Earnings call transcript: Major Drilling Q4 2025 misses EPS forecast

Major Drilling Group International reported its fourth-quarter earnings for 2025, revealing a significant miss in earnings per share (EPS) compared to forecasts. The company posted an EPS of $0.01, falling short of the expected $0.1033, marking a surprise of -90.32%. Revenue came in at $187.5 million, slightly below the forecast of $187.84 million. The stock saw a modest decline of 0.92% in after-hours trading, closing at $8.58. According to InvestingPro analysis, the company maintains a "GREAT" financial health score of 3.03, suggesting strong underlying fundamentals despite the earnings miss.

Key Takeaways

• Major Drilling’s Q4 EPS missed expectations significantly, impacting investor sentiment.
• Revenue grew by 11.6% year-over-year, but gross margins declined.
• The company continues to innovate with new drilling technologies and partnerships.
• A positive outlook for Q1 2026, anticipating a 20% revenue increase.

Company Performance

Major Drilling reported a robust year-over-year revenue increase of 11.6% for Q4 2025, reaching $187.5 million. However, net earnings dropped sharply to $1 million from $9.9 million the previous year. The company’s focus on specialized drilling services remains strong, accounting for 60% of total revenue. InvestingPro data reveals the company operates with moderate debt levels and maintains strong liquidity, with current assets significantly exceeding short-term obligations. Despite a challenging quarter, Major Drilling maintains a competitive edge with one of the most modern fleets in the industry and a strong presence in South and Central America.

Financial Highlights

• Revenue: $187.5 million, up 11.6% YoY
• Earnings per share: $0.01, down from $0.12 last year
• Adjusted Gross Margin: 22.8%, down from 26.9%
• EBITDA: $20.5 million, down from $25.3 million
• Net Debt: $3.9 million
• Total Available Liquidity: $123 million

Earnings vs. Forecast

Major Drilling’s Q4 earnings per share of $0.01 fell significantly short of the forecasted $0.1033, representing a surprise of -90.32%. Revenue was also slightly below expectations at $187.5 million compared to the forecast of $187.84 million. This marks a notable deviation from the company’s historical trend of meeting or exceeding forecasts.

Market Reaction

Following the earnings announcement, Major Drilling’s stock experienced a decline of 0.92%, closing at $8.58 in after-hours trading. This movement is within the context of its 52-week range, which has seen highs of $9.77 and lows of $6.51. With a beta of 0.39, the stock shows lower volatility compared to the broader market. The minor decrease reflects investor concerns over the missed earnings expectations and margin pressures. Want deeper insights? InvestingPro subscribers have access to over 30 additional financial metrics and expert analysis for Major Drilling, including detailed Fair Value calculations and comprehensive financial health scores.

Outlook & Guidance

Looking ahead, Major Drilling anticipates a 20% increase in revenue for Q1 2026, driven by increased exploration budgets and continued demand for specialized drilling services. The company expects improved margins in the coming quarter, supported by strategic initiatives and technological advancements. InvestingPro analysis shows strong revenue growth of 190% over the last twelve months, suggesting momentum in the company’s core business. Discover more exclusive insights and detailed financial analysis in the comprehensive Pro Research Report, available to InvestingPro subscribers.

Executive Commentary

CEO Denis Larocque highlighted the ongoing demand for specialized services, stating, "Despite the pressing need to replenish reserves to both gold and critical metals, exploration spending has not yet caught up to levels required to address this issue." CFO Ian Ross added, "We continue to see high levels of demand for our specialized services."

Risks and Challenges

• Declining gross margins pose a risk to profitability.
• Fluctuations in commodity prices could impact revenue streams.
• Global exploration spending remains below optimal levels.
• Economic uncertainties in key markets may affect operations.

Q&A

During the earnings call, analysts inquired about the company’s expansion efforts in South America, particularly in Peru and Colombia. Executives emphasized the deployment of new rigs to these regions and highlighted stable performance in Australasia and Africa. The focus on critical minerals and copper exploration was also discussed as a strategic priority moving forward.

Full transcript - Major Drilling Group International (MDI) Q4 2025:

Conference Operator: Good morning, ladies and gentlemen, and welcome to the Fourth Quarter twenty twenty five Results Conference Call. Would now like to turn the meeting over to Ryan Henley. Please go ahead, Mr. Henley.

Ryan Henley, Investor Relations, Major Drilling: Thank you, and good morning, everyone. As mentioned, we would like to welcome you to Major Drilling’s conference call for the fourth quarter of fiscal twenty twenty five. With me on the call today are Denis Larocque, President and CEO and Ian Ross, CFO. Our results were released last night 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 call over to Denita Rock, President

Denis Larocque, President and CEO, Major Drilling: and CEO. Thank you, Ryan, and good morning everyone and thank you for joining today. For those of you who were on the call around the same time last year, you may remember that I started off by congratulating our employees for setting a new safety record. This year, I’m very proud to begin the call in the same fashion. For fiscal twenty twenty five, we continue to build on our industry leading safety stats with our total recordable incident frequency rate of 0.74, marking yet another new record for the company.

I’d like to once again thank our employees for maintaining such a strong safety culture, as well as their continued enthusiasm, dedication and loyalty. In addition to setting a new safety record, fiscal twenty twenty five also marked a pivotal year for the company as we successfully completed the acquisition of Explomin, increasing our presence in the South And Central American region by adding operations in Peru, Colombia and The Dominican Republic. We also continued the development of our drill side geo solutions, including our partnership with DGI and CORE Geosystems, which was announced earlier in the fiscal year. These advancements along with the ongoing deployment of our proprietary ROC5 system and other innovations like the integration of our hands free rod handling systems continue to demonstrate our commitment to staying on the leading edge of technology, providing our customers with important incremental data, as well as tools to help our crews stay safe. Turning to the fourth quarter, as expected, we experienced a slow start to the year due to delayed mobilization related to the economic uncertainty around tariffs, with many programs only starting their ramp up in March and April.

While this resulted in training, mobilization and startup costs impacting our revenue and margin, we expect to see the benefits as early as next quarter. I’ll discuss more of the outlook after Ian walks us through the Ian? Thanks, Denis.

Ian Ross, CFO, Major Drilling: Revenue for the fourth quarter was $187,500,000 up 11.6% from the $168,000,000 recorded over the same period last year, driven by continued strength in the South And Central American region, but partially offset by Canada and The U. S, which was impacted by delayed startups and limited junior exploration budgets. The favorable foreign exchange translation impact on revenue when compared to the effective rates for the previous year was approximately $5,000,000 while the impact on net earnings was minimal. The overall adjusted gross margin percentage, excluding depreciation, was 22.8% for the quarter compared to 26.9% for the same period last year. The decrease in margins was mainly attributable to increased startup, training and mobilization costs as programs ramped up through March and April.

G and A costs were $20,900,000 an increase of $3,500,000 compared to the same quarter last year due to the addition of Explo Min, along with our annual inflationary wage adjustments. The income tax provision for the quarter was an expense of $700,000 compared to expense of $2,400,000 for the prior year period. Decrease was driven by reduced profitability. Company generated EBITDA of $20,500,000 in the quarter compared to $25,300,000 in the prior year period, with net earnings of $1,000,000 or $01 per share compared to net earnings of $9,900,000 or $0.12 per share for the prior year period. The company ended the quarter with $3,900,000 in net debt as a typical fourth quarter working capital requirements of a busy ramp up period temporarily impacted the cash position.

With total available liquidity of $123,000,000 and cash flow projected to increase, the company remains well positioned heading into the new fiscal year. In line with our fleet modernization strategy, the company spent $18,600,000 on capital expenditures in the quarter, adding seven new drill rigs and support equipment while disposing of four older, less efficient rigs, bringing the total rig count at quarter end to seven zero eight. As we look forward to fiscal twenty twenty six, the company expects to spend approximately $70,000,000 on CapEx to support elevated activity levels and equip our industry leading fleet with the latest technology. The breakdown of our fleet and utilization in the quarter is as follows: three zero three specialized drills at 41% utilization 162 conventional drills at 40% utilization, and two forty three underground drills at 49% utilization for a total of seven zero eight drills at 43% utilization. As we’ve mentioned before, specialized work in our definition is not necessarily conducted with a specialized drill.

Rather, it is work that requires to meet the rigorous standards of our customers in terms of technical capabilities, operational and safety standards and other related factors. In the fourth quarter, specialized work accounted for 60% 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, remained low at 12% of our revenue for the quarter, while underground drilling contributed 28% of total revenue as the company continues to look for diversity in its revenue streams, particularly with the recent addition of Exploomin. We continue to see the bulk of our revenue driven from seniors and intermediates, representing 92% of revenue this quarter, as they continue their elevated efforts to address depleting reserves.

Junior activity remained impacted by a lack of access to capital and made up only 8% of our revenue in the fourth quarter. In terms of commodities, gold represented 41% of revenue in the quarter, driven by record high gold prices, while copper accounted for 35% of revenue having increased from the beginning of the fiscal year due to the ExploMe acquisition. Iron ore continues to make a meaningful contribution at 11% of revenue, driven by continued strength from our Australian operations and demonstrating that diversity in the commodities for which we drill for 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, President and CEO, Major Drilling: Thanks, Ian. While delayed mobilization impacted our revenue and margins in the quarter as expected, activity levels continue to ramp up. Given the sharp increase in activity, expect revenue in the first quarter of twenty twenty six to increase by approximately 20% when compared to what was just reported in Q4. While we don’t plan to give quarterly guidance of this nature going forward, we thought it was important to quantify in this one instance, given the magnitude of the anticipated revenue increase. We also expect margins to improve from Q4, although we continue to mobilize rates through May and into early June.

With year over year increases in exploration budgets having now been released by several senior mining companies, we believe that this should lead to a strong fiscal twenty twenty six. Concurrently, while junior miners continue to face challenges in raising equity, the slow increase in both quantity and size of financings over the last few weeks may also prove to be a source of additional demand for drilling services. Despite the pressing need to replenish reserves to both gold and critical metals, exploration spending has not yet caught up to levels required to address this issue, as global exploration spending in 2024 only represented 60% of what was spent in 2012, the last time the industry faced such a supply crisis, and that’s still in non adjusted dollars. Future deposits are expected to continue to come from areas that are increasingly difficult to access, thereby requiring increasingly complex drilling solutions. As the industry leader in specialized drilling and innovation and with the industry’s largest and one of the most modern fleets, Major Drilling remains very well positioned to take advantage of this opportunity.

As we close out our fiscal twenty twenty five, I must say that I’m proud of the progress we’ve made with our offering in the field through innovation, and I’m excited that the further progress we’ll make as we move into 2026. I’d like to once again thank our more than 5,400 employees around the world for their continued enthusiasm, dedication, loyalty, and most of all great ideas, all of which are qualities that make us such a successful and productive company. With that, we’ll open up the call to questions. Operator?

Conference Operator: Thank you. We will now take questions from the telephone lines. If you have a question, please press 1. Please press 1 at this time if you have a question.

There will be a brief pause while participants register for questions. We thank you for your patience. Our question is from Donangelo Valpi from Beacon Securities. Please go ahead.

Donangelo Valpi, Analyst, Beacon Securities: Hey guys, how’s it going? Good, good. Good. Okay. question for me, I guess, I just wanted to kind of get a bit more color on which pockets you were seeing the most increases in activity levels for April.

North America actually came in ahead of my expectations. So I was wondering if you could give more specifics on if activity levels in North America are increasing.

Denis Larocque, President and CEO, Major Drilling: Yeah. Basically, you’re right. The increase in activity that we’re seeing is coming from North America, but also Chile and Peru. It’s coming from both commodity groups. Obviously Chile and Peru are driven by copper and we’re seeing that continuing and then there is also gold related programs that are ramping up as well.

Donangelo Valpi, Analyst, Beacon Securities: Okay, thank you. And then just moving over to the addition of seven rigs and disposal of four, Given that North America is improving, were some of those rigs added to North America or was that predominantly to aid in explodement operations where majority of those rigs go to South America?

Denis Larocque, President and CEO, Major Drilling: Yeah, as you can appreciate over the last year with the slowdown we saw in juniors and I mean when you look at our numbers there was a slowdown in North America. So we do have excess capacity in North America, so we didn’t need to add to that. So really to answer your question, most if not all of those rigs went to South America to basically ramp up in already busy regions.

Donangelo Valpi, Analyst, Beacon Securities: Okay, perfect. Thank you. And then I guess last one for me, Just regarding Australasia and Africa, can you just provide some color on what you guys are seeing there in terms of the market? I was modeling a flat year over year performance. I think it was a slight decline this year.

So just kind of wondering what you guys are seeing there?

Denis Larocque, President and CEO, Major Drilling: Yeah, that region is basically we have it’s all seniors and it’s a very stable business and basically we see that continuing, that stability continuing. In terms of the slight decrease, it just ebbs and flows. Sometimes seniors will add a few more rigs or basically slow down and readjust. But again that region has been doing really well for us and been very steady over the years.

Donangelo Valpi, Analyst, Beacon Securities: Okay, perfect. I appreciate the color. I’ll hop back on the queue.

Conference Operator: Thank you. For any questions or comments. Our following question is from James Bell from Arcadia Advisors. Please go ahead.

James Bell, Analyst, Arcadia Advisors: Good morning. Well, Danny Good morning, Jim. I’m good. How are you guys? This this is my this is good.

Good. You’re you’re the reason for my question. The fact that you said what revenues are gonna be in the first quarter almost knocked me off my chair. But, anyway, the contracts that are causing that type of revenue, they can’t be over and done with in one quarter. Is that correct?

Is that a good assumption?

Denis Larocque, President and CEO, Major Drilling: Yeah, no it is a good assumption. It is a reflection of the increase of the senior budget. Basically seniors have increased their budget given the commodity prices and the need for metals. And basically on the metal side I’ve been saying for a long time people were be asking me over the years, I’ve been saying that there’s a supply shortage of copper for you probably have heard me say that for a little while and when I would get asked about what’s the catalyst, what’s you know, at one point do you think things could pick up? And my answer was always, well when the supply shortage becomes a main street story and not just a Wall Street or Bay Street story.

And you just have to watch the news over the last, well just few weeks, whether it’s in Canada, whether it’s in The US or even globally, and you can’t go one day without critical minerals being mentioned or critical metals or being mentioned as and governments needing to do, take steps to improve and to go look for it and there were still articles again this morning on that. So I think that increase in budgets from seniors is indicative of that, the need to find more and we’re basically that’s what we’re seeing.

James Bell, Analyst, Arcadia Advisors: Okay, well you mentioned it, I’m looking at mining.com, I don’t know if you look at that, but Ivanhoe is slashing its 2025 copper guidance by 28%. So, it’s falling in. Okay, you’ve answered my questions as usual, Denny. All the best.

Denis Larocque, President and CEO, Major Drilling: Thank you. And by the way, Jim, I’m looking at your old building, the windows of your old office right now.

James Bell, Analyst, Arcadia Advisors: Oh, really? You’re in New York.

Denis Larocque, President and CEO, Major Drilling: Yeah, there’s a mining conference going on in New York this week.

James Bell, Analyst, Arcadia Advisors: I was tempted to come in for that but I just got overcome by inertia. Yeah, I haven’t been there in a long time. Anyway, all right, good luck.

Ryan Henley, Investor Relations, Major Drilling: Okay. Well, thank you,

James Bell, Analyst, Arcadia Advisors: Jim. Hello.

Conference Operator: Thank you. We have no further questions registered at this time. I would now like to turn the meeting back over to Daniel Larocque.

Denis Larocque, President and CEO, Major Drilling: Well, thank you for listening and again we’re quite excited about the year coming up and looking forward to it. Thank you.

Conference Operator: Thank you. The conference has now ended. Please disconnect your lines at this time and we thank you for your participation.

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