Beacon Report Target $4.05 UnchangedTemporary Setback With Q2/24 Results, Expect Stronger 2H/24 We have transitioned coverage from Ahmad Shaath to Donangelo Volpe. Following the transition, we maintain our Buy rating and $4.05 PT which is based on a 3.75x NTM EBITDA multiple. Q2/FY24 Results Fall Short of Expectations - Foraco reported Q2/FY24 revenue of $78M, falling short of our $92M forecast and consensus $89M. Revenue declined 22% y/y due to soft performance in South America and EMEA. South America revenues declined 53% y/y as a function of limited financing in the junior mining sector (mostly impacted by lithium prices) and an early winter season on high altitude projects. EMEA revenue declined 60% y/y following the exit out of unstable jurisdictions such as Russia and regions of West Africa. These revenue declines were partially offset by record high quarterly figures in North America ($32M, up 3% y/y) and Asia-Pacific ($22M, up 33% y/y). Adjusted EBITDA was $16M compared to our $23M forecast and consensus $21M. Despite the decrease in revenues, FAR was able to hold margins relatively stable. Adjusted EBITDA margin was slightly lower than we expected, coming in at 21% vs. our 23% forecast while gross margins were 23% (revenue decline was offset by 18% reduction in SG&A), down from 26% last year. The company reported EPS (diluted) of $0.08 vs. our $0.12 forecast and consensus $0.10. Q2 Performance Impacted from South American Operations - An early winter season was the largest impact on top line numbers as shutdowns occurred two months earlier than expected at large projects in Chile and Argentina. This is considered to be a one-off/temporary setback and is a large factor behind the 53% y/y decline in South America revenue. Remain in Active Discussions for Potential Gold Drilling Contracts - During its Q1 earnings call, management indicated being in the final steps of discussions with a Tier-1 client to drill for gold. The contract is for highly specialized, ultra-deep, directional drilling in North America. On today’s call, management reiterated that it is still working towards finalizing this contract, with hopes to see progress in 2H/24. With revenues reaching record highs in North America, the addition of a new Tier-1 client to its roster would bode well for future growth. Temporary Setback with Improvement in 2H/24 - On the earnings call, management emphasized that the Q2 results were a temporary setback and remain excited about the opportunities moving forward following the company’s strategic pivot. The company has pivoted out of unstable jurisdictions, are focusing on tier-1 customers and are relocating portions of their fleet to improve utilization rates (40% in Q2) back to normalized levels. Our model forecasts normalization of utilization rates in the second half of the year, as South American operations improve. We remain optimistic about the potential growth through FAR’s water segment. FAR has a third and fourth rig (which are already booked) being mobilized in 2H/24. Gross margins improved to 29% from the 17% low experienced last quarter and will help strengthen consolidated margins as this segment grows. Additionally, the deployment of two BF800 rotary drills in 2H/24 should boost figures in Australia. Introducing FY25 Estimates, Maintaining BUY Recommendation - Following the Q2 results, we have made revisions to our FY24 forecasts (see sidebar) and have introduced our FY25 estimates. Our FY25 estimates imply modest y/y growth in top line as well as improvement in margins through growth in the water segment. We maintain our Buy recommendation and $4.05/sh PT.