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Orbit Garant Drilling Reports Fiscal 2019 Third Quarter Financial Results

by ahnationtalk on May 10, 2019105 Views

Val-d’Or, Quebec, May 9, 2019 – Orbit Garant Drilling Inc. (TSX: OGD) (“Orbit Garant” or the “Company”) today announced its financial results for the three and nine-month periods ended March 31, 2019. All dollar amounts are in Canadian dollars unless otherwise stated. Percentage calculations are based on numbers in the financial statements and may not correspond to rounded figures presented in this news release.

Financial Summary

($ amounts in millions,

except per share amounts)

Three months ended
March 31, 2019
Three months ended
March 31, 2018

Nine months ended

March 31, 2019

Nine months ended

March 31, 2018

Revenue $37.4 $43.1 $108.4 $128.6
Gross Profit $3.1 $2.2 $11.6 $14.0
Gross Margin (%) 8.2 5.2 10.7 10.9
Adjusted Gross Margin (%)¹ 14.3 9.8 16.7 15.5
EBITDA2 $1.4 $0.9 $5.7 $9.2
Net earnings (loss) $(1.4) $(1.3) $(2.7) $1.2
Net earnings (loss) per share
       – Basic and diluted $(0.04) $(0.04) $(0.07) $0.03
Total metres drilled 361,642 378,640 989,005 1,154,060

1Adjusted 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”.

“We are pleased with our operating performance in the third quarter, given the continued challenging business environment in Canada,” said Eric Alexandre, President & CEO of Orbit Garant. “Our increased gross profit, margins and EBITDA compared to the same quarter last year were primarily attributable to our international operations, particularly in Chile and Burkina Faso. We continue to see exciting opportunities to grow our business in Chile and West Africa.”

“We are seeing some positive trends for our domestic business. While mining finance activity weakened in January and February this year, it strengthened in March, as mining companies raised significantly more capital. We also experienced an increase in drill utilization rates in the quarter compared to the first six months of fiscal 2019,” added Mr. Alexandre. “Looking ahead, with our strong market position in Canada and the scale we have added in the last three years in Chile and West Africa, we are well positioned to capture new contracts and market share as drilling activity increases. We believe the long-term outlook for our business is positive, and we are encouraged that metal prices have improved from their lows last year and that depletion of reserves is becoming an increasing challenge in the mining industry.”

Third Quarter Results

Revenue for the three-month period ended March 31, 2019 (“Q3 FY2019”) totalled $37.4 million, compared to $43.1 million for the three-month period ended March 31, 2018 (“Q3 FY2018”). Drilling Canada revenue was $25.1 million, compared to $30.2 million in Q3 FY2018, reflecting a decline in metres drilled during the quarter. Drilling International revenue, net of intersegment revenue, was $12.3 million, compared to $12.9 million in Q3 FY2018. The decline in international revenue is primarily attributable to the conclusion of a large drilling contract in Chile, partially offset by increased drilling activity in Burkina Faso.

Orbit Garant’s fleet drilled a total of 361,642 metres in the quarter, compared to 378,640 metres drilled in Q3 FY2018. Consolidated average revenue per metre drilled decreased 9% to $103.27 compared to $113.56 in Q3 FY2018. The decline in consolidated average revenue per metre drilled is primarily attributable to a lower proportion of specialized drilling in international markets in the quarter, partially offset by an increase in average revenue per metre drilled in Canada.

Gross profit and gross margin for Q3 FY2019 were $3.1 million and 8.2%, respectively, compared to $2.2 million and 5.2%, respectively, in Q3 FY2018. Depreciation expenses totalling $2.3 million are included in cost of contract revenue for Q3 FY2019 compared $2.0 million in Q3 FY2018. Adjusted gross margin, excluding depreciation expenses, was 14.3% in Q3 FY2019, compared to 9.8% in Q3 FY2018. The increase in gross profit and margins was primarily attributable to improved margins on international contracts. Orbit Garant’s gross margins in Canada were impacted by a reduction in drilling volumes, higher employee-related fixed costs on a lower revenue base and lower productivity attributable to adverse weather conditions, compared to Q3 FY2018.

General and administrative (G&A) expenses were $4.2 million in Q3 FY2019 (representing 11.1% of revenue), compared to $3.9 million in Q3 FY2018 (representing 9.2% of revenue). Increased G&A expenses are primarily attributable to integration costs related to the Company’s acquisition of the drilling business of Projet Production International BF S.A. (“PPI”) in Burkina Faso during Q2 FY2019.

Earnings before interest, taxes, depreciation and amortization (“EBITDA”)¹totalled $1.4 million in Q3 FY2019, compared to $0.9 million in Q3 FY2018.

The Company’s net loss for Q3 FY2019 was $1.4 million, or $0.04 per share, compared to a net loss of $1.3 million, or $0.04 per share, in Q3 FY2018.

During Q3 FY2019, Orbit Garant generated $1.0 million from financing activities, similar to Q3 FY2018. The Company repaid a net amount of $2.6 million during Q3 FY2019 on its secured, three-year revolving credit facility (the “Credit Facility”), compared to a withdrawal of $2.1 million in Q3 FY2018. As at March 31, 2019, the Company had $24.8 million drawn under the Credit Facility, compared to $18.1 million as at June 30, 2018.

As at March 31, 2019, Orbit Garant had working capital of $55.3 million ($53.3 million as at June 30, 2018), and 37,008,756 common shares issued and outstanding.

Orbit Garant’s unaudited interim condensed consolidated financial statements and management’s discussion and analysis for the three and nine-month periods ended March 31, 2019 are available on the Company’s website at www.orbitgarant.com or SEDAR at www.sedar.com.

Conference call

Eric Alexandre, President and CEO, and Alain Laplante, Vice President and CFO, will host a conference call for analysts and investors on Friday, May 10, 2019 at 10:00 a.m. (ET). The dial-in numbers for the conference call are 416-764-8609 or 1-888-390-0605. A live webcast of the call will be available on Orbit Garant’s website at: http://www.orbitgarant.com/en/sites/fog/investors.aspx. 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: 984075#. The replay will be available until May 17, 2019.

(1)  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 and margin:    Contract revenue less operating costs. 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

March 31, 2019

3 months ended

March 31, 2018

9 months ended

March 31, 2019

9 months ended

March 31, 2018

Net earnings (net loss) for the period (1.4) (1.3) (2.7) 1.2
Add:
Finance costs 0.6 0.4 1.5 1.3
Income tax expense (0.6) (0.5) (0.5) 0.1
Depreciation and amortization 2.8 2.3 7.4 6.6
EBITDA 1.4 0.9 5.7 9.2

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

March 31, 2019

3 months ended

March 31, 2018

9 months ended

March 31, 2019

9 months ended

March 31, 2018

Contract revenue 37.4 43.1 108.4 128.6
Cost of contract revenue (including depreciation) 34.4 40.9 96.8 114.6
Less depreciation (2.3) (2.0) (6.5) (5.9)
Direct costs 32.1 38.9 90.3 108.7
Adjusted gross profit 5.3 4.2 18.1 19.9
Adjusted gross margin (%) (1) 14.3 9.8 16.7 15.5

(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 236 drill rigs and more than 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.

For further information:

Alain Laplante
Vice President and Chief Financial Officer
(819) 824-2707 ext. 122

Bruce Wigle
Investor Relations
(647) 496-7856

NT4

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