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Good morning, ladies and gentlemen, and welcome to the Orbit Garant Drilling Inc. 2019 First Quarter Results Conference Call. [Operator Instructions] This call is being recorded on Wednesday, November 14, 2018.I would now like to turn the conference over to Eric Alexandre. Please go ahead.
Thank you, Jessica, and good morning, ladies and gentlemen. With me on the call is Alain Laplante, CFO. We are hosting the call today from our office in Santiago, Chile. Following my opening remarks, Alain will review our financial results, and I will conclude with comments on our outlook and growth strategy. We will then welcome questions.This call is being recorded, and a replay will be available shortly. Instructions for accessing the replay can be found in our news release. Please be aware that certain information discussed today may be forward looking and that actual results could differ materially.We will also be discussing certain non-IFRS measures. Please refer to our SEDAR filing for additional information on both our risk factors and non-IFRS measures.Following a year of record revenue for Orbit Garant in fiscal 2018, our results in the first quarter of fiscal 2019 reflect a slowdown in demand from our customers. Our drill utilization rates for the quarter were 55%, down from 61% in Q1 last year.We believe this slowdown, particularly in Canada, is related to the lower level of financing activities in the mining sector that started in the second half of calendar 2018, during our fiscal 2019 first quarter as well as lower commodity prices among other market factors.In our international operation, a large drilling contract that we had with a major mining company in Chile ended prior to the first quarter this year and another one was delayed.There was also a contract in Burkina Faso that was delayed, both contracts resumed operation in November. We drilled a total of 316,000 meter in Q1 this year, a 22% decline compared to a record first quarter of 404,000 meter drilled last year.Despite our decline in meter drilled and lower overall revenue, we were able to preserve margins due to higher contribution from specialized drilling activity in Canada and higher margin contracts in Chile.As a result of our higher portion of specialized drilling, consolidated average revenue per meter drilled was up 12% to approximately $118 compared to $105 per meter in Q1 last year.Looking ahead, it's difficult to speculate on the short-term outlook for demand in the mineral drilling industry, but we expect that the slowdown in demand is temporary. We will gain better insight as we talk to our customers throughout this quarter and get a better idea of their budget for 2019.According to S&P Global Market Intelligence, corporate exploration strategies finally will report from October this year. Global nonservice exploration budgets were up nearly 20% in 2018 compared to 2017, and there are more companies actively exploring in 2018 than in 2017. S&P expect exploration budget to increase again in 2019 but by a more modest amount.We expect this growth to be led by the majors, which are increasing their spending to replenish declining reserves, particularly the gold producers. The current slowdown in demand we are experiencing is more prominent in our Canadian operation than our international operations. This further validates our strategy to expand our international presence and establish greater geographic and customer diversification.We are also better positioned now to be an international partner of choice for mining companies with global operation.In Chile, we are increasingly being recognized as a drilling partner of choice because of our advanced expertise in both underground and surface drilling. This is due in part to our long Canadian history of surface and underground drilling and constant focus on innovation, but we were able to leverage these strengths by acquiring Captagua in 2013. The combination of Captagua local expertise, exceptional personnel equipment, and industry relationship has turned out to be a very successful combination.We are now aiming to duplicate this success in West Africa. Subsequent to quarter-end, we acquired a drilling business, a project production international in Burkina Faso for USD 6.4 million. Through the acquisition, we have added 13 surface drills, related support equipment, existing customer contracts and approximately 100 employees.We expected the acquisition to add approximately $12 million in revenue in January positive earnings and cash flow for our 2019 fiscal year.This acquisition significantly strengthened our presence in Burkina Faso and the broader West African mineral drilling market positioning us to pursue new growth opportunities.Just as we did in Chile, we first established a foothold in West Africa and then strengthened our presence with a local and highly complementary acquisition.Looking ahead, we are well positioned to build value when demand picks up with our strong market position in Canada and growing presence in Chile and our recently expanded operation in Burkina Faso.We believe Canada, Chile and West Africa will continue to be attractive regions for us in terms of near- and long-term market opportunity.Now I'd like to turn the call over to Alain Laplante, who'll review our financial results in more detail. Alain?
Thank you, Eric, and good morning, everyone. Revenue totaled $37.3 million in the quarter, a $5.2 million decline from Q1 a year ago.Drilling Canada revenue was $29.1 million compared to $31.9 million in Q1 last year, reflecting a decline in meters drilled, partially offset by increased specialized drilling activities.Drilling International revenue was $8.2 million compared to $10.6 million in Q1 last year. The decline in international revenue is primarily attributable to the conclusion of a large drilling contract in Chile and a contract delay in Burkina Faso.Gross profit for the quarter was $5.6 million compared to $6.7 million in Q1 last year. Adjusted gross margin, excluding depreciation expenses, was 20.4% in the quarter, in line with Q1 a year ago.As Eric noted earlier, we were able to preserve margins due to an increased proportion of higher margin specialized drilling activity in Canada and higher margin contracts in Chile.G&A expenses were $0.2 million higher in the quarter, reflecting our growth strategy in Canada and internationally.EBITDA was $3.4 million, down from $5.1 million in Q1 last year. Our net earnings for the quarter were $0.4 million or $0.01 per share compared to $1.7 million or $0.05 per share in Q1 a year ago. The decrease was attributable to lower gross profit.Turning now to our balance sheet. As at September 30, 2018, we had $20 million drawn from our credit facility compared to $18.1 million as at June 30, 2018. Our working capital position was $55.5 million, up from $53.3 million at fiscal 2018 year-end.We continue to maintain a solid balance sheet providing us the flexibility to pursue growth opportunities.I'll now turn the call back to Eric for closing comments. Eric?
Thank you, Alain. We believe the long-term outlook for the mining industry is positive, despite short-term volatility. Demand for metals remain constant, major and new -- major new mineral discoveries are increasingly rare. Many minors are dealing with declining reserves and production. This is particularly true in the gold mining industry from which we generate roughly 2/3 of our revenue. Looking ahead, with our solid balance sheet, recent investment in growth, expertise in both surface and underground drilling, expanded international presence, vertically integrated manufacturing and our constant focus on innovation, we are well positioned to continue strengthening our market leadership position in the mineral drilling industry and build value for our shareholders.That concludes our formal remarks. Alain and I will now be pleased to answer any questions. Operator, please begin the question period.
[Operator Instructions] We don't have any questions at this time. Please proceed.
Okay, operator. If there is no question, we'll terminate the call.
No, we still have no questions at this time.
Okay. So let's terminate the call, please. Thank you, everyone.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and ask that you please disconnect your lines.