Karim Aksoy (Analyst)
No, that makes a lot of sense, since it’s a lot you guys have done. So that contract you mentioned in Northern Canada, $100 million over five years, or maybe $5 million per quarter, is that run rate being realized in Q1—you know, that $5 million run rate—or is it still ramping up such that there’ll be some top line benefit from that throughout the rest of the year?
Daniel Maheu (President and Chief Executive Officer)
Yes, that’s a good question, Karim. Essentially, we started this new contract with two rigs. The first one started in the middle of June 2026, so technically no effect on Q4 2026, but the effect was in Q1 2027. So from July to September 2026, we had the effect of one full rig on this contract, and a second one starting at the end of the quarter. So, technically, we will have progressively in Q2—so from now—the third one is in place, I would say this week, working at this new contract.
So the third one will start, and a fourth one will start probably before Christmas, and after, at the beginning of January–February, a fifth one will start. And progressively—so the question is—we will have full impact, let’s say, more in Q3, so from January, and also in Q4, probably five or six rigs will be in place in this new contract. So that will be in Q4. So this is a progressively increased contract. But as mentioned, we have already purchased all the equipment, built four new rigs for this contract, and all the inventory and other equipment for the new contract are already purchased and sent by barge to this contract at the end of September 2026. So technically all the assets we need to fulfill this contract are done already.
Karim Aksoy (Analyst)
Okay. No, I appreciate that. And then maybe just kind of a follow‑up on the margin, which you talked about a lot. So in Q1 it was—the EBITDA margin was 6.3%. And, you know, there’s a lot of things happening in terms of investment and cost inflation. And you’ve talked about the—you’re working with your customers. What looks like a realistic—I guess, can you help us—can you provide some expectations for the rest of the year? You know, you talked about it increasing; like, what’s the realistic rate that we could kind of expect over the next couple quarters? Maybe in the past you’ve talked about that 12% EBITDA margin, you know, 12 to 15%. Is that something that can be achieved this year, or is that like an exit rate, or just—yeah, I was curious how you thought about that progression and recovery of margin over the next couple quarters.
Pierre-Luc Lapland (Chief Financial Officer)
We don’t provide guidance on future margins. We said before we expect, in terms of adjusted gross margins, 20% or higher is our long‑term target.
Karim Aksoy (Analyst)
I mean, is long term like next year, or how do you think about that, I guess? Or, yeah, like what is a realistic time frame to realize that?
Pierre-Luc Lapland (Chief Financial Officer)
I think it’s something we’d like to achieve over the next 12 months, or that kind of timeframe. But we’ll see how our improvements to productivity and how the ramp‑up of the new contract goes.
Karim Aksoy (Analyst)
Okay, that was it for me. Thanks, guys. I appreciate it.
Daniel Maheu (President and Chief Executive Officer)
Thank you.
OPERATOR
And we’ll allow another opportunity for our audience to press star and 1 if you have a question or a follow‑up today. We’ll take just another moment. We have no signals from our phones presently. I’ll turn it back to you gentlemen for any closing or additional remarks that you have.
Daniel Maheu (President and Chief Executive Officer)
Thank you, Jim. Thank you to everyone for participating today. We look forward to speaking with you again soon.
OPERATOR
Ladies and gentlemen, this does conclude today’s Orbit Garant Drilling’s Fiscal 2027 First Quarter Results call. We thank you all for your participation. You may now disconnect your lines. Have a great day.
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.