Release Date: September 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Improved profitability in Q4 with adjusted gross margin exceeding 20%, the highest since Q2 2021.
- Successful exit from the unprofitable West African market, allowing focus on more stable markets in Canada and Chile.
- Secured two large renewable and copper drilling projects in Chile with senior mining companies, including long-term contracts of three and five years.
- Strong operating performance in Chile, attributed to focusing on large copper producers and maintaining good margins.
- General and administrative expenses reduced to $4 million or 8.9% of revenue compared to $5.1 million or 10.9% of revenue in Q4 last year.
Negative Points
- Revenue for fiscal 2024 decreased by 9.8% compared to fiscal 2023, primarily due to project suspensions and reductions in Canada.
- Net loss for the quarter was $1.2 million or $0.04 per share, impacted by a $5.2 million effect of the substantial modification of receivables and expected credit loss.
- International revenue declined to $12.5 million in Q4 compared to $14.2 million in Q4 last year, reflecting the cessation of drilling activity in West Africa.
- Adjusted EBITDA decreased by $4.7 million compared to fiscal 2023, reflecting reduced drilling activity in Canada and costs related to retaining key personnel.
- The decline in demand for junior exploration companies in Q4, while demand for senior and intermediate mining companies remained strong.
Q & A Highlights
Highlights of Orbit Garant Drilling Inc (OBGRF, Financial) Earnings Call
Q: Your performance in Chile is significantly outperforming your peers. Is there any specific aspect you can attribute this to?
A: Since January 2023, our Chilean operations have recovered by focusing on large copper producers, which are the main producers in Chile. We have put 100% of our effort into serving these major clients, resulting in very good margins and the renewal of key contracts for the next five years. (Daniel Maheu, CFO)
Q: Can you talk about your current total liquidity position and what your plans are in terms of loan repayment for fiscal '25?
A: In fiscal 2024, we focused on profitability and used it to reduce our debt by more than $4 million. We will continue to focus on increasing margins and reducing debt while investing in new drill rigs for our contracts in Chile. Our liquidity is growing steadily. (Daniel Maheu, CFO)
Q: Should we expect the adjusted gross margin to stabilize at this level going forward? Does management have any target for the adjusted gross margin?
A: Our margins should remain stable due to our strategic decisions, such as exiting the West African market and focusing on profitable operations in Chile and Canada. The only potential for significant margin increase would be a resurgence in junior mining activity in Canada, which we hope to see in 2024. (Daniel Maheu, CFO)
Q: What were the main factors contributing to the improved profitability in Q4?
A: The improved profitability in Q4 was due to increased drilling activity in Chile, cessation of unprofitable operations in West Africa, and the absence of last year's one-time restructuring charges. (Pierre Alexandre, CEO)
Q: How has the exit from West Africa impacted your financial performance?
A: Exiting West Africa has allowed us to focus on more stable and profitable markets like Canada and Chile. This strategic shift has significantly improved our margins and overall financial performance. (Pierre Alexandre, CEO)
Q: Can you provide more details on the new contracts secured in Chile?
A: We have secured two large renewable and copper drilling projects in Chile with senior mining companies. One contract is for three years with an option to extend for two years, and the other, our largest by revenue, is for five years. (Pierre Alexandre, CEO)
Q: What are your expectations for customer demand given the current metal prices?
A: With record high gold prices and strong copper pricing, we expect continued strong demand from senior and well-financed intermediate mining companies. If junior companies regain access to capital, demand could increase significantly. (Pierre Alexandre, CEO)
Q: How has the financial performance of your international operations evolved?
A: Our international operations have shown improved profitability, primarily due to increased drilling activity in Chile and the cessation of operations in West Africa. This has led to a significant increase in our adjusted gross margin. (Daniel Maheu, CFO)
Q: What are the key elements of your strategic plan to improve operating performance?
A: Our strategic plan includes focusing on Canadian gold drilling operations, prioritizing long-term contracts with major and intermediate customers, pursuing high-margin international contracts, investing in drilling technologies, and fostering a team-oriented leadership structure. (Pierre Alexandre, CEO)
Q: How has the reduction in drilling activity in Canada affected your overall revenue?
A: The reduction in drilling activity in Canada, particularly due to financing difficulties for junior mining companies, has impacted our revenue. However, this was partially offset by increased activity in Chile and the strategic exit from West Africa. (Daniel Maheu, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
