Orbit Garant Drilling Q3 Earnings Call Highlights

Key Points

• Orbit Garant posted record third-quarter revenue of CAD 51.4 million and its highest drilling utilization in more than a decade at 67%, but profitability weakened sharply due to weather, ramp-up costs and legacy pricing pressure.
• Gross profit, adjusted EBITDA and net income all declined year over year, with the company reporting a CAD 1.2 million net loss versus a profit a year earlier as severe winter conditions and contract transitions compressed margins.
• Management remains optimistic, pointing to an improved pricing environment and a new five-year Northern Canada contract expected to generate more than CAD 100 million in revenue, while targeting 70% utilization by the end of 2026.

Orbit Garant Drilling TSE: OGD reported record third-quarter revenue and its highest drilling utilization rate in more than a decade, but profitability declined as the company dealt with severe winter weather, contract ramp-up costs and legacy pricing pressure.

On the company’s fiscal 2026 third-quarter conference call, President and CEO Daniel Maheu said drilling utilization reached 67%, up from 56% in the first quarter and 62% in the second quarter. He said the result marked Orbit Garant’s highest utilization rate in more than 10 years and its highest third-quarter revenue in company history.

“Our fiscal third quarter is typically our weakest quarter due to the gradual ramp-up of operation after the shutdown of mining and exploration activities over the holiday season and more difficult winter weather condition in Canada,” Maheu said. He added that utilization gains were a positive sign, though weather and other factors weighed on productivity and margins.

Revenue Rises, But Margins Contract

Chief Financial Officer Pier-Luc Laplante said revenue for the quarter totaled CAD 51.4 million, up 2.7% from the same quarter last year. Canadian revenue was CAD 36.3 million, an increase of 0.5%, while international revenue rose 8.2% to CAD 15.1 million.

Laplante said the Canadian revenue increase reflected higher drilling activity, partially offset by lower average revenue per meter drilled. He attributed the decline in average revenue per meter to reduced activity on certain specialized drilling projects because of more severe winter weather compared with the prior-year quarter, along with legacy pricing on contracts from previous quarters.

Internationally, the revenue increase was driven by higher drilling activity in Chile and Guyana. That was partially offset by continued modifications to an existing drilling program and lower average revenue per meter drilled due to a decline in certain specialized drilling activities, Laplante said.

Gross profit fell to CAD 2.9 million, or 5.7% of revenue, from CAD 5.9 million, or 11.9% of revenue, in the third quarter of fiscal 2025. Adjusted gross margin, excluding depreciation expenses and a gain on disposal of property, plant and equipment, was 10.3%, compared with 16.5% a year earlier.

Adjusted EBITDA was CAD 1.4 million, down from CAD 5.4 million in the prior-year quarter. Orbit Garant posted a net loss of CAD 1.2 million, or CAD 0.03 per diluted share, compared with net earnings of CAD 1.9 million, or CAD 0.05 per diluted share, in the year-earlier period.

Weather, Ramp-Up Costs and Legacy Pricing Weigh on Results

Management cited several factors behind the weaker profitability, including the mobilization of drill rigs under new long-term contracts in Canada and related ramp-up periods, legacy pricing pressure from earlier contract awards and more severe winter weather in Canada.

Maheu said the company experienced pricing pressure during the first half of the fiscal year, which led it to lose or walk away from certain bids. He said Orbit Garant “had to ease” its pricing discipline on some important new contracts and renewals during that period.

However, Maheu said pricing pressure has “now disappeared,” and that the company saw an improved pricing environment during the third quarter and into April and May. He also noted that conflicts in the Middle East and Ukraine, along with strong industry demand, have contributed to cost inflation in supplies, materials and wages.

“We will continue to work with customers to accommodate these expected increase to our input cost with future contract and renewal, supported by an important pricing environment,” Maheu said.

New Five-Year Northern Canada Contract Announced

Subsequent to quarter-end, Orbit Garant began mobilizing drill rigs for a new five-year specialized drilling contract in Northern Canada with a senior mining company, Maheu said. The contract includes a client option to extend for two additional years.

Maheu said the company estimates the project will generate more than CAD 100 million in revenue over the initial five-year term. Two drill rigs have already been deployed, and six additional rigs are expected to be mobilized by September.

The company expects to finance CAD 20 million in required capital expenditures for modification or manufacturing of drill rigs and related inventory through internally generated cash flows, increased borrowing availability on its credit facility and a new long-term loan.

In response to an investor question, Maheu said half of the eight rigs for the contract will be refurbished and half will be newly built. Laplante said the company expects a return in the “10% range” on the CAD 20 million investment, while emphasizing that figure should not be confused with the project margin. He described the project as a specialized drilling contract that is expected to have “good margins.”

Balance Sheet and Share Repurchases

Laplante said Orbit Garant withdrew a net CAD 4.8 million from its credit facility during the quarter, compared with CAD 0.8 million in the same quarter last year. The increase was primarily due to CAD 3.6 million in capital expenditures.

Long-term debt under the credit facility, including the current portion, stood at CAD 20.8 million at quarter-end, compared with CAD 14.0 million at the end of fiscal 2025. Working capital was CAD 52.7 million, up from CAD 50.4 million at the end of fiscal 2025.

During the quarter, Orbit Garant repurchased and canceled 20,450 shares under its normal course issuer bid at a weighted average price of CAD 1.83 per share. Laplante said the company continues to view the bid as a useful tool to enhance shareholder value when management believes the company’s underlying value is not reflected in the share price.

Management Targets Higher Utilization and Improved Profitability

Maheu said demand for drilling services in Canada and South America remains strong, supported by historically high gold and copper prices and a robust financing environment for mining companies. He said mining companies listed on the TSX and TSX Venture completed more than CAD 16 billion in aggregate equity financings in 2025, a 53% increase from 2024.

Management said Orbit Garant’s strategic focus remains on senior and well-financed intermediate customers in Canada and South America, disciplined contract selection and operational improvement.

During the question-and-answer portion of the call, Maheu said the company aims to increase utilization to 70% by the end of calendar 2026, supported by continued demand and the addition of new rigs to contracts. He said Orbit Garant is prioritizing specialized long-term contracts with major and intermediate customers, while remaining selective on smaller contracts with junior companies.

Asked about revenue expectations, Maheu said the company does not provide formal guidance but noted that if utilization rises from 56% to 70%, revenue would be expected to exceed CAD 200 million for fiscal 2027. He also said fiscal 2026 revenue would likely be around CAD 200 million, compared with CAD 189 million in fiscal 2025.

Laplante said legacy contracts with less favorable pricing are expected to roll off progressively, with some completed in April, May and June. He said rigs will then be mobilized onto new contracts with more favorable pricing.

“Our business outlook is positive,” Maheu said. “Customer demand remains high. Our pricing environment is improving.” He added that, barring unforeseen events, the company expects stronger performance and improved profitability in the fourth quarter and into the next fiscal year.

About Orbit Garant Drilling TSE: OGD

Orbit Garant Drilling Inc is a Canadian based drilling company providing services to mining companies through all stages of exploration, development, and production. The company operates a surface and underground diamond drilling business. The firm also manufactures conventional drill rigs while also manufacturing and providing other support equipment such as water recirculation systems, heat recovery systems, and fuel-efficient systems. The company operates in Canada, the United States, Central and South America, and West Africa.

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