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Good morning. My name is Christina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Orbit Garant Drilling Inc. Fiscal 2018 Second Quarter Results Conference Call. [Operator Instructions] Thank you.Eric Alexandre, President and Chief Executive Officer, you may begin your conference.
Thank you, operator, and good morning, ladies and gentlemen. With me on the call today is Alain Laplante, CFO. Following my opening remarks, Alain will review our second quarter 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 provided today is forward-looking. Actual results could differ materially. Please refer to the Risk Factors section in our public filings.We are pleased to report all-time high in second quarter and first half revenues, demonstrating the current strength of customer demand for our services both in Canada and our international markets. Notably, our second quarter revenue exceeded our first quarter revenue for the first time since fiscal 2009. This is not typical for Orbit Garant as our first and fourth quarters are usually our strongest quarters due to seasonal factors. The strength of our second quarter further indicates that demand from our customers is building.We drilled 371,000 meters in Q2, a 30% increase compared to Q2 a year ago. Our expanded international operation continued to make a major contribution to our growth, demonstrating the success of our international expansion strategy, including our acquisition of Captagua in Chile. Our international operation contributed 34% of our consolidated revenue in the quarter, with revenue from Chile accounting for over 80% of international revenue.With this sustained growth in demand for our services both in Canada and internationally, we've had to invest in scaling up our operation, training new employees and mobilizing equipment and crew for new projects. These factors continue to be reflected in our gross margins.Looking ahead, we expect to realize gradual improvements in productivity and benefit from improving contract pricing in calendar 2018, which will enhance our margins and profitability going forward. The increased drill utilization rates we're seeing across the industry give us confidence that higher pricing will continue to be supported in calendar 2018 as our mining company customers set their budgets.With access to a broader range of growth opportunities, our market position is stronger today than ever before. We are well-positioned to build market share as our industry continues to recover.Now I'd like to turn the call over to Alain Laplante to review our financial results in more detail. Alain?
Thank you, Eric, and good morning, everyone. The size of our fleet was 220 drill rigs at the end of the second quarter. We manufactured 3 new drill rigs during the quarter, while 3 conventional rigs were dismantled. We currently have 91 underground drill rigs and 129 surface rigs in our fleet. 32 of our underground drill rigs are outfitted with our computerized monitoring and control technology. Every one of these rigs is currently in use on a project or being mobilized for near-term deployment.Our drill utilization rate in Q2 was 66%. This is the fourth straight quarter in which we have exceeded 60% utilization. The last time we achieved 4 quarter -- 4 straight quarters with utilization over 60% was in fiscal 2012. Our utilization rate was 54% in Q2 last year.Our fleet drilled approximately 371,000 meters in the second quarter, up 30% from Q2 last year.Consolidated average revenue per meter drilled was approximately $116 in the quarter, up from about $96 in Q2 last year. The increase was primarily due to increased specialized drilling activity in Chile and Canada, which is priced at higher rates than conventional drilling. We also benefited from improved pricing on certain drilling contracts in Canada.Our consolidated revenue in the quarter was $43 million, up 57% from Q2 a year ago. Drilling Canada revenue was $28.3 million, up 41.8% from Q2 last year, reflecting increased meters drilled and increased specialized drilling activity.Drilling International revenue was $14.7 million, nearly double the $7.4 million we reported in Q2 last year. This includes $11.9 million of revenue from Chile compared to $5.3 million in the same quarter a year ago. The remaining increase in international revenue was primarily attributable to increased drilling activity in Burkina Faso.Gross profit for the second quarter was $5.1 million, up from $1.5 million last year. Our adjusted gross margin, excluding depreciation expenses, was 16.3% compared to 13.6% in Q2 2017. The increase in gross profit and adjusted gross margin reflects higher drilling volume in Canada and increased specialized drilling activity in both Canada and Chile.G&A expenses for the quarter were $4.3 million, representing 10% of revenue compared to $4 million or 14.5% of revenue in Q2 a year ago. The increased G&A expenses reflect our recent growth in Canada and internationally.EBITDA was $3.3 million compared to a nominal amount in Q2 last year. We recorded net earnings of $0.8 million or $0.02 per share in the quarter, up from a net loss of $1.9 million or $0.05 per share in Q2 last year.Turning now to our balance sheet. As at December 31, 2017, we had $16.5 million drawn from our credit facility compared to $13.6 million as at June 30, 2017. In addition, we provided a letter of credit from our credit facility to a bank of one of our subsidiaries worth USD 1 million or approximately CAD 1.3 million.Working capital was $50.9 million at the end of the quarter compared to $30.8 million at year-end fiscal 2017. The substantial increase in working capital was due to the signing of a new credit agreement on November 2, 2017. As a result of this agreement, the outstanding amount under the credit facility was reclassified from current debt to noncurrent debt. Our strong balance sheet provides us with significant financial flexibility to support our growth plans.I'll now turn the call back to Eric for closing comments. Eric?
Thanks, Alain. There are clear indications that mining companies are now increasing their focus on exploration and development. As I noted in our Q1 call, according to a recent preliminary analysis of global corporate mineral exploration strategies by S&P Global Market Intelligence, 2017 global nonferrous exploration budgets increased more than 14% year-over-year to USD 7.95 billion, the first increased exploration budget since 2012.S&P forecasts that budget will increase again in 2018 at approximately the same rate as in 2017. This validates what we are seeing with our customers. A combination of increased metal and gold prices over the past year, generally improved access to capital for mining companies and the overall declining reserves in both gold and copper are resulting in increased demand and more favorable conditions for mineral drillers.As I noted earlier, Orbit Garant is well-positioned to build value as the industry recovery continues with our well-established industry leadership in Canada and our expanded base of international operations.Looking ahead, our growth strategy will continue to focus on capturing increased market share in Canada and continuing to grow our international business. We will do this while carefully monitoring market condition and managing our staff and inventory levels, capital expenditures and balance sheet accordingly.We will continue to support and advance our core strengths, including our expertise in surface and underground drilling, particularly our specialized drilling capabilities; our vertically integrated manufacturing operation, which enable us to manufacture custom drill rigs in less time and at a less cost than one of our competitors ordering a rig from a customer from an OEM; our focus on continuous innovation, including our industry-leading computerized monitoring and control technology, which is an important competitive differentiator for us; and maintaining strong health and safety and environmental standards.That concludes our formal remarks, and Alain and I will now be pleased to answer any questions. Operator, please begin the question period.
[Operator Instructions] There are no questions at this time.
Okay. So if there is no question, we'll terminate the call. We'll see you next conference call. Thank you very much.
Thanks. Have a nice day.
This concludes today's conference call. You may now disconnect.