Metatek-Group Q3 2026 Earnings Call Transcript

Metatek-Group (TSX:MTEK) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Metatek-Group reported a record third quarter with $9.7 million in revenue, driven by strong project execution in Japan and Azerbaijan.

Adjusted EBITDA reached $4.1 million with a 42% margin, showing significant improvement and aligning with target levels.

The company completed major projects and expanded its client base with multidisciplinary surveys, enhancing revenue diversification.

Future outlook includes full-year revenue guidance of $28-32 million and adjusted EBITDA of $11-13 million, with full fleet utilization through year-end.

Signed agreements with Lockheed Martin and Bridger Aerospace to expand capacity, ensuring long-term growth and exclusivity in technology deployment.

Full Transcript

OPERATOR

Thank you for standing by. This is the conference operator. Welcome to Metatek-Group Third Quarter Fiscal 2026 Results Conference Call. As a reminder, today all participants are in a listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity for analysts to ask their questions. To ask a question and join the queue, at that time you may press star, then 1 on your telephone keypad. You will hear a tone acknowledging your request.

Should you need assistance during today’s conference call, you may reach an operator by pressing star, then zero. I would now like to turn the conference over to Dennis Fong, Investor Relations. Please go ahead.

Dennis Fong (Investor Relations)

Thank you, operator. On the call today are Mark Davis, Metatek-Group CEO, and Nick Morgan, CFO. Before we begin, Metatek-Group would like to remind listeners that certain information discussed today may be forward-looking in nature. Such forward-looking information reflects the company’s current views with respect to future events. Any such information is subject to risks, uncertainties, and assumptions that can cause actual results to differ materially from those projected in the forward-looking statements.

For more information on the risks, uncertainties, and assumptions related to forward-looking statements, please refer to Metatek-Group’s public filings, which are available on SEDAR+. During the call we will reference certain non-IFRS financial measures. Although we believe these measures provide useful supplemental information about our financial performance, they are not recognized measures and do not have standardized meanings under IFRS. Please see our MD&A for additional information regarding our non-IFRS financial measures, including reconciliations to the nearest IFRS measures.

Please note that unless otherwise noted, all references to any financial figures are in US dollars. With that, I’ll hand the call over to Mark.

Mark Davis (Chief Executive Officer)

Good morning, everyone, and thanks for taking the time to join us. I’m pleased to report a record third quarter for Metatek-Group. We delivered 9.7 million of revenue, the highest in the company’s history. As contracts awarded earlier in the year moved into execution, margins strengthened significantly from the first half of the year, with adjusted EBITDA of $4.1 million representing a margin of 42%, which moves us back towards our target levels. That performance was driven by three main projects, one in Japan and two in Azerbaijan, with our operations team delivering them efficiently while managing mobilization across three countries and undertaking scheduled maintenance.

With respect to Q3 operations, let me start with the FTG. In mid-July, we completed the data acquisition phase on a multi-year program in Nigeria, our largest contract to date. After scheduled maintenance, the EFTG mobilized to Japan for our second in-country program, a multidisciplinary survey covering hydrocarbons, minerals and geothermal energy. That kind of conversion to multidisciplinary work is increasingly typical, particularly with our larger clients.

The Japan program was completed on time and to budget. Early indications are that the data are of exceptional quality and more broadly, the EFTG platform has continued to outperform all expectations. As for the DFTG, that platform mobilized to Azerbaijan where we ran two programs back to back. First for a TSX-listed Canadian energy company, followed by a second program for SOCAR, the Azeri State Energy Company, which has continued into the fourth quarter. That’s a great example of how we can diversify our revenue and improve utilization. Interestingly enough, we’ve seen a growing number of independents look to run their programs alongside nation-state work, which not only increases the potential revenue for each deployment, but also broadens our client base.

As mentioned, the two main programs in the third quarter were for repeat clients, which speaks to the long-term nature of our engagements. Repeat work also reduces execution risk when we know the client and the country. Getting security clearances and low-flight permits in place is much quicker and far more predictable. As we move into the fourth quarter, our fleet is fully contracted through year end which supports our full-year guidance. The EFTG platform was mobilized to the Philippines to begin a new program for the Department of Energy. The Philippines has enormous resource potential and large parts of the country have never been surveyed before with modern high-resolution airborne technology. This is exactly the kind of sovereign program we built for. Data acquisition is well underway and we expect the EFTG platform to be operating there for most of the fourth quarter.

In Azerbaijan, weather and air traffic control restrictions have extended the DFTG’s work and we now expect to complete both programs there in November rather than October. From there the DFTG will mobilize to West Africa for a nation-state mapping program. You may remember that that program was delayed in the second quarter. We’re also expecting to start in Q4 in-country operations in North Africa on the airborne gravity survey we announced in July for a global energy company.

That survey uses our conventional gravity system rather than one of our FTG instruments. It shows how we match the right technology to our client’s objective and importantly adds revenue without taking up FTG capacity. Alongside acquisition activity, our processing and interpretation teams will be undertaking work on Japan and both the Azerbaijan programs. Looking into the new year, we expect the EFTG to continue operations in Nigeria, completing the current phase of our multi-year program. As we said before, the first quarter reflects the normal seasonality of government-led businesses where fiscal budgets and approval cycles typically mean lower activity early in the year. That’s a cadence we expect and plan for. But having long-term contracted nation-state phase programs like Nigeria, alongside a growing share of independent commercial work that runs on different timelines will help us manage it.

I want to spend a moment on backlog because I think the headline number is easy to misread. Adjusted backlog at the end of Q3 was approximately $80 million compared with $89 million at the end of Q2. Now the way to think about our backlog is that it’s constrained by capacity rather than demand. With two instruments, we can realistically schedule about two years of work. So a level of around $80 to $90 million is close to a full order book for our current fleet.

There’s also a seasonal pattern. Our government clients typically award contracts in the first half of the year and that work is then executed in the second half. So backlog tends to build through Q1 and Q2 with drawdown through Q3 and Q4, and that’s exactly what you see in this year. Importantly, our backlog is supported by a much larger pipeline and it will grow meaningfully from current levels as we add capacity starting with the launch of our Marine FTG system in 2027 and the new EFTGs thereafter.

In that regard, let’s address capacity. On October 6th we signed a contract with Lockheed Martin, our longstanding technology supplier, to build our next set of EFTG instruments. Just as importantly, the agreement gives us seven years of global exclusivity with the order of the first instrument and an option on a second instrument which we intend to execute in the new year that extends our exclusivity to nine years. Building a new EFTG takes approximately three years, so we expect the first new instrument to join the fleet in 2029.

Given the complexity of these systems and the build time, that effectively extends our global exclusivity for the better part of a decade. Alongside that, on October 27th we signed the long-term Strategic Aviation Partnership with Bridger Aerospace. Bridger will modify, operate and maintain three new dedicated Basler BT67 aircraft configured to our bespoke specifications, with the first expected to be operational by mid-2027. For us, this is really about more productive time out of our instruments. Aircraft operational availability has a big impact on how much time our systems spend on survey and with a dedicated aviation partner we expect better reliability, more efficient mobilizations, which ultimately translates to more time acquiring data.

It also replaces some of the unpredictable costs of aircraft maintenance with a more predictable structure. And furthermore, because these new aircraft will be equipped for cold weather operations, it opens up markets we haven’t been able to target previously, which is an additional revenue opportunity for us. These benefits come without capital, overhead and the complexity of building a larger aviation operation ourselves as we add new instruments.

Taken together, that gives us a clear path to steady, robust growth in our capacity. In 2027, we launch our Marine FTG system. It already has an active pipeline of opportunities that is not yet reflected in our backlog, and we’d expect that work to ramp up through the year. In 2028 we’ll have all three systems working for the full year, and from 2029 the new EFTGs will start joining the fleet on the dedicated Bridger aircraft. So to conclude, before I hand over to Nick, I want to leave you with a recent example of what our data can make possible for governments. The survey we carried out in Singapore with our partners Chevron Corporation and Sabana Jurong in 2025 has indicated geothermal potential of more than 60 times the country’s annual electricity use. And on the back of that body of work, Singapore’s Energy Market Authority is moving to the next phase of its geothermal program.

That’s a wonderful example of how data shaping national energy strategy and planning. With that, I’ll turn it over to Nick, who will walk you through the financial results in more detail.

Nick Morgan (Chief Financial Officer)

Thanks, Mark. As Mark said, this was a record quarter and it’s a good illustration of the earnings potential of this business. I’ll walk through the results, our capital plans and finish with our outlook for the rest of the year. Revenue for the third quarter was 9.7 million, up 29% from 7.5 million in the same period last year. Revenue mainly came from integrated acquisition contracts on both the EFTG and the DFTG, with smaller contributions from standalone processing and interpretation work. Cost of sales was 3.5 million, compared with 2.8 million last year. That’s an increase of about 26% against revenue growth of 29%. The largest component was the direct cost of our project in Japan, followed by operations in Azerbaijan which ran throughout the quarter.

These are mainly the in-country costs of mobilizing and flying our surveys, along with aircraft maintenance, royalties and an allocation of our processing and interpretation team costs. Gross profit was 6.2 million, compared with 4.8 million last year, representing a gross margin of 64%. Last quarter I said we expected margins to trend back towards our historical level of about 60% as utilization improved and we came in above that. It shows the operating leverage of this model.

Operating expenses were $3 million compared with 1.8 million last year. The increase reflects additional senior personnel costs associated with being a public company, stock option costs, higher travel and business development activity, and higher depreciation now that the DFTG is in service. Importantly, operating expenses were essentially flat with the second quarter while revenue more than tripled. Adjusted EBITDA was 4.1 million compared with 3.4 million last year, representing an adjusted EBITDA margin of 42%.

That’s a strong margin and a significant improvement on the first half of the year as we move back towards our target levels. Finance costs were minimal in the quarter, reflecting the simpler balance sheet after the IPO and the repayment of our term loan and convertible debt. As a result, we posted a net profit before tax for the quarter of $3.2 million or $0.05 per share, compared to a net loss of 1.9 million in the same quarter last year. Moving on to the balance sheet, we ended the quarter with 10.5 million pounds of cash and cash equivalents and minimal debt. Trade and other receivables and contract assets rose to a combined 10.2 million pounds from 4.9 million at the end of June, reflecting the step-up in project activity partly offset by a £3.3 million increase in payables. We expect those receivables to convert to cash in the fourth quarter and into the first quarter of 2027.

In investing activities, we spent $3.3 million in the quarter mainly on the first payments for the Marine FTG refurbishments and the balance of the new engines for one of our aircraft which were installed during the quarter. Subsequent to quarter end, we signed the new EFTG Instrument Supply Agreement with Lockheed Martin with the first milestone payment on our EFTG order. With Lockheed, we expect to fund future milestone payments in fiscal 2027 and through to instrument delivery from operating cash flow.

We also plan to exercise our option on a second EFTG in the new year. The Marine FTG remains on track for deployment in early fiscal 2027, with that investment continuing over the balance of this year. Our capital allocation priority hasn’t changed: expanding our operating capacity to meet our multi-year backlog and pipeline. We did not repurchase any shares under the NCIB during the quarter. Finally, we are reaffirming our full-year fiscal 2026 guidance of revenue between 28 million and 32 million and adjusted EBITDA of between 11 million and 13 million. Our fleet is fully contracted through year end. The EFTG is operating in the Philippines and the DFTG moves to West Africa once it completes its work in Azerbaijan in November. The later finish in Azerbaijan is a shift in timing within Q4 rather than lost work, and it’s reflected in the guidance we’ve reaffirmed today.

And with operating expenses running at a stable level, incremental revenue in the fourth quarter converts at a high rate to adjusted EBITDA, as you saw in the third quarter. That concludes our prepared remarks. We’d be happy to take your questions.

OPERATOR

Thank you. We will now begin the analyst question-and-answer session. As a reminder, to join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. If your question has been addressed and you would like to withdraw it, please press star then 2. We will now pause for a moment as callers join the queue, and today’s first question comes from Aravinda Galapagay with Canaccord Genuity.

Please go ahead.

Aravinda Galapagay (Analyst)

Good morning. Thanks for taking my questions. Maybe I’ll start with a question for Mark based on your comment, Mark, about the 80 to 90 million in revenue on full capacity utilization. I guess two-part question, I’m trying to understand whether that your 80 to 90 million estimate, does that include some component of contribution from IFTG as well? Are you still referring to the original the EFTG and the DFTG? And then I guess connected to that the backlog is 80 million.

I realize that not all of it, that may be a component of it that spills over into fiscal 28 possibly, but any kind of color that you can provide in terms of the proportion of that that can reasonably be deployed within 2027.

Mark Davis (Chief Executive Officer)

Yeah, sure. Thanks, Aravinda. First and foremost, there’s no numbers in the reporting for the marine system whatsoever. So that is in addition to what we’ve reported there. As I said, we fully expect that to be operational in early 27. We already have the test program that we’ll deploy to and we already have numerous clients who wish to use that system as well. So we’re quite excited by it and we are way ahead of schedule on delivering that. So there are no numbers in our backlog from the marine system.

In terms of getting through our backlog itself, we are fully booked for the year. Some of that will loop over into 2028. As you pointed out, what we don’t include in this is infill as well with clients. So I’m not entirely sure whether we’ve ever talked about the way in which we acquire data, but we tend to do a base survey and as the data reveals what’s in the subsurface, our clients then would infill and get a higher resolution. So that’s not included in any of those numbers either.

Aravinda Galapagay (Analyst)

Thank you. And then maybe just a question for Nick. On the CAPEX side of things, can you sort of, I mean, how much more do you have in terms of payments that you need to make on the IFTG? I know a component of it was there in the Q3 results and then I guess broadening that out, can you just remind us of how we should be thinking about the prepayments and those installments through 2027 just to get a sense of what the balance sheet picture would be like over the next, call it, 18 months.

Nick Morgan (Chief Financial Officer)

Sure. On the IFTG, which is obviously being redeployed in the marine environment, we are probably about halfway through CAPEX there, so there’s a little more to go. As we mentioned, or I mentioned in the statement earlier, towards the end of the year, I think most of it will be paid this year. There might be some final bills as we deploy in January, but we’re very pleased with the total build cost of that. As we sort of further explored how we’re putting that together and the functionality required, that’s gone very well and very much under the initial budget that we thought it would cost.

As we move into next year, the main CAPEX is going to be the milestone payments on the new instruments. So obviously we’ve got the first instrument that we’ve ordered, and that payment’s first milestone payment, which is a large milestone payment at the beginning, or down payment if you want to call it, will happen this year. And then you have steady milestones throughout the build’s life for the next two, three years. Then we’ll exercise the option on the next new instrument in Q1.

Again, there’ll be a larger initial milestone, or down payment if you like, followed by regular payments. So CAPEX for next year is predominantly, if not entirely really, on those instruments.

Aravinda Galapagay (Analyst)

Thank you. And then any, just lastly on the personnel expenses and the OPEX side of things. I know you alluded to it on the call. Any sort of anything we should sort of keep an eye on as we sort of look to forecast that over the next several quarters? Anything on the seasonality there? I’ll pass the line.

Nick Morgan (Chief Financial Officer)

Yeah, just going down the income statement on the cost of sales and OpEx, as we said, we’re happy that we’re sort of in the mid-60s on our gross profit margin and that’s somewhere we want to stay, if not even a little bit higher, depending exactly on the contracts that we sign up. But that’s pleasing to be there. So an assumption around 60–65% gross profit margin is reasonable for next year. And at the personnel expenses or operating expenses, as we said, in the last two quarters they’ve been at about $3 million, which includes depreciation and other sort of equity-based costs. I think that’s probably where we’re going to stay for the next year. There’ll be a bit of increase. We’ll be taking on some new staff to help roll out the marine projects. But a cash cost of somewhere in the sort of $2 to $2.5 million a quarter is probably where I see operating expenses.

OPERATOR

Once again, if you do have a question, please press star then 1. And our next question comes from Russell Stanley with Beacon Securities. Please go ahead.

Russell Stanley (Analyst)

Good morning and thank you for the question. Congrats on the top line improvement. In looking at the 26 guidance, obviously the midpoints imply an even stronger Q4, but you still have that reiterated revenue range in there. I’m wondering if you can elaborate on where the remaining question marks are in terms of the top line. I imagine maybe it’s permitting on those projects in Africa, but any color on that front would be helpful. Thank you.

Mark Davis (Chief Executive Officer)

Sure. I’ll take the permitting first, Russ. The great thing about what we’re doing in Q4 is we’re in familiar territory, so we understand the permitting because we’ve returned to that area of operations multiple times in the past. What happens in terms of permits is you’ve got several different types of permits that we tend to get in advance, and then once the aircraft get in country, there’s a final permit that gets issued. So we don’t expect any delays as we move into the operations through Q4 and into Q1.

Nick Morgan (Chief Financial Officer)

Just adding a little bit of color there, Russ, on sort of the numbers. You’re right, Q4 is looking stronger. That’s why we’re happy to reiterate that guidance. Do the mathematics, and yeah, it’s got to be a stronger quarter to get to those numbers in that range, which we feel—we’re halfway through the quarter pretty much now. The majority of that is made up of our ongoing project in the Philippines, which has been going very well operationally, which is pleasing to see.

And as Mark says, we’re returning to some familiar territory. I think one project that we’re hoping to see a bit of benefit from will be the conventional gravity project that we’re looking to do in North Africa, and how that goes will probably determine whereabouts in the range we are.

Russell Stanley (Analyst)

Great. That’s really helpful color. And then maybe on the contract pipeline, appreciate your comments around the backlog and how to think about that. You mentioned earlier in terms of the pipeline, I think seeing more demand for multidisciplinary contracts. I’m wondering what other trends you can call out in terms of potential contracts that you’re seeing. Any particular sources of strength? Thank you.

Nick Morgan (Chief Financial Officer)

Didn’t quite hear. Sorry, Russ, just to reiterate, in terms of the sort of trends you’re sort of thinking, what are you looking—

Russell Stanley (Analyst)

—for trends in the contract pipeline? You mentioned during your prepared remarks that you’re seeing more interest in multidisciplinary work. I’m wondering what other trends, what other particular sources of strength you’re seeing in terms of potential clients.

Mark Davis (Chief Executive Officer)

Yeah, so it’s quite interesting. We’ve been focusing on the multidisciplinary big nation-state contracts, and as we’ve had multiple successes in different projects in different areas around the world, we are getting more interest from other commercial entities and private independents, large independents. So the trend that we’ve seen at the moment is—and this is happening in Azerbaijan—where we’ve been approached by large independents and said, okay, we understand you’ve got full capacity, but are you mobilizing across one of our areas, and if you are, can you stop off during mobilization and acquire data?

So we are looking at trying to have efficient mobilization, opening up small gaps, and doing these smaller kind of one to $2 million projects. So there is a little bit of change. But as I say, our main focus is still the big multidisciplinary projects. And frankly, our pipeline is incredibly strong there, and we have nation states waiting patiently—which I’ve never seen before—actually waiting patiently to get time on the instruments.

Russell Stanley (Analyst)

That’s great. That’s all from me. Thanks for the color.

OPERATOR

And at this time, we are showing no further questions in the queue. And this does conclude our question-and-answer session. I would now like to turn the conference back over to Dr. Mark Davies for any closing remarks.

Mark Davis (Chief Executive Officer)

Well, thank you everyone for joining us today. I’m incredibly pleased with how it’s gone in Q3 and moving into Q4. It does reflect the seasonality of our business. We are mindful of the beginning of this year, and we’re working hard to ensure that we have seamless projects all the way through H1 of 2027 as well at the same time. So, yeah, record revenue, incredible operations. And of course, what translates to more workload for us is successes. And I’ll reiterate again, the splash that came out two weeks ago with the minister in Singapore putting on record that our data that we acquired has contributed significantly to their energy plan moving forward within Singapore. Thank you.

OPERATOR

This brings to a close today’s conference call. You may now disconnect your lines. Thank you for participating and have a pleasant day.

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