Q2 2026 Foraco International SA Earnings Call Transcript
Key Points
- Revenue increased 22% year-over-year to $84.5 million, the strongest quarterly revenue since Q2 2023.
- Rig utilization improved significantly to 51% from 35% in the prior year quarter, demonstrating strong operating leverage.
- Record backlog of $404 million provides strong revenue visibility through the second half of 2026 and beyond.
- Broad-based growth across geographies, with South America revenue up 94% and North America up 28%.
- Diversified portfolio with 82% of revenue from Tier 1 customers and exposure to attractive commodities like gold, copper, and cobalt.
- Tender pipeline remains robust and 'frothy' across all commodities and customer profiles, indicating sustained future demand.
- Management is actively addressing margin compression through pricing adjustments expected to be recognized in the second half of the year.
- Gross margin declined to 15.5% from 20.5% year-over-year due to higher labor, consumable costs, and lower efficiency during project start-ups.
- EBITDA margin contracted to 17.8% of revenue from 20.3% in Q2 2025.
- Net debt increased to $85.7 million due to temporary working capital investment and a $16 million capital expenditure program.
- Asia Pacific revenue declined year-over-year due to project phasing and customers pulling back activity during contract renewals.
- Cost inflation, particularly for labor (up 10-15% in some regions) and drilling consumables like drill bits, has outpaced pricing, with no cost increases recognized in the first half.
- Free cash flow was negative $30 million year-to-date, impacted by heavy investment and working capital build-up.
- The stock price remains undervalued and lower than it was in 2021, causing shareholder frustration despite strong operational performance.
Good morning, and welcome to Foraco International's second quarter 2026 results conference call. All participants will remain in listen-only mode until the question-and-answer session.
I will now turn the call over to Tim Bremner, Chief Executive Officer. Please go ahead.
Thank you, Joanna, and good morning, everyone.
Thank you for joining us today to discuss Foraco International's results for the second quarter ending June 30, 2026.
Joining me on the call is Fabian Selveste, our Chief Financial Officer, who will review the financial results and the key drivers of our performance.
Before we begin, please note that our remarks and presentation may include forward-looking information, which is subject to known and unknown risks and uncertainties.
The market backdrop entering the second-half of 2026 remains constructive.
Global non-ferrous exploration budgets reached approximately $12.4 billion in 2025, recovering from multi-year lows,
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