Mr. Ian Ross reports

MAJOR DRILLING ANNOUNCES THIRD QUARTER RESULTS, STRONG CASH GENERATION CONTINUES

Major Drilling Group International Inc. today released its results for the third quarter of fiscal 2024, ended Jan. 31, 2024.

Quarterly highlights

• Revenue of $132.8-million, down 11 per cent from the $149.2-million recorded for the same quarter last year.
• Foreign exchange loss of $2.9-million in Argentina due to significant devaluation of the Argentine peso in December.
• Net loss of $2.3-million (or three cents per share), compared with net earnings of $6.3-million (or eight cents per share) for the same period last year.
• Repurchased 317,400 shares at a cost of $2.7-million.
• Net cash position increased $12.2-million during the quarter to $96.4-million.
• Collaborative investments in cutting-edge technology with key customers for optimized drilling operations.

"The company continued its cash generation through this third quarter, which is traditionally the weakest of our fiscal year, as mining and exploration companies pause operations for the holiday season. We continue to see increased demand from copper and battery metal customers, up 8 per cent over last year, however, we saw several projects slow down earlier than last year, as noted in our previous quarter release," said Denis Larocque, president and chief executive officer of Major Drilling.

"Globally, senior mining companies are well funded and are maintaining, and in some regions expanding, drilling programs even though calendar 2023 saw a slowdown in precious metal exploration, driven primarily by the reduction of funding for juniors and intermediates. Regionally, we have seen growth in several of our markets in South America, while in Canada-U.S., the reduction of junior activity has created a more competitive environment, but we remain disciplined on pricing," added Mr. Larocque.

"The company generated $11.4-million in EBITDA with results impacted by the typical third quarter seasonality, along with a $2.9-million foreign exchange loss in Argentina in relation to the significant devaluation of the Argentine peso in December following economic reforms implemented by the new Argentinian government," said Ian Ross, chief financial officer of Major Drilling. "The company's balance sheet provides a competitive advantage with $96.4-million in net cash, and we remain committed to our strategy of positioning the company for elevated drilling activity levels as mining companies address depleting reserves. In line with this strategy, we spent $21.4-million on capital expenditures during the quarter, including six new drills, while disposing of three older, less efficient drills, bringing the total fleet count to 605. As well, we spent $2.7-million in the quarter acquiring and cancelling 317,400 shares at a weighted average price of $8.45 per share.

"Amidst robust cash generation, we maintain the industry's largest, and one of the most modern fleets, with continued investment in strategic innovation. Over the last two years, in partnership with some of our key customers, we've developed cutting-edge technologies, including digitizing our rigs to capture drilling data and the introduction of analytics to optimize drilling operations. Moreover, we started partnering with some of these customers to leverage this drilling data for the development of their models," said Mr. Larocque. "Additionally, we made great progress in our enhanced hands-free rod handling capacity, a critical safety feature valued by many of our important clients and a growing trend in the industry.

"As we enter our fourth quarter, we anticipate reaching last year's activity levels by April, after a slow start to the quarter due to delayed mobilizations. We are encouraged to see elevated activity levels returning in the coming months, driven by demand from copper and battery metals, while we wait for a rebound in activity and financing in the gold sector. Despite economic volatility, worldwide consumption of minerals and mine production continue at high levels, while reserves remain stagnant due to a lack of exploration. As the world transitions to a green economy, the potential supply and demand imbalance of various metals creates a positive long-term outlook for our industry, and the company remains well positioned to capitalize on this potential," concluded Mr. Larocque.

Third quarter ended Jan. 31, 2023

Total revenue for the quarter was $132.8-million, down 11.0 per cent from revenue of $149.2-million recorded in the same quarter last year. The 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 nil as rates were stable year over year.

Revenue for the quarter from Canada-U.S. drilling operations decreased by 21.7 per cent to $62.3-million, compared with the same period last year. The decrease was mainly due to a seasonal shutdown of certain drill programs earlier than in previous years due to budgets being spent quicker as a result of inflationary pressures, and a lack of junior and intermediate financing, which has driven a more competitive environment.

South and Central American revenue increased by 4.6 per cent to $34.0-million for the quarter, compared with the same quarter last year. The growth in the region was supported by busy markets in Chile and Brazil, but was slightly muted by slowdowns in Argentina due to the elections, and Mexico as a result of overall investment sentiment.

Australasian and African revenue decreased by 1.3 per cent to $36.6-million, compared with the same period last year. The slight decrease in the region from the prior year was mainly driven by a few projects shutting down earlier for the holiday season compared with previous years.

Gross margin percentage for the quarter was 14.2 per cent, compared with 17.7 per cent for the same period last year. Depreciation expense totalling $12.3-million is included in direct costs for the current quarter, versus $11.3-million in the same quarter last year. Adjusted gross margin, which excludes depreciation expense, was 23.4 per cent for the quarter, compared with 25.3 per cent for the same period last year. The decrease in margins from the prior year was mainly attributable to reduced activity levels. The company also uses the seasonal slowdown to conduct annual preventative maintenance while the drills are idle for the holiday season.

General and administrative costs were $17.1-million, an increase of $700,000 compared with the same quarter last year. The increase from the prior year was driven by annual inflationary wage adjustments and increased travel costs.

Foreign exchange loss was $2.3-million, compared with a loss of $300,000 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. Despite the company's best efforts to minimize exposure, during the quarter, the loss from Argentina was $2.9-million as they experienced a significant devaluation of the peso in December as part of economic reforms implemented by the new Argentinian government. This loss was offset by smaller gains in other countries.

The income tax provision for the quarter was an expense of $900,000, compared with an expense of $2.5-million for the prior-year period. The decrease from the prior year was driven by reduced profitability.

Net loss was $2.3-million or three cents per share (three cents per share diluted) for the quarter, compared with net earnings of $6.3-million or eight cents per share (eight cents per share diluted) for the prior-year quarter.

The company's financial data have been prepared in accordance with IFRS (international financial reporting standards), with the exception of certain financial measures detailed herein. The measures below have been used consistently by the company's management team in assessing operational performance on both segmented and consolidated levels, and in assessing the company's financial strength. The company believes these non-IFRS financial measures are key, for both management and investors, in evaluating performance at a consolidated level and are commonly reported and widely used by investors and lending institutions as indicators of a company's operating performance and ability to incur and service debt, and as a valuation metric. These measures do not have a standardized meaning prescribed by IFRS and therefore may not be comparable with similarly titled measures presented by other publicly traded companies and should not be construed as an alternative to other financial measures determined in accordance with IFRS.

About Major Drilling Group International Inc.

Major Drilling Group International 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 Group International will provide a simultaneous webcast and conference call to discuss its quarterly results on Friday, March 1, 2024, at 8 a.m. ET. To access the webcast, which includes a slide presentation, please go to the investors/webcasts section of Major Drilling's website. Please note that this is listen-only mode.

To participate in the conference call, please dial 416-340-2217, participant pass code 4513723 followed by the pound key and ask for Major Drilling's third 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 Monday, April 1, 2024. To access the rebroadcast, dial 905-694-9451 and enter the pass code 6191673 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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