ADF Group Inc. (DRX) reported mixed financial results for the second quarter of 2026, with revenue growth exceeding projections but earnings falling well short of analysts’ estimates. The company’s shares fell 7.07% in premarket trading to $13.94, following a prior close of $15.00, and later dipped further to CAD 15.78 intraday. The 52-week range for DRX spans $6.90 to $18.44, highlighting volatility in investor sentiment around the company’s recent performance.
In Q2 2026, ADF Group reported earnings per share (EPS) of $0.10 (CAD 0.10), far below the $0.32 forecast by analysts, marking a 68.75% shortfall. Revenue, however, surpassed expectations, rising to CAD 95.03 million from a prior-year range of CAD 53 million, a year-over-year increase of 79.2%. First-half 2026 revenue reached CAD 194.3 million, up 79% from CAD 108.5 million in the same period a year earlier. Despite revenue growth, gross margins declined from 20.7% in Q2 2025 to 18.7% in Q2 2026—a 200-basis-point drop—and year-to-date gross margins settled at 21.5%, up slightly from 21.3% in the prior-year period.
Adjusted EBITDA improved significantly, with Q2 figures rising to CAD 8.4 million from CAD 3.7 million a year earlier—a 127% increase—and first-half EBITDA reaching CAD 26.9 million, up 90.8% from CAD 14.1 million. Net income for Q2 was CAD 3.0 million ($0.10 per share), compared with CAD 0.9 million ($0.03 per share) in Q2 2025, while first-half net income climbed to CAD 15.0 million ($0.52 per share), up 56% from CAD 9.6 million ($0.34 per share) in the same period a year prior.
The company’s order backlog reached a record CAD 693.7 million at the end of Q2, driven by Groupe LAR’s backlog of CAD 243.3 million. Geographic distribution of the backlog shifted to 64% Canadian-based projects and 36% U.S.-based, a major improvement from April 2025, when Canadian content accounted for only 5% of the backlog. Cash and cash equivalents stood at CAD 91.4 million as of July 31, 2026, up CAD 28.7 million from the start of the fiscal year, while working capital was CAD 109.5 million. Operating cash flow for the first half was CAD 47.1 million, and capital expenditures for 2026 are expected to exceed CAD 40 million, including CAD 10 million in U.S. investments for Great Falls facility upgrades.
The company’s financial performance was also impacted by share-based compensation adjustments, which resulted in a negative net earnings impact of CAD 4.3 million ($0.15 per share) in Q2 and CAD 5.6 million ($0.20 per share) for the first half. Foreign exchange losses contributed CAD 1.8 million ($0.06 per share) in Q2 and CAD 1.4 million ($0.05 per share) in the first half. A final settlement of a claim for Groupe LAR generated a CAD 25 million inflow just before quarter-end, adding CAD 20.2 million to revenues and CAD 5.3 million to gross margin for the periods.
ADF Group’s Chief Financial Officer, Jean-François Boursier, noted that the company’s success has led to challenges in share-based compensation accounting, stating, “We are the victim of our own success.” He highlighted the shift in backlog composition as a positive development, though a 50/50 geographic split would remain ideal. Boursier also confirmed the approval of a semi-annual dividend of CAD 0.02 per share, payable on October 15 to shareholders of record as of September 25, 2026. Additionally, Boursier will retire from his role as CFO on December 31, 2026, after 16 years of service, transitioning to a strategic advisor role starting January 1, 2027.
The company’s guidance for 2026 remains focused on maintaining stable core SG&A expenses, with only normal salary inflation expected, and capital expenditures are expected to support continued growth in its facilities and operations.
