Major Drilling Group Intl (TSX:MDI) reported first-quarter financial results on Thursday. The transcript from the company's first-quarter earnings call has been provided below.

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The full earnings call is available at https://edge.media-server.com/mmc/p/ofwnj46h/

Summary

Major Drilling Group Intl reported a record quarterly revenue of $277.3 million, a 22% increase from the previous year, driven by strong performance across all regions, particularly in Canada and the U.S.

EBITDA rose by 16% to $37.2 million, and net earnings increased by nearly 44%, demonstrating significant operational leverage.

The company saw a notable increase in revenue contribution from both senior and junior drillers, with a 31% increase in the Canada/U.S. region and 18% in South and Central America.

Capital expenditures totaled $13.5 million, focusing on fleet optimization by adding new drill rigs and disposing of older ones, resulting in a total rig count of 683.

Management remains optimistic about future growth, citing high demand for specialized services and expectations for continued margin improvement despite ongoing labor and training costs.

Full Transcript

OPERATOR

Good day, and thank you for standing by. Welcome to the Major Drilling first quarter 2027 results conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.

Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Ryan Hanley, Director of Capital Markets. Sir, please go ahead.

Ryan Hanley, Director of Capital Markets

Thank you. Good morning, everyone. As mentioned, we would like to welcome you to Major Drilling’s conference call for the first quarter of fiscal 2027. With me on the call today are Denis Larocque, President and CEO, and Ian Ross, CFO. Our results were released yesterday after market hours and can be found on our website at www.majordrilling.com. We also invite you to visit our website for further information. Before we get started, we’d like to caution you that during this conference call we will be making forward‑looking statements about future events or the future financial performance of the company.

These statements are forward‑looking in nature and actual events or results may differ materially from those currently anticipated in such statements. I’ll now turn the presentation over to Denis Larocque, President and CEO.

Denis Larocque, Chief Executive Officer

Thanks, Ryan, and good morning, everyone, and thank you for joining us today. We had a strong start to our new fiscal year with quarterly revenue of 277.3 million, representing a 22% increase over the prior-year period and setting a new quarterly record for the company. This new record was the result of each region delivering meaningful year-over-year revenue growth as we continue to deploy rigs in the field in order to meet the growing needs of our customers.

The bulk of the growth continues to be driven by increasing activity levels in Canada and the U.S., where we saw new contract wins and the addition of rigs to existing projects. While seniors continue to execute on their expanded programs, we’re seeing juniors becoming increasingly more impactful as they look to deploy larger amounts of capital that flowed through the significant increase in financing activity we saw earlier in the year. As a result, revenue in the Canada/U.S. region increased by over 31% when compared to the prior-year period. In South and Central America, we saw a strong 18% year-over-year increase, led by continued growth in Peru and increasing activity levels in Mexico and Brazil. In the Australasian and Africa region, revenue increased by nearly 14% when compared to the prior-year period, driven by new contract wins and project expansions with seniors in Australia. With the strong revenue increase in each region and ongoing efforts to manage cost pressures, the company generated EBITDA of 37.2 million in the quarter, a 16% increase over the prior-year period, while net earnings increased by nearly 44%, further demonstrating our operational leverage. I’ll discuss more of the outlook after Ian walks us through the quarter’s financials.

Ian Ross, Chief Financial Officer

Thanks, Denis. Revenue for the quarter was 277.3 million, up 22.4% from the 226.6 million recorded for the same period last year, driven by strength in each region, led by Canada and the U.S. The favorable foreign exchange translation impact on revenue when compared to the effective rates for the same period last year was approximately 8 million, while the impact on net earnings was minimal. The overall adjusted gross margin percentage, excluding depreciation, was 24% for the quarter compared to 25.2% for the same period last year, while margins improved from the 22% realized in the last quarter, reflecting ongoing pricing improvements.

This was partially offset by ramp‑up costs associated with new contracts, as well as higher labor and consumable costs, and investments in workforce training and development. G&A costs were 23.8 million, an increase of 2.4 million compared to the same quarter last year. The increase is attributable to annual wage adjustment and additional costs to address rapid growth in our busiest regions. Other expenses were 6 million, up from 3.3 million in the same quarter last year, due to increased incentive compensation resulting from improved profitability and higher stock‑based compensation costs tied to the company’s share price performance.

The income tax provision for the quarter was an expense of 4.6 million compared to an expense of 3.9 million in the prior‑year period. The increase reflects the overall improvement in profitability, while the lower effective rate is attributable to the utilization of previously unrecognized losses. The company generated EBITDA of 37.2 million in the quarter, an increase of 15.9% from the 32.1 million recorded for the prior‑year period. Net earnings of 14.5 million, or $0.18 per share, increased from 10.1 million, or $0.12 per share, in the same period last year, demonstrating our operational leverage.

The company ended the quarter with $15.7 million in net cash, a decrease from the $20.6 million at the end of the prior quarter, as higher regularization resulted in a temporary increase in working capital requirements. With total available liquidity of approximately $160 million and cash flow projected to increase, the company remains very well positioned as we move through the new fiscal year. In line with our ongoing fleet optimization initiatives, the company spent $13.5 million on capital expenditures in the quarter, adding five new drill rigs and support equipment while disposing of 10 older, less efficient rigs, bringing the total rig count at quarter end to 683. Effective this quarter, we are consolidating fleet utilization into two categories: surface and underground, with the surface component combining what was previously split into specialized and conventional categories. This adjustment was made as it better reflects how management views the business and better aligns with our internal reporting and forecasting standards. As a reminder, specialized work is defined by job characteristics, including technical complexity, remote site access, and/or elevated safety requirements, and not by rig type, as in many cases, a conventional rig is fully capable of performing specialized work. Therefore, the new breakdown of our utilization in the quarter is as follows: 455 surface rigs at 57% utilization; 228 underground drills at 59% utilization; for a total of 683 drills at 58% utilization. In the first quarter, specialized work accounted for 59% of our total revenue. We continue to see high levels of demand for our specialized services and expect this trend to continue as deposits become increasingly more challenging to find, with discoveries continuing to be made in remote locations.

Conventional drilling, which is mostly driven by juniors, contributed 17% of revenue, while underground drilling accounted for 24% of total revenue. As the company continues to look for diversity in its revenue streams, seniors continue to account for the bulk of our revenue, representing 85% of activity in the quarter as they continue their efforts to address the depleting reserves, while juniors are beginning to have a more meaningful impact. Following the acceleration of junior financing activity over the last year, this segment grew to represent 15% of revenue in the quarter, compared to 13% in the prior quarter and 8% in the same period last year. In terms of commodities, gold represented 46% of revenue in the quarter, driven by continued strength in gold price and related junior financing activity, while copper accounted for 28% of revenue, with activity levels at copper mines and projects expected to grow as we move through the year. Iron ore continues to make a meaningful contribution at 9%, driven by continued strength for our Australian operations and demonstrating the diversity in the commodities for which we drill around the world.

With that overview of our financial results, I’ll now turn the presentation back to Denis to discuss the outlook.

Denis Larocque, Chief Executive Officer

Thanks, Ian. Looking ahead to the next quarter, rigs are expected to continue to gradually be deployed into the field at incrementally higher prices as we strive to meet the demands of our senior customers who continue to expand their exploration programs, while juniors continue to deploy the capital that they’ve raised over the past year. Demand remains strong, and the primary constraint across the industry continues to be the availability of experienced drillers.

We’ve remained focused on recruitment and retention while also expanding our pipeline of future talent by increasing the number of trainee drillers in the field. As expected, there is a learning curve associated with bringing new people into the workforce, which has a temporary impact on productivity, but it positions us well to support future growth. As we noted last quarter, margin expansion typically trails revenue growth during periods of rapid activity growth.

We’re still absorbing labor, training, and ramp‑up costs, but price increases are taking hold and progressively offsetting those pressures. As a result, we expect margins to continue improving, albeit at a slower pace than revenue growth. So in closing, we’re optimistic. Gold is holding up, which keeps senior budgets and junior financing going. Copper just hit an all‑time high, and everyone is talking about critical minerals. We’ve got the global experience, the expertise, and the best balance sheet in the industry.

And we intend to stay the driller people call and the company drillers want to work for in every country where we operate. Finally, please don’t forget to join us for our AGM, which will be held in person and virtually today at 3:30 Eastern Time. All of the details related to the AGM can be found on our website. With that, we can open the call to questions. Operator,

OPERATOR

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment while we compile our Q&A roster. Our first question is going to come from the line of James Dale with Arcadia Advisors. Your line is open. Please go ahead.

James Dale, Analyst at Arcadia Advisors

Well, thank you very much. Not much to say, guys. Great quarter. One thing got my attention — the gain on disposal of property of 573,000, I guess versus last year — suggests you’re selling those older, older rigs at a pretty nice price. What is that? I’ve — no, I’ve never seen anything like that before. Is that just an indication of how strong the market is?

Denis Larocque, Chief Executive Officer

No, we don’t look to sell rigs in the market. That’s not our business. The odd time we’ll get rid of some old gear to help fund kind of new purchases, but a lot of it — it’s not selling rigs to the market, that’s for sure. The rigs that we announce as disposed, usually we cut them up and they’re retired. They’re at the end of their life and we don’t put them back in the market.

James Dale, Analyst at Arcadia Advisors

Oh, okay. Because I was wondering if someone could buy them and undercut you in very simple drilling, you know, drilling projects and, you know, kind of make things a little difficult, but okay. Other than that, this is great how things are coming together.

Denis Larocque, Chief Executive Officer

Well, thank you.

OPERATOR

Thank you. And again, as a reminder, to ask a question, please press star 11 on your telephone. I’m showing no further questions at this time, and I would like to hand the conference back over to Denis Larocque, CEO, for closing remarks.

Denis Larocque, Chief Executive Officer

Well, thank you. Pretty slow on the questions, but I guess right before a long weekend, hopefully people are going to listen to the call at a later date. It’s our AGM, so if you are around or online, please join us today. And again, we remain very optimistic on the future. Thank you for listening.

OPERATOR

Thank you. This concludes today’s conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.