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01/10 16:34
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals a record high quarterly revenue, a promising shareholder return plan through a buyback program, and optimistic market positioning in Canada. Although margins declined and net earnings were lower, the company shows strong financial health and liquidity. The Q&A highlights proactive measures for future growth, despite some unclear responses. The positive aspects, like record revenue and strategic initiatives, outweigh the negatives, suggesting a likely positive stock price movement.
Quarterly Revenue $244 million, a 29% increase year-over-year. This represents the highest quarterly revenue in the company's 45-year history. The increase was driven by strong performance in North and South America, particularly Canada and Peru, despite challenges in the Australasian and African regions.
Canadian Operations Revenue 63% year-over-year increase. This growth was attributed to strategic market positioning and increased activity levels.
Adjusted Gross Margin Percentage 26%, down from 30.5% year-over-year. The decrease was due to competitive pricing in North America, training and maintenance programs, and the margin profile of Explomin's longer-term contracts and underground drilling focus.
G&A Costs $21.7 million, an increase of $3.6 million year-over-year. The rise was due to the addition of Explomin's operations.
EBITDA $37.7 million, compared to $38.7 million in the prior year. The slight decrease was due to various operational factors.
Net Earnings $13.9 million or $0.17 per share, compared to $18.2 million or $0.22 per share in the prior year. The decline was attributed to operational challenges and margin pressures.
CapEx $11.8 million, down from $20.1 million year-over-year. The reduction was due to prior investments in the fleet, with the addition of 2 new drill rigs and disposal of 4 older rigs.
Cash Position Increased by $17.6 million, ending the quarter with $14.3 million in net cash. Total available liquidity grew to over $149 million, reflecting strong financial management.
Specialized Work Revenue Contribution 60% of total revenue. This reflects high demand for specialized services as deposits become more challenging to find.
Gold Revenue Contribution 39% of total revenue. This was driven by strong performance in the South and Central American regions.
Copper Revenue Contribution 31% of total revenue. This was supported by increased demand for electrification and decarbonization.
Revenue Growth: Achieved a record-setting quarterly revenue of $244 million, a 29% increase compared to the same period last year.
Fleet Expansion: Added 2 new drill rigs and disposed of 4 older rigs, bringing the total rig count to 707.
Canadian Market: Revenue increased by 63% year-over-year due to strong rebound in activity levels.
South American Market: Growth in Peru driven by Explomin acquisition; offset by slowdowns in Argentina and Chile, but growth in Brazil and Guiana Shield compensated.
Australasian and African Market: Impacted by operational suspension in Indonesia, but activity is gradually resuming.
Gross Margin: Adjusted gross margin decreased to 26% from 30.5% last year due to competitive pricing and training programs.
Utilization Rates: Overall fleet utilization at 51%, with specialized drills at 47%, conventional drills at 54%, and underground drills at 54%.
Cash Position: Increased cash position by $17.6 million, ending the quarter with $14.3 million in net cash and $149 million in total liquidity.
Junior Financing: Increase in junior financing activities, expected to drive future demand.
Commodity Focus: Gold and copper remain key revenue drivers, with gold at 39% and copper at 31% of revenue.
Critical Minerals: Focus on securing supply of strategic commodities to meet global electrification and decarbonization demands.
Competitive Pricing Environment: Decreased margins were attributed to the continued competitive pricing environment in North America, which could impact profitability.
Operational Incident in Indonesia: The company's largest customer in Indonesia experienced an operational incident, leading to a suspension of all mine site activity for most of the quarter, impacting revenue and operations in the Australasian and African region.
Economic Conditions in Argentina and Chile: Slowdowns in Argentina and Chile due to challenging economic conditions and customer delays affected operations, though offset by growth in other regions.
Labor Shortages: A shortage of experienced drill crews is expected to temporarily pressure labor costs and productivity, particularly in the busiest markets.
Training and Maintenance Costs: Ongoing training and maintenance programs are impacting margins in the short term, though they are aimed at preparing for increased demand.
Explomin Margin Profile: Explomin's focus on longer-term contracts and underground drilling results in lower margins, which could affect overall profitability.
Seasonal Activity Decline: The company expects a seasonal pause in activity during the fiscal third quarter, which could impact short-term revenue.
Revenue Expectations: The company anticipates increased demand from mining customers, expecting a busier calendar year 2026. Revenue growth is expected to be driven by senior mining companies addressing depleting reserves and increased junior financing activity.
Margin Projections: Margins are expected to face slight pressure in the third quarter due to training and maintenance programs but are anticipated to recover over the longer term as industry demand drives pricing improvements.
Market Trends: Gold prices remain near record highs, leading to higher free cash flow for senior mining companies. Copper prices have doubled over the last two years, driven by electrification and decarbonization trends, with supply disruptions expected to exacerbate the supply deficit. Critical minerals are gaining importance globally.
Operational Changes: The company is investing in training and recruitment to address labor shortages and ensure readiness for increased demand. Drilling operations in Indonesia are expected to return to full capacity by the fourth fiscal quarter.
Share Buyback Program: During the quarter, the company announced a normal course issuer bid, whereby 5% of the issued and outstanding shares of Major Drilling may be repurchased over a 12-month period beginning October 21. The company intends to be opportunistic in the use of its NCIB, taking advantage of any potential share price weakness resulting in a valuation that does not accurately reflect its strong financial position and underlying fundamentals.
The earnings call reveals a record high quarterly revenue, a promising shareholder return plan through a buyback program, and optimistic market positioning in Canada. Although margins declined and net earnings were lower, the company shows strong financial health and liquidity. The Q&A highlights proactive measures for future growth, despite some unclear responses. The positive aspects, like record revenue and strategic initiatives, outweigh the negatives, suggesting a likely positive stock price movement.
The earnings call highlights several negative aspects: declining revenues, gross margin drop, and increased net loss. The Q&A section reveals management's evasive responses on expansion plans, indicating uncertainty. Although there are positive elements like improved inventory management and Outlet 2.0 feedback, the lack of guidance and reliance on promotions are concerning. Overall, the financial struggles and unclear future strategies suggest a negative stock price movement.
The earnings call highlights significant revenue decline, net loss, and operational challenges, including store closures and tariff impacts. While there are efforts to improve inventory management and future partnerships, the lack of Q&A insights, weak financial performance, and ongoing economic pressures weigh negatively. The absence of a shareholder return plan further dampens sentiment. Thus, the stock price is likely to experience a negative movement in the next two weeks.
The earnings call reveals multiple challenges: declining revenues, increased losses, and macroeconomic pressures. Despite some positive aspects like inventory management improvements and share repurchases, the guidance indicates a projected operating loss and lower gross margins. The Q&A section highlights concerns about customer behavior shifts and vague management responses, further dampening sentiment. The overall outlook is negative, with expected continued headwinds, leading to a likely negative stock price reaction.
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