ADF Group – Strong Q2 Results with Revenue Up 79% YoY

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Author: Atrium Research September 10, 2026

Nicholas Cortellucci, CFA | Equity Research Analyst | [email protected] | 647-391-3314

Luca Perna | Equity Research Associate | [email protected] | 647-969-1027

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What you need to know:

  • ADF reported strong Q2 financial results including revenue of $95.0M (+79% YoY) vs. our estimate of $85.8M.

  • EBITDA of $8.4M (+128% YoY, 9% margin), below our expectations due to $5.9M in DSU/PSU expense. Adjusting for this, EBITDA would have been in line with our forecast.

  • The order backlog reached $693.7M (vs. $645.8M in Q1), including $243.3M from Groupe LAR.

  • ADF ended the quarter with $91.4M in cash against $38.8M in debt, generating $30.5M in FCFF largely from A/R reduction.

This morning, ADF Group (DRX:TSX) reported Q2 financial results, with topline beating our expectations and profitability missing due to non-recurring factors explained below. Revenue growth of 79% was driven by LAR’s contribution and the ramp of newly signed contracts, while EBITDA still outpaced revenue growth, being up 128% YoY. ADF is well positioned in our view, with the backlog growth supported by positive trends in its end markets. We are maintaining our BUY rating and target price of $21.00/share on ADF Group.

Key Highlights

  • Revenue for Q2/27 came in at $95.0M (+79% YoY), well ahead of our estimate of $85.8M. LAR contributed $48.3M in the quarter including a $20.2M claim from a customer. 45% of revenue was realized in US dollars, down from 91% in Q2/26 on the LAR acquisition and the new contract mix in the backlog.

  • The backlog came in at a record of $693.7M (vs. $645.8M in Q1) comprised of 51% fabrication hours and excluding long-term contracts. LAR’s backlog was reported at $243.3M (35% of the total). ADF signed $127.0M in new contracts in June (read our note here).

  • Gross margin for Q2 was 18.7% vs. our estimate of 23.0% and 20.7% in Q2 last year, with gross profit of $17.8M (+63% YoY). This was impacted by higher input costs (steel) and customs duties. LAR contributed $5.9M (12% margin), assisted by the settlement of a claim against a customer.

  • Management specified that 13,000 fabrication and coating hours were spent at Terrebonne for LAR’s new plant; as such, these hours did not generate revenue and were capitalized. Associated overhead costs for these hours were expensed, however, lowering gross profit.

  • Q2 adjusted EBITDA came in at $8.4M (+128% YoY, 9% margin) compared to our estimate of $14.7M (17% margin) and $3.7M (7% margin) in Q2/26. If we adjust this for the DSU/PSU expense, adjusted EBITDA would have been $14.3M, aligning with our estimate.

  • EPS in Q2 was $0.10 (or $3.0M in net income) compared to our estimate of $0.32/share (or $9.2M) and $0.03 last year. This was impacted by the DSUs and $2.3M in FX losses, and would have been in line otherwise.

  • OCF before WC changes was $13.9M and after WC changes was $37.0M. ADF spent $6.4M on capex in Q2, translating to $30.5M in FCFF in Q2.

  • The Company ended the quarter with $91.4M in cash and $38.8M in debt.

Q2/27A Atrium Est. YoY
Revenue ($M) $95.0 $85.8 +79%
Gross Margin (%) 18.7% 23.0% -194 bps
Adj. EBITDA ($M) $8.4 $14.7 +128%
Adj. EBITDA Margin (%) 8.9% 17.2% +190 bps
EPS ($) $0.10 $0.32 +233%

Figure 1: Q2 Financials Summary

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