DRX: Q4 Financials; Growing Again but Weaker Margins
What you need to know:• ADF reported Q4 and FY26 financial results that were mixed relative to our expectations, including Q4 revenue of $78.8M (+2% YoY) vs. our $77.5M and Q4 EBITDA of $11.1M (14% margin) vs. our $17.9M.
• The Company’s PF backlog has reached record highs of $718M following new contract announcements of $157M and $140M.
• Management’s outlook noted that FY27 will be a transitional year (still growing nicely), focused on integrating LAR and expanding its capacity, while growing the backlog. However, the new steel tariff regime applies to ADF, with a 10% tariff applying to the full value of its products.
This morning, ADF Group (DRX:TSX) reported Q4 financial results (ending January 31st) that were in line with our estimates for both revenue and EBITDA. FY26 represented a lacklustre year for ADF, where results were weighed down by tariffs and a tough comparable period. Following the LAR acquisition, ADF has been signing a streak of new contracts, setting up the Company for growth in FY27 and FY28. We remain firm on our stance that the infrastructure spending cycle will continue for years to come, and ADF is positioned in key segments within the market, with FY28 being the year to focus on. We are maintaining our BUY rating and our $13.00/share target price on ADF Group.
Key Highlights
• Revenue for Q4/26 came in at $78.8M, just ahead of our estimate of $77.5M and representing 2% YoY growth. This represented ADF’s first quarter of positive revenue growth since Q1/25. FY26 revenue was $258.7M, down 24% from the record year in FY25. 83% of FY26 revenue was from the U.S.
• The order backlog came in at a record of $561.1M (vs. $497.1M in Q3), excluding the new $157.3M in contracts signed earlier this month. LAR’s backlog was reported at $138.2M, a solid portion of the total. 57% of the backlog comes from Canadian contracts.
• Gross margin for Q4 was 21% vs. our estimate of 27% and 31% in Q4 last year. FY26 gross margin came in at 23%. The decrease was due to the declining revenue, the impact of U.S. tariffs, and LAR’s lower margin profile.
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.
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