Major Drilling Group International Inc. (TSX: MDI) Q4 2025 Earnings Call | 06/12/2025

Major Drilling held its Q4 fiscal 2025 earnings conference call with President and CEO Denis Laroque and CFO Ian Ross.

Key Highlights:

• Safety Record: For fiscal 2025, Major Drilling achieved a new industry-leading safety record with a total recordable incident frequency rate of 0.74, highlighting the company's strong safety culture.
• Strategic Growth and Innovation:
  • Successfully completed the acquisition of ExpoMin, expanding operations in Peru, Colombia, and the Dominican Republic, increasing presence in South and Central America.
  • Continued development of drill-side geosolutions, including partnerships with DGI and Core Geosystems.
  • Ongoing deployment of proprietary ROC5 system and integration of hands-free rod handling systems, demonstrating commitment to technology, data provision, and crew safety.
• Q4 Fiscal 2025 Financial Performance:
  • Revenue: $187.5 million, up 11.6% year-over-year, driven by strength in South and Central America, partially offset by delayed startups and limited junior exploration budgets in Canada and the U.S.
  • Adjusted Gross Margin (excluding depreciation): 22.8%, down from 26.9% year-over-year, mainly due to increased startup, training, and mobilization costs.
  • G&A Costs: $20.9 million, up $3.5 million year-over-year due to ExpoMin acquisition and inflationary wage adjustments.
  • EBITDA: $20.5 million, down from $25.3 million year-over-year.
  • Net Earnings: $1 million ($0.01 per share), down from $9.9 million ($0.12 per share) year-over-year, attributed to reduced profitability.
  • Net Debt: $3.9 million at quarter-end due to working capital requirements.
  • Liquidity: $123 million total available liquidity, well-positioned for the new fiscal year.
• Fleet and Capital Expenditures:
  • Spent $18.6 million on CapEx in Q4, adding seven new drill rigs and support equipment, while disposing of four older rigs. Total rig count is 708.
  • Forecasted CapEx for fiscal 2026 is approximately $70 million to support elevated activity and technology upgrades.
  • Utilization in Q4: Specialized drills 41%, Conventional drills 40%, Underground drills 49% (overall 43% utilization for 708 drills).
• Revenue Mix:
  • Specialized work: 60% of total revenue, with continued high demand expected.
  • Conventional drilling (mainly juniors): 12% of revenue.
  • Underground drilling: 28% of revenue.
  • Seniors and intermediates: 92% of revenue, addressing depleting reserves.
  • Juniors: 8% of revenue, still impacted by limited access to capital.
• Commodity Exposure:
  • Gold: 41% of revenue (driven by record high prices).
  • Copper: 35% of revenue (increased due to ExpoMin acquisition).
  • Iron Ore: 11% of revenue (strong Australian operations).
• Outlook (Q1 Fiscal 2026):
  • Expected revenue increase of approximately 20% compared to Q4 fiscal 2025 due to ramping activity levels.
  • Margins expected to improve from Q4 levels.
  • Strong fiscal 2026 anticipated due to increased exploration budgets from senior mining companies and a slow increase in junior financings.
  • Global exploration spending in 2024 is still significantly lower than required to address the supply crisis of gold and critical metals.
  • Major Drilling is well-positioned to capitalize on opportunities due to its leadership in specialized drilling, innovation, and modern fleet.
• Q&A Insights:
  • Increased activity levels are primarily seen in North America, Chile, and Peru, across both copper and gold-related programs.
  • Most new rigs added went to South America to ramp up operations in already busy regions, as North America currently has excess capacity.
  • The Australasia and Africa region remains very stable, driven by senior miners.
  • The significant projected revenue increase for Q1 FY26 is driven by long-term contracts reflecting increased budgets from senior miners due to high commodity prices and the pressing need for critical metals.