̶ Continued margin
enhancement supported by strong customer demand, improved
productivity and increased revenue per metre drilled –
VAL-D'OR, QC, Nov. 9, 2022
/CNW/ - Orbit Garant Drilling Inc. (TSX: OGD) ("Orbit Garant"
or the "Company") today announced its financial results for the
three-month period ended September 30,
2022 ("Q1 2023"). All dollar amounts are in Canadian dollars
unless otherwise stated.
Financial Highlights
($ amounts in
millions,
except per share
amounts)
|
Three months
ended
September 30, 2022
|
Three months
ended
September 30, 2021
|
Revenue
|
$53.2
|
$50.6
|
Gross Profit
|
$6.2
|
$3.8
|
Gross Margin
(%)
|
11.7
|
7.4
|
Adjusted Gross Margin
(%)¹
|
16.3
|
12.3
|
EBITDA2
|
$5.8
|
$2.7
|
Net earnings
(loss)
|
$1.1
|
$(1.3)
|
Net earnings (loss) per
share
|
|
|
- Basic and
diluted
|
$0.03
|
$(0.04)
|
Total metres
drilled
|
410,121
|
463,755
|
1
|
Adjusted Gross
Margin is a non-IFRS financial measure and is defined as Gross
Profit excluding depreciation expenses. See "Reconciliation
of Non-IFRS financial measures".
|
2
|
EBITDA is a
non-IFRS financial measure and is defined as earnings before
interest, taxes, depreciation, and amortization. See
"Reconciliation of Non-IFRS financial measures".
|
"Our profitability continued to improve in the first quarter as
our average revenue per metre drilled increased nearly 20% compared
to Q1 last year, primarily reflecting improved productivity of our
drillers, supported by our training program, and more favourable
contract pricing that helped offset inflation impacts in
Canada. Our margins also benefited
from increased specialized drilling activity and decreased project
ramp-up costs in Canada, and a
reduction in mobilization costs for our recent drilling projects in
Guinea and Chile," said Eric
Alexandre, President and CEO of Orbit Garant. "Customer
demand remains strong and we expect to generate further margin
expansion in fiscal 2023, supported by the investments we made in
ramping up our operations last year, improving driller productivity
and a more favourable pricing environment."
First Quarter Results
Revenue for Q1 2023 totalled $53.2
million, an increase of 5.3% compared to $50.6 million for the three-month period ended
September 30, 2021 ("Q1 2022"). Canada revenue totalled $42.8 million in the quarter, an increase of
12.9% compared to $37.9 million in Q1
2022. The increase was primarily attributable to improved driller
productivity, a more favorable pricing environment and increased
specialized drilling activity. International revenue declined
to $10.4 million in Q1 2023, compared
to $12.7 million in Q1 2022,
reflecting a reduction in drilling activity in Burkina Faso and Chile, partially offset by increased drilling
activities in Guinea and
Guyana.
Orbit Garant drilled 410,121 metres in the quarter, compared to
463,755 metres drilled in Q1 2022. The Company's average
revenue per metre drilled in Q1 2023 was $129.66, an increase of 19.5% compared to
$108.46 in Q1 2022. The increase
in average revenue per metre drilled was primarily attributable to
an improved pricing environment in Canada and a higher proportion of specialized
drilling activity.
Gross profit for Q1 2023 increased to $6.2 million, or 11.7% of revenue, compared to
$3.8 million, or 7.4% of revenue, in
Q1 2022. Depreciation expenses totalling $2.5 million are included in the cost of contract
revenue for Q1 2023, similar to Q1 a year ago. Adjusted gross
profit in Q1 2023, excluding depreciation expenses, was
$8.7 million, compared to
$6.2 million in Q1 2022. Adjusted
gross margin was 16.3% in Q1 2023, compared to 12.3% in Q1
2022. The increases in gross profit, gross margin, adjusted gross
profit and adjusted gross margin were primarily attributable to
higher average revenue per metre drilled, reflecting improved
driller productivity, a more favourable pricing environment and
increased specialized drilling activity in Canada. Prior year margins were impacted by
project ramp-up costs due to rapid growth in Canada and mobilization costs for new,
long-term projects in Guinea and
Chile.
General and administrative expenses were $3.9 million, or 7.3% of revenue, in
Q1 2023, compared to $3.8 million, or 7.4% of revenue, in
Q1 2022.
Earnings before interest, taxes, depreciation and amortization
("EBITDA") increased to $5.8 million
in Q1 2023, compared to $2.7 million
in Q1 2022. Net earnings for Q1 2023 were $1.1 million, or $0.03 per share, compared to a net loss of
$1.3 million, or $0.04 per share, in Q1 a year ago. The positive
variances were primarily attributable to higher average revenue per
metre drilled, reflecting improved driller productivity, a more
favourable pricing environment and increased specialized drilling
activity in Canada. The Company's
EBITDA and net earnings in Q1 2023 also reflect decreased
project ramp-up costs in Canada
and a reduction in mobilization costs for drilling projects in
Guinea and Chile.
Liquidity and Capital Resources
During Q1 2023, cash flow of $0.1
million was generated from financing activities. In Q1 2022,
the Company repaid a net amount of $1.2
million of its long-term debt and lease liabilities.
On September 9, 2022, the Company
entered into an additional loan agreement with the Business
Development Bank of Canada (the
"BDC Loan Agreement") which provides for a term loan in the
principal amount of $8.47 million. The loan bears interest at a
fixed rate of 6.70% per year, has a 20-year term and is repayable
by way of 240 consecutive monthly payments from November 2022 until October 2042. The fixed interest rate may be
reduced by 0.20% from October 2023,
if certain financial covenants are met by the Company. The
Company's obligations under the BDC Loan Agreement are secured: (a)
by a first ranking immovable hypothec on the building serving as
the Company's head office located in Val-d'Or, Quebec (the "Property"); and (b)
guaranteed on a solidary (joint and several) basis by certain of
the Company's subsidiaries.
As a result of the Company entering into the BDC Loan Agreement
and in order to extract the Property from the borrowing base under
the Credit Agreement, the Company entered into a third amending
agreement to the Credit Agreement with National Bank on
September 9, 2022 (the "Third
Amending Agreement"), pursuant to which the amount available for
borrowing under the revolving facility contemplated under the
Credit Agreement was reduced from $35.0 million to $30.0 million. Other noteworthy amendments made
pursuant to the Third Amending Agreement include consents by
National Bank to authorize the first ranking immovable hypothec on
the Property pursuant to the BDC Loan Agreement and modifications
to certain financial covenants of the Company applicable to Q1 2023
and future quarters.
As at September 30, 2022, the
Company's working capital was $53.7
million, compared to $53.4
million as at June 30, 2022,
and 37,372,756 common shares were issued and outstanding. The
Company's working capital requirements are primarily related to the
funding of inventory and the financing of accounts receivable.
Orbit Garant's unaudited interim consolidated financial
statements and management's discussion and analysis for
Q1 2023 are available via the Company's website at
www.orbitgarant.com or SEDAR at www.sedar.com.
Conference Call
Eric Alexandre, President and
CEO, and Daniel Maheu, CFO, will
host a conference call for analysts and investors on Thursday,
November 10, 2022 at 10:00 a.m. (ET).
The dial-in numbers for the conference call are 416-764-8688 or
1-888-390-0546. A live webcast of the call will be available on
Orbit Garant's website at:
http://www.orbitgarant.com/en/events.
To access a replay of the conference call, dial
416-764-8677 or 1-888-390-0541, passcode: 086240 #. The replay
will be available until November 17,
2022. The webcast will be archived following conclusion of
the call.
RECONCILIATION OF NON - IFRS FINANCIAL MEASURES
Financial data has been prepared in conformity with IFRS.
However, certain measures used in this discussion and analysis do
not have any standardized meaning under IFRS and could be
calculated differently by other companies. The Company believes
that certain non-IFRS financial measures, when presented in
conjunction with comparable IFRS financial measures, are useful to
investors and other readers because the information is an
appropriate measure to evaluate the Company's operating
performance. Internally, the Company uses this non-IFRS financial
information as an indicator of business performance. These measures
are provided for information purposes, in addition to, and not as a
substitute for, measures of financial performance prepared in
accordance with IFRS.
EBITDA:
Net earnings (loss) before interest, taxes, depreciation and
amortization.
Adjusted gross profit:
Contract revenue excluding operating expenses. Operating
expenses comprise material and service expenses, personnel
expenses, other operating expenses, excluding
depreciation.
EBITDA
Management believes that EBITDA is an important measure when
analyzing its operating profitability, as it removes the impact of
financing costs, certain non-cash items and income taxes. As a
result, Management considers it a useful and comparable benchmark
for evaluating the Company's performance, as companies rarely have
the same capital and financing structure.
Reconciliation of EBITDA
(unaudited)
(in millions of
dollars)
|
3 months
ended
September 30,
2022
|
3 months
ended
September 30,
2021
|
Net earnings (net loss)
for the period
|
1.1
|
(1.3)
|
Add:
|
|
|
Finance
costs
|
0.7
|
0.4
|
Income tax
expense
|
1.3
|
0.8
|
Depreciation and
amortization
|
2.7
|
2.8
|
EBITDA
(loss)
|
5.8
|
2.7
|
Adjusted Gross Profit and Margin
Although adjusted gross profit and margin are not recognized
financial measures defined by IFRS, Management considers them to be
important measures as they represent the Company's core
profitability, without the impact of depreciation expense. As a
result, Management believes they provide a useful and comparable
benchmark for evaluating the Company's performance.
Reconciliation of Adjusted Gross Profit and
Margin
(unaudited)
(in millions of
dollars)
|
3 months
ended
September 30,
2022
|
3 months
ended
September 30,
2021
|
Contract
revenue
|
53.2
|
50.6
|
Cost of contract
revenue (including depreciation)
|
47.0
|
46.9
|
Less
depreciation
|
(2.5)
|
(2.5)
|
Direct costs
|
44.5
|
44.4
|
Adjusted gross
profit
|
8.7
|
6.2
|
Adjusted gross margin
(%) (1)
|
16.3
|
12.3
|
(1)
|
Adjusted gross
profit, divided by contract revenue X 100
|
About Orbit Garant
Headquartered in Val-d'Or,
Quebec, Orbit Garant is one of the largest Canadian-based
mineral drilling companies, providing both underground and surface
drilling services in Canada and
internationally through its 217 drill rigs and approximately 1,400
employees. Orbit Garant provides services to major, intermediate
and junior mining companies, through each stage of mining
exploration, development and production. The Company also provides
geotechnical drilling services to mining or mineral exploration
companies, engineering and environmental consultant firms, and
government agencies. For more information, please visit the
Company's website at www.orbitgarant.com.
Forward-looking information
This news release may contain forward-looking statements
(within the meaning of applicable securities laws) relating to
business of Orbit Garant Drilling Inc. (the "Company") and the
environment in which it operates. Forward-looking statements are
identified by words such as "believe", "anticipate", "expect",
"intend", "plan", "will", "may" and other similar expressions.
These statements are based on the Company's expectations,
estimates, forecasts and projections. They are not guarantees of
future performance and involve risks and uncertainties that are
difficult to control or predict. Risks and uncertainties that could
cause actual results, performance or achievements to differ
materially include the ability of the jurisdictions in which the
Company operates to manage and cope with the implications of
COVID-19, the impact of measures taken by such jurisdictions to
control the spread of COVID-19 on the Company's operations, the
economic and financial implications of COVID-19 to the Company,
including its impact on cash flows, liquidity and the Company's
compliance with its obligations under its borrowing agreements as
well as the risks and uncertainties are discussed in the Company's
regulatory filings available at www.sedar.com. There can be no
assurance that forward-looking statements will prove to be accurate
as actual outcomes and results may differ materially from those
expressed in these forward-looking statements. Readers, therefore,
should not place undue reliance on any such forward-looking
statements. Further, a forward-looking statement speaks only as of
the date on which such statement is made. The Company undertakes no
obligation to publicly update any such statement or to reflect new
information or the occurrence of future events or circumstances
except as required by applicable securities laws.
SOURCE Orbit Garant Drilling Inc.