– Fourth quarter and year-end gross margins
and net earnings reflect a $4.2
million one-time, non-cash charge related to a write-down of
inventory as Company plans to exit Burkina Faso –
VAL-D'OR, QC, Sept. 19,
2023 /CNW/ - Orbit Garant Drilling Inc. (TSX: OGD)
("Orbit Garant" or the "Company") today announced its financial
results for the three-month period ("Q4 2023") and fiscal year
ended June 30, 2023. All dollar
amounts are in Canadian dollars unless otherwise stated.
Financial Highlights
($ amounts in
millions,
except per share
amounts)
|
Three months
ended
June 30, 2023
|
Three months
ended
June 30, 2022
|
Year
ended
June 30,
2023
|
Year
ended
June 30,
2022
|
Revenue
|
$46.8
|
$53.8
|
$201.0
|
$195.5
|
Write-down of
inventories from restructuring in Burkina Faso
|
$(4.2)
|
--
|
$(4.2)
|
--
|
Gross Profit
|
$0.7
|
$6.9
|
$18.3
|
$13.7
|
Gross Margin
(%)
|
1.4
|
12.8
|
9.1
|
7.0
|
Adjusted Gross Margin
(%)¹
|
15.9
|
17.2
|
16.2
|
12.2
|
Adjusted
EBITDA2
|
$1.8
|
$5.7
|
$19.1
|
$10.0
|
Net earnings
(loss)
|
$(4.1)
|
$0.5
|
$(0.7)
|
$(6.6)
|
Net earnings (loss) per
share
|
|
|
|
|
- Basic and
diluted
|
$(0.11)
|
$0.01
|
$(0.02)
|
$(0.18)
|
1 Adjusted Gross Margin is
a non-IFRS financial measure and is defined as Gross Profit
excluding depreciation expenses and write-down of inventories
from restructuring in Burkina Faso. See "Reconciliation of Non-IFRS
financial measures".
|
2
Adjusted EBITDA is a non-IFRS financial measure and
is defined as earnings before interest, taxes, depreciation,
amortization, and write-down of inventories from restructuring in
Burkina Faso. See "Reconciliation of Non-IFRS financial
measures".
|
"Our growth in revenue, gross margins and adjusted EBITDA in
Fiscal 2023 reflects increased specialized drilling activity and
improved pricing in Canada, as we
benefitted from continued strong customer demand throughout the
year. Our positive momentum was impacted late in our fourth
quarter, as we had to suspend our drilling activities in Québec and
on one project in Ontario for
various periods from May 29 into
July 2023, due to forest
fires. This temporary work stoppage reduced our revenue by
approximately $3.0 million in the
quarter. We began ramping these projects back up in early July, and
fully resumed operations later in the month. Our fourth quarter and
year-end results were also impacted by a $4.2 million one-time, non-cash restructuring
charge relating to our decision to wind down our drilling
activities in Burkina Faso. We
expect to complete our drilling program in that country during the
second quarter of Fiscal 2024," said Pierre
Alexandre, President and CEO of Orbit Garant.
"Looking ahead, we intend to continue to focus primarily on our
Canadian operations, prioritizing longer-term, specialized drilling
contracts with major and intermediate customers. We will
selectively pursue international projects that offer attractive
returns. We believe that executing on this strategy will enable us
to capitalize on positive market conditions and drive profitable
growth."
Fourth Quarter Results
Revenue for Q4 2023 totalled $46.8
million, a decrease of 13.1% compared to $53.8 million for the three-month period ended
June 30, 2022 ("Q4 2022").
Canada revenue totalled
$32.6 million in Q4 2023, a decline
of 22.6% compared to $42.0 million in
Q4 2022. Approximately $3.0 million
of the decline is attributable to the suspension of the Company's
drilling projects in Québec and one project in Ontario for various periods during the quarter
due to forest fires. The remaining year-over-year decline in
revenue was primarily attributable to customer decisions to
temporarily suspend or reduce drilling activity on certain projects
late in the quarter. The Company had restarted operations on all
its drilling projects that were impacted by forest fires by
July 26, and expects to resume full
operations on other projects that were temporarily suspended or
reduced by January 2024. One
of these projects resumed in mid-August
2023. International revenue increased to $14.2 million in Q4 2023 from $11.8 million in Q4 2022, primarily reflecting
increased drilling activities in Chile.
The Company recorded a one-time, non-cash $4.2 million restructuring charge in Q4 2023
relating to its decision to exit Burkina
Faso and complete its drilling program in the country during
the second quarter of Fiscal 2024. The restructuring charge
reflects a write-down of inventory to its net realizable value.
Gross profit for Q4 2023 was $0.7
million, or 1.4% of revenue, compared to $6.9 million, or 12.8% of revenue, in
Q4 2022. The decrease in gross profit and gross margin was
primarily attributable to the $4.2 million write-down of
inventories from restructuring and a reduction of drilling activity
in Canada due to forest fires and
temporarily suspended or reduced drilling activity on certain
projects, as discussed above. Depreciation expenses and the
write-down of inventories from restructuring totalling
$2.6 million and $4.2 million, respectively, are included in the
cost of contract revenue for Q4 2023, compared to depreciation
expenses of $2.3 million in
Q4 2022. Adjusted gross margin, excluding depreciation
expenses and the write-down of inventories from restructuring,
was 15.9% in Q4 2023, compared to adjusted gross margin of 17.2% in
Q4 2022. The decline in adjusted gross margin was primarily
attributable to the Company's revenue reduction in Q4 2023 due
to forest fires and temporarily suspended or reduced drilling
activity on certain projects.
General and Administrative expenses were $5.1 million, or 10.9% of revenue, in Q4 2023,
compared to $3.8 million, or 7.0% of
revenue, in Q4 2022.
Adjusted earnings before interest, taxes, depreciation,
amortization and write-down of inventories ("Adjusted EBITDA") were
$1.8 million in Q4 2023,
compared to $5.7 million in Q4 2022.
The decrease was primarily attributable to the reduction of
drilling activity in Canada due to
forest fires and temporarily suspended or reduced drilling
activity on certain projects, as described above. Net loss for
Q4 2023 was $4.1 million,
or $0.11 per share, compared to net
earnings of $0.5 million, or
$0.01 per share, in Q4 2022. The
net loss in Q4 2023 was primarily attributable to the $4.2 million one-time restructuring charge
and a reduction of drilling activities in Canada, as described above.
Fiscal 2023 Results
Revenue for Fiscal 2023 totalled $201.0
million, an increase of 2.8% compared to $195.5 million in Fiscal 2022, reflecting
increased specialized drilling activity and improved pricing in
Canada, partially offset by a
revenue reduction in Q4 2023 due to forest fires and
temporarily suspended or reduced drilling activity on certain
projects, as described above, and a decline in international
drilling activity. Canada revenue
totalled $152.1 million in Fiscal
2023, an increase of 4.8% compared to $145.2
million in Fiscal 2022. International revenue totalled
$48.9 million in Fiscal 2023,
compared to $50.3 million in Fiscal
2022, reflecting a reduction of drilling activity in Burkina Faso, partially offset by increased
drilling activity in Chile and
Guinea.
Gross profit for Fiscal 2023 was $18.3
million, or 9.1% of revenue, compared to $13.7 million, or 7.0% of revenue, in
Fiscal 2022. The increases in gross profit and gross margin
were primarily attributable to increased specialized drilling
activity, improved pricing and cost controls in Canada, partially offset by the $4.2 million write-down of inventories from
restructuring and the reduction in drilling activity in
Canada during Q4 2023, as
described above. Prior year margins were also impacted by project
ramp-up costs in Canada,
mobilization costs for new, long-term projects in Chile and Guinea, and Omicron-related work interruptions
that began in November 2021.
Depreciation expenses and the write-down of inventories from
restructuring totalling $10.1
million and $4.2 million,
respectively, are included in the cost of contract revenue for
Fiscal 2023, compared to depreciation expenses of $10.1 million in Fiscal 2022. Adjusted gross
margin, excluding depreciation expenses and the write-down of
inventories from restructuring, was 16.2% in Fiscal 2023, compared
to adjusted gross margin of 12.2% in Fiscal 2022. The increase
in adjusted gross margin was primarily attributable to increased
specialized drilling activity, improved pricing and cost controls
in Canada, partially offset by the
reduction of drilling activity in Canada in Q4 2023, described above.
General and Administrative expenses were $16.4 million, or 8.2% of revenue, in Fiscal
2023, compared to $14.5 million, or
7.4% of revenue, in Fiscal 2022.
Adjusted EBITDA increased to $19.1
million in Fiscal 2023, compared to EBITDA of $10.0 million in Fiscal 2022. The increase was
primarily attributable to increased specialized drilling activity,
improved pricing and cost controls in Canada and a $1.9
million foreign exchange gain. Prior year EBITDA reflects
higher project ramp-up costs in Canada, higher mobilization costs for new
long-term projects in Guinea and
Chile, and Omicron-related work
interruptions beginning in November
2021.
Net loss for Fiscal 2023 was $0.7
million, or $0.02 per share,
compared to a net loss of $6.6 million, or $0.18 per share, in Fiscal 2022. The
reduced net loss in Fiscal 2023 was primarily attributable to a
higher proportion of specialized drilling activity, improved
pricing and cost controls in Canada, and a $1.9
million foreign exchange gain, partially offset by the
$4.2 million non-cash, write-down of
inventories from restructuring, the reduction of drilling activity
in Canada during Q4 2023, as
described above, and a $1.1 million
increase in interest expense. The reduced net loss for
Fiscal 2023 also reflects decreased project ramp-up costs in
Canada, a reduction in
mobilization costs for drilling projects in Chile and Guinea, and the absence of Omicron-related
work interruptions.
Liquidity and Capital Resources
During Fiscal 2023, Orbit Garant repaid a net amount of
$4.4 million of its long-term debt
and lease liabilities. In Fiscal 2022, cash flow of
$2.7 million was generated from
financing activities.
The Company repaid a net amount of $9.3
million on its Credit Facility in Fiscal 2023, compared to a
withdrawal of $7.3 million in
Fiscal 2022. The Company's long-term debt under the Credit
Facility, including US$2.0 million
($2.6 million) drawn from the
US$5.0 million revolving credit
facility and the current portion, was $22.2
million as at June 30, 2023,
compared to $31.5 million as at
June 30, 2022. This reduction
primarily reflects the utilization of a substantial portion of the
$8.47 million borrowed from the
Business Development Bank of Canada to repay amounts drawn on the Credit
Facility.
As at June 30, 2023, the Company's
working capital totalled $50.4
million, compared to $53.4
million as at June 30, 2022, and 37,372,756 common
shares were issued and outstanding. Orbit Garant's working capital
requirements are primarily related to the funding of inventory and
the financing of accounts receivable.
Orbit Garant's audited consolidated financial statements and
management's discussion and analysis for the fourth quarter and
fiscal year ended June 30, 2023 are
available via the Company's website at www.orbitgarant.com or
SEDAR+ at www.sedarplus.ca.
Conference Call
Pierre Alexandre, President and
CEO, and Daniel Maheu, CFO, will
host a conference call for analysts and investors on Wednesday, September 20, 2023 at 10:00 a.m. (ET). To join the conference call
without operator assistance, you can register and enter your phone
number at https://emportal.ink/3OKxAbQ to receive an instant
automated call back. Alternatively, you can dial 416-764-8688
or 1-888-390-0546 to reach a live operator that will join you into
the call.
A live webcast of the call will be available on Orbit Garant's
website at: http://www.orbitgarant.com/en/events. The webcast will
be archived following conclusion of the
call.
To access a replay of the conference call dial 416-764-8677 or
1-888-390-0541, passcode: 000613 #. The replay will be available
until September 27, 2023.
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, adjusted EBITDA
and adjusted EBITDA margin:
|
EBITDA is defined as
net earnings (loss) before interest, taxes, depreciation and
amortization. Adjusted EBITDA is defined as EBITDA excluding the
impact of the write-down of inventories from restructuring in
Burkina Faso. Adjusted EBITDA margin is defined as the percentage
of adjusted EBITDA to contract revenue.
|
|
|
|
|
Adjusted gross profit
and adjusted gross margin:
|
Adjusted gross profit
is defined as gross profit excluding depreciation and write-down of
inventories from restructuring in Burkina Faso. Adjusted gross
margin is defined as the percentage of adjusted gross profit to
contract revenue.
|
EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin
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, income taxes and
restructuring costs. 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, Adjusted EBITDA and Adjusted EBITDA
Margin
(unaudited)
(in millions of
dollars)
|
Q4
2023
|
Q4 2022
|
Fiscal
2023
|
Fiscal 2022
|
Fiscal 2021
|
Net earnings (loss) for
the period
|
(4.1)
|
0.5
|
(0.7)
|
(6.6)
|
2.3
|
Add:
|
|
|
|
|
|
Finance
costs
|
0.9
|
0.7
|
3.4
|
2.2
|
2.3
|
Income tax
expense
|
(2.1)
|
1.9
|
1.1
|
3.2
|
2.5
|
Depreciation and
amortization
|
2.9
|
2.6
|
11.1
|
11.2
|
10.5
|
EBITDA
|
(2.4)
|
5.7
|
14.9
|
10.0
|
17.6
|
Write-down of
inventories from restructuring in Burkina Faso
|
4.2
|
-
|
4.2
|
-
|
-
|
Adjusted
EBITDA
|
1.8
|
5.7
|
19.1
|
10.0
|
17.6
|
Contract
revenue
|
46.8
|
53.8
|
201.0
|
195.5
|
163.3
|
Adjusted EBITDA
margin (%) (1)
|
3.8
|
10.6
|
9.5
|
5.1
|
10.9
|
(1) Adjusted EBITDA, divided by
contract revenue X 100
|
Adjusted Gross Profit and Adjusted Gross Margin
Although adjusted gross profit and adjusted gross 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 Adjusted Gross
Margin
(unaudited)
(in millions of
dollars)
|
Q4
2023
|
Q4 2022
|
Fiscal
2023
|
Fiscal 2022
|
Fiscal 2021
|
Contract
revenue
|
46.8
|
53.8
|
201.0
|
195.5
|
163.3
|
Cost of contract
revenue
|
46.2
|
46.8
|
182.7
|
181.7
|
143.1
|
Less:
depreciation
write-down of
inventories from restructuring in Burkina Faso
|
(2.6)
(4.2)
|
(2.3)
-
|
(10.1)
(4.2)
|
(10.0)
-
|
(8.9)
-
|
Direct costs
|
39.4
|
44.5
|
168.4
|
171.7
|
134.2
|
Adjusted gross
profit
|
7.4
|
9.3
|
32.6
|
23.8
|
29.1
|
Adjusted gross margin
(%) (1)
|
15.9
|
17.2
|
16.2
|
12.2
|
17.9
|
(1) Adjusted gross profit,
divided by contract revenue X 100
|
About Orbit Garant
Headquartered in Val-d'Or,
Québec, 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 212 drill rigs and approximately 1,300
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 world economic climate as it relates to the
mining industry; the Canadian economic environment; the Company's
ability to attract and retain customers and to manage its assets
and operating costs; the political situation in certain
jurisdictions in which the Company operates and the operating
environment in the jurisdictions in which the Company operates as
well as the risks and uncertainties are discussed in the Company's
regulatory filings available at www.sedarplus.ca. 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.