DRX: Q3 Financials Beat Expectations; Diversified Away from Tariffs
What you need to know:• ADF reported Q3 financials that beat our expectations, driven by stronger project execution, margin recovery, and early contributions from LAR.
• Revenue came in at $71.4M vs. our estimate of $68.4M while EBITDA of $18.4M meaningfully outperformed our $10.2M estimate.
• Backlog increased to $497.1M (+6% QoQ), supported by a stronger mix of Canadian projects (now 57% of the backlog), while integration progress at LAR is setting up ADF for a strong Q4 and FY27.
This morning, ADF Group (DRX:TSX) reported Q3/26 financial results, which came in ahead of our expectations and marked a quick rebound from the softer first half. The quarter benefited from stronger project execution, a partial contribution from LAR, and meaningful improvements in margins, while the order backlog has now grown to $497.1M. We are maintaining our BUY rating and our $12.00/share target price on ADF Group.
Key Highlights
• Revenue for Q3 came in at $71.4M vs. our estimate of $68.4M, representing a 11% YoY decline. This included a partial contribution of $6.2M from LAR; over the last nine months, LAR generated $33.1M in revenue.
• The order backlog came in at $497.1M compared to $468.0M last quarter. This includes $91.9M from LAR and does not include the option to extend the Quebec energy infrastructure contract. 53% of the backlog was fabrication hours, representing a strong product mix. 57% of the backlog is now from Canadian projects, compared to 41% in Q2.
• Gross margin for Q3 was 28% vs. our estimate of 22% and 30% in Q3 last year. This compares to the recent lows of 21% in Q2/26.
• EBITDA came in at $18.4M (26% EBITDA margin) compared to our estimate of $10.2M (15% margin) and $3.7M in Q2/26.
• EPS in Q3 of $0.36/share (or $10.3M in net income) compared to our estimate of $0.21/share (or $6.2M in net income). This included $0.2M from LAR and acquisition-related expenses of $1.4M.
• ADF spent $4.4M on capex in Q3, compared to $1.4M in Q3/25, as the Company makes investments to support the growth ahead. This resulted in $1.8M in FCFF without including the LAR acquisition.
• The Company ended the quarter with $32.7M in cash and $42.7M in debt. Working capital at the end of the period was $101.4M.
ADF Group is engaged in the design and engineering of connections, fabrication and installation of complex steel superstructures, heavy steel built-ups, as well as architectural and miscellaneous metalwork for the five principal segments of the non-residential construction market namely, office towers and high-rises, commercial and recreational buildings, airport facilities, industrial complexes and nuclear facilities, and transport infrastructures.
Atrium Research provides institutional quality issuer paid research on North American public equities using deep fundamental analysis. Our research reports are disseminated through Bloomberg, FactSet, Capital IQ, Reuters and many more, as well as through our social media and email distribution lists.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.