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Orbit Garant Drilling Reports Fiscal 2020 First Quarter Financial Results

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by ahnationtalk on November 14, 201919 Views


Val-d’Or, Quebec, November 13, 2019 – Orbit Garant Drilling Inc. (TSX: OGD) (“Orbit Garant” or the “Company”) today announced its financial results for the three-month period ended September 30, 2019 (“Q1 FY2020”). 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.

Q1 FY2020 Financial Highlights

($ amounts in millions,

except per share amounts)

Three months ended
September 30, 2019
Three months ended
September 30, 2018
Revenue 43.3 37.3
Gross Profit 6.9 5.6
Gross Margin (%) 16.0 15.0
Adjusted Gross Margin (%)1 21.3 20.4
EBITDA2 5.1 3.4
Net earnings 1.1 0.4
Net earnings per share (basic and diluted) 0.03 0.01
Total metres drilled 387,424 316,045

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 experiencing improved demand for our drilling services in Canada, which drove our growth in revenue, gross margins and earnings in the quarter. We believe increased customer spending on mine exploration and development in Canada is supported by the recent strengthening in the price of gold and improved access to capital for many of our mining company customers,” said Eric Alexandre, President and CEO of Orbit Garant. “Revenue in our international operations was down slightly from the first quarter a year ago due to the completion of a multi-year drilling contract in Chile during the fourth quarter last fiscal year, but we continue to see good opportunities in our international markets, and our current projects in Burkina Faso, Guyana and Argentina nearly offset the completion of this large contract.”

“Looking ahead, with our strong presence in Canada and other leading gold producing jurisdictions, we are well positioned to benefit from increased customer spending on gold related projects,” added Mr. Alexandre.

First Quarter Results

Revenue increased 16.1% to $43.3 million in Q1 FY2020, compared to $37.3 million for the three-month period ended September 30, 2019 (“Q1 FY2019”). Drilling Canada revenue increased 21.7% to $35.4 million, compared to $29.1  million in Q1 FY2019, reflecting increased meters drilled. International revenue was $7.9 million, a decrease of $0.3 million compared to $8.2 million in Q1 FY2019, reflecting the completion of a multi-year drilling contract in Chile during the fourth quarter of fiscal 2019, mostly offset by new drilling projects in Burkina Faso, Guyana and Argentina,.

Orbit Garant drilled a total of 387,424 metres in Q1 FY2020, a 22.6% increase from the 316,045metres drilled in Q1  FY2019. The Company’s average revenue per metre drilled in Q1 FY2020 was $109.93, compared to $117.55 in Q1 FY2019. The decrease in average revenue per metre drilled was attributable to a lower proportion of higher-priced specialized drilling activity in the International drilling segment.

Gross profit for Q1 FY2020 was $6.9 million, or 16.0% of revenue, compared to $5.6 million, or 15.0% of revenue, in Q1  FY2019. Adjusted gross margin, excluding $2.3 million in depreciation expenses, was 21.3% in Q1 FY2020, compared to adjusted gross margin, excluding $2.0 million in depreciation expenses, of 20.4% in Q1 FY2019. The increase in gross profit, gross margins, and adjusted gross margins were primarily attributable to higher drilling volumes.

General and administrative (“G&A”) expenses were $4.4 million, or 10.1% of revenue, in Q1 FY2020, compared to $3.9 million, or 10.4% of revenue, in Q1 FY2019. Increased G&A expenses reflect the Company’s strategic growth in Canada and its international operations.

Earnings (loss) before interest, taxes, depreciation and amortization (“EBITDA”) increased 46.8% to $5.1 million in Q1  FY2020, compared to $3.4 million in Q1 FY2019, reflecting improved gross profit and margins, as noted above. Net earnings increased to $1.1 million, or $0.03 per share, compared to net earnings of $0.4 million, or $0.01 per share, in Q1 FY2019.

During Q1 FY2020, Orbit Garant generated $3.2 million from financing activities, compared to $1.7 million in Q1  FY2019. The Company withdrew a net amount of $2.8 million during Q1 FY2020 on its secured, three-year revolving credit facility (the “Credit Facility”) with National Bank of Canada Inc. (the “Lender”), compared to a withdrawal of $1.9 million in Q1 FY2019. The Company’s long-term debt under the Credit Facility, including the current portion, was $28.1 million as at September 30, 2019, compared to $25.3 million as at June 30, 2019. The Company’s debt was incurred to support working capital requirements, the financing of the acquisition in Burkina Faso of certain assets of Projet Production International BF S.A. in Q2 FY2019, and the acquisition of capital assets, property, plant and equipment.

As at September 30, 2019, the Company’s working capital was $59.4 million ($55.1 million as at June 30, 2019) and 37,021,756 common shares were issued and outstanding.

Orbit Garant’s unaudited interim consolidated financial statements and management’s discussion and analysis for Q1 FY2020 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 Alain Laplante, Vice President and CFO, will host a conference call for analysts and investors on Thursday, November 14, 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.

To access a replay of the conference call, dial 416-764-8677 or 1-888-390-0541, passcode: 544087 #. The replay will be available until November 21, 2019. 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, 2019

3 months ended

September 30, 2018

Net earnings for the period 1.1 0.4
Add:
Finance costs 0.7 0.4
Income tax expense 0.6 0.4
Depreciation and amortization 2.7 2.2
EBITDA 5.1 3.4

Adjusted Gross Profit and Margin

Although adjusted gross margin 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, 2019

3 months ended

September 30, 2018

Contract revenue 43.3 37.3
Cost of contract revenue (including depreciation) 36.4 31.7
Less depreciation (2.3) (2.0)
Direct costs 34.1 29.7
Adjusted gross profit 9.2 7.6
Adjusted gross margin (%) (1) 21.3 20.4

 (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 234 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                                                                                                      Bruce Wigle
Vice President and Chief Financial Officer                                                     Investor Relations
(819) 824-2707 ext. 122                                                                                     (647) 496-7856

NT4

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