Mr. Denis Larocque reports

MAJOR DRILLING REPORTS FIRST QUARTER RESULTS, ROBUST CASH POSITION DRIVES SHARE REPURCHASES AND LONG-TERM DEBT REDUCTION TO ZERO

Major Drilling Group International Inc. has released results for the first quarter of fiscal 2024, ended July 31, 2023.

Quarterly highlights:

• Revenue of $198.9-million, flat compared with the same period last year; however, an increase of 7.5 per cent from revenue reported in Q4 of fiscal 2023;
• EBITDA (earnings before interest, taxes, depreciation and amortization) of $40.3-million (or 48 cents per share), down from $43.5-million for the same period last year;
• Net earnings of $21.8-million (or 26 cents per share), down from $24.2-million for the same period last year;
• Discretionary repayment of $20-million on long-term debt, bringing long-term debt to nil;
• Spent $1.3-million in share buybacks;
• Net cash increased during the quarter to $60.8-million.

"We continued to see steady growth every month of the quarter, with increased activity from copper, lithium, silver and nickel customers, offsetting the reduced demands of junior gold exploration companies," commented Denis Larocque, chief executive officer of Major Drilling. "Early in the summer, forest fires and project delays due to permitting impacted our North American operations; however, by the end of the quarter, we saw the return of strong activity levels. We were particularly pleased with the results from our South American and Australasian operations, which are seeing a pickup in activity that bodes well for the future."

"The company delivered solid financial performance in the quarter, generating $40.3-million in EBITDA bolstered by growing demand in South America and Australasia, while navigating temporary challenges in North America," commented Ian Ross, chief financial officer of Major Drilling. "Our continued robust cash position provided the opportunity to pay off the company's remaining $20-million balance of long-term debt. Against a backdrop of rising interest rates, this will provide tremendous stability and flexibility to our balance sheet, which had $60.8-million in net cash at the end of the quarter. The company also took the opportunity, at current valuations, to make use of its normal course issuer bid, spending $1.3-million on share buybacks at an average price of $8.89 per share. As the company positions itself to capitalize on the encouraging industry outlook, we spent $16.3-million on capital expenditures, including five new drills and adding support equipment to be able to field more rigs in busy markets, while disposing of four older, less efficient rigs, bringing Major Drilling's total fleet count to 601 drills," concluded Mr. Ross.

Mr. Larocque continued: "As we move into our second quarter of fiscal 2024, the monthly growth we experienced since the beginning of this calendar year is expected to continue throughout the quarter. The need to replenish supply shortfalls for most metals remains a priority for mining companies, despite the recent decline in commodity prices. Those prices remain well above the level needed to support exploration, and we are already in discussions with several senior customers regarding their calendar 2024 programs, with many looking to book their rigs early.

"Looking forward, the global demand for electric vehicles continues to grow and will require an enormous volume of copper and battery metals, which will increase pressure on the existing supply/demand dynamic. We expect all of this to lead to substantial additional investments in copper and other base metal exploration projects as we help our customers discover the metals that will allow the world to accelerate its efforts toward a green economy. Many of the new mineral deposits in question are located in areas challenging to access, requiring complex drilling solutions and continued demand for Major Drilling's specialized services.

"Major Drilling remains in a unique position to react to, and benefit from, these market dynamics. Backed by our strong financial position, our success in recruiting, training and inventory management has allowed us to maintain our position as both the operator and employer of choice in our industry," concluded Mr. Larocque.

First quarter ended July 31, 2023

Total revenue for the quarter was $198.9-million, down 0.5 per cent from revenue of $199.8-million recorded in the same quarter last year. The favourable foreign exchange translation impact on revenue and net earnings for the quarter, when comparing with the effective rates for the same period last year, was approximately $6-million and $1-million, respectively.

Revenue for the quarter from Canadian/U.S. drilling operations decreased by 9.9 per cent to $101.5-million, compared with the same period last year. Customer-related delays due to permitting and forest fires negatively impacted the region at the start of the quarter, but activity levels had picked up by quarter-end.

South and Central American revenue increased by 8.6 per cent to $51.6-million for the quarter, compared with the same quarter last year. All regions but Mexico contributed to the growth as demand for battery metals and depleting gold reserves drove strong exploration efforts. Mexico continues to be impacted by the uncertainty over new mining legislation and access to capital for juniors.

Australasian and African revenue increased by 15.1 per cent to $45.8-million, compared with the same period last year. Major Drilling's specialized services in Australia continue to be in high demand and the company has added some energy work in Mongolia, which has contributed to the growth in the region.

Gross margin percentage for the quarter was 24.6 per cent, compared with 25.6 per cent for the same period last year. Depreciation expense totalling $11-million are included in direct costs for the current quarter, versus $10.4-million in the same quarter last year. Adjusted gross margin, which excludes depreciation expense, was 30.1 per cent for the quarter, compared with 30.8 per cent for the same period last year. Margins were relatively flat quarter-over-quarter as inflationary impacts continue to be covered by pricing adjustments in most markets.

General and administrative costs were $16.5-million, an increase of $300,000 compared with the same quarter last year, primarily due to annual wage adjustments implemented at the start of the new fiscal year.

Foreign exchange loss was $1.6-million, compared with a loss of $700,000 for the same quarter last year. While the company's reporting currency is the Canadian dollar, various jurisdictions have net monetary assets or liabilities exposed to various other currencies. The company strives to limit its exposure to the Argentine peso; however, Argentina generated a significant portion of the loss during the current quarter as the currency faced continued devaluation in this high-inflation market.

The income tax provision for the quarter was an expense of $7.2-million, compared with an expense of $7.3-million for the prior-year period. The income tax expense for the quarter was impacted by lower utilization of previously unrecognized tax losses.

Net earnings were $21.8-million or 26 cents per share (26 cents per share diluted) for the quarter, compared with net earnings of $24.2-million or 29 cents per share (29 cents per share diluted) for the prior-year quarter.

About Major Drilling Group International Inc.

Major Drilling is one of the world's largest drilling services companies primarily serving the mining industry. Established in 1980, Major Drilling has over 1,000 years of combined experience and expertise within its management team. The company maintains field operations and offices in Canada, the United States, Mexico, South America, Asia, Africa and Australia. Major Drilling provides a complete suite of drilling services including surface and underground coring, directional, reverse circulation, sonic, geotechnical, environmental, water-well, coal-bed methane, shallow gas, underground percussive/long-hole drilling, surface drill and blast, and a variety of mine services.

Webcast/conference call information

Major Drilling will provide a simultaneous webcast and conference call to discuss its quarterly results on Wednesday, Sept. 6, 2023, at 8 a.m. (EDT). To access the webcast, which includes a slide presentation, please go to the investors/webcasts section of Major Drilling's website and click on the link. Please note that this is listen-only mode.

To participate in the conference call, please dial 416-340-2217, participant passcode 8876233 followed by the pound key, and ask for Major Drilling's first quarter results conference call. To ensure your participation, please call in approximately five minutes prior to the scheduled start of the call.

For those unable to participate, a taped rebroadcast will be available approximately one hour after the completion of the call until Saturday, Oct. 7, 2023. To access the rebroadcast, dial 905-694-9451 and enter the passcode 3592816 followed by the pound key. The webcast will also be archived for one year and can be accessed on the Major Drilling website.

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