Geodrill Limited

Good morning everyone and welcome to Geodrill's second quarter 2026 financial results conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties hearing the conference, please press star zero for operator assistance at any time. I would like to remind everyone that this conference call is being recorded today, August 10, 2026. Before we begin, certain statements made on today's call by management may be forward-looking in nature and, as such, are subject to various risks and uncertainties. Please refer to the company's press release and MD&A for more details on these risks and uncertainties. I will now turn the call over to Mr. Dave Harper, President and CEO of Geodrill. Please go ahead.

Good morning everyone and thank you for joining us today on the Q2 2022 utility call. On the call with me today is Fred Borsk, our CFO. He will be discussing the financial shock as it started. The second quarter was a target to outcomes. We believe in record revenue and continue to see strong demand across our markets. that we expect in the business. Starting with the positives. Okay, so we believe that the highest quarterly revenue in GeoGeo's history is $55,001,000,000. This result is less than $3,000,000,000,000,000,000,000. There is a solution that can be used to do these things. Ultimately, programs can be expanded back and forth between the 100 people of the world, just like your house is the best for me. I don't know why I'm not getting by myself, but it's the building that I'm struggling with, the black system, and I'm going to need to go to a different level. So, yeah, it is amazing to be doing the wrong jobs. But, at the same time, or when it leads to regular trouble. Bargains remain below what they are meant to be. I have later comments. Intervention across consumables and operating inputs and operational challenges associated with our chipping operations vary heavily on margins. Chipping is a bit difficult, but then you've got to be careful and careful. and a number of other varieties to understand that challenge and to the benefit of the individual country, country region or another region. Simply put, this is an election that is so active in the United States that it is impossible not to miss the experience from the listeners. That said, it is important, with a certain amount, that these results live in the context of what is happening across the different industries. I'm really sorry. Dave, your line sounds really garbled. Yeah. Maybe is it okay if I just continue for Dave because Jenny?

Yes, of course.

Okay. I'm sorry, Greg. Okay.

Let me do it. So over the past several years, drilling contractors have operated through rising labor costs, inflation in fuel, consumables and spare parts, supply chain disruptions, and increasing costs associated with mobilizing crews and equipment to support growth. Across the industry, many long-term contracts that were negotiated several years ago had been running through a very different cost environment that then originally anticipated. As costs moved higher, those contracts naturally became less profitable toward the back end of their terms. We've seen similar dynamics across the sector as contractors work through legacy pricing structures while continuing to support customers and maintain service levels. The good news, however, is that those same long-term contracts that have served us extremely well, they provide revenue visibility, utilization, strong customer relationships, and stability through periods of market uncertainty. They help build the platform we have today. As many of these contracts renew or as we secure new work, we have opportunities to incorporate pricing and terms that better reflect today's cost structure and the value of the service we provide. That should help us better absorb inflationary pressures going forward while maintaining the high-quality service our customers expect. From an industry perspective, the longer-term outlook remains very constructive. Gold prices remain strong Copper continues to benefit from positive long-term fundamentals, and mining companies remain focused on reserve replacement, resource expansion, and advancing development projects. As a result, exploration budgets remain healthy, and bidding activity continues to be active across West Africa and Egypt. We are actually seeing customers commit to multi-rig and multi-year programs, which gives us confidence that demand for drilling services will remain strong. What we are seeing today is an industry that is busy. Utilization levels remain healthy among quality operators. Tender activity is strong. and customers continue to invest in exploration despite broader economic uncertainty. While inflation and contract startup costs have pressured margins for many contractors, the underlying demand environment remains one of the strongest we've seen in recent years. For Geodrill, our focus is now execution. We're focused on improving performance in Chile, driving productivity gains across the organization, managing cost responsibly, and ensuring that the substantial demand we are seeing translates into stronger profitability. We have a modern fleet, a highly experienced workforce, industry-leading infrastructure across our operating regions, and relationships with many of the world's leading mining companies. Those are significant competitive advantages that have been built over nearly three decades. We've been through several commodity cycles over the years, and one thing that we have learned is that when demand is strong and the fundamentals are healthy, operational discipline becomes the differentiator. The opportunity in front of us is not finding work. The opportunity is executing efficiently, improving margins, and converting record activity levels into stronger returns for our shareholders. We believe Geodrill is well-positioned to do exactly that. The foundation of the business is strong. The market backdrop remains favorable, and we are focused on taking the actions necessary to ensure today's revenue growth translates into improved earnings and long-term value creation in the quarters ahead. Let me now turn to the financial results. For the second quarter ended June 30, 2026, revenue for the quarter was $55.1 million, representing an increase of 10% compared to Q2 2025. The record revenue is a testament to management strategy of continuing to focus on its primary markets and adding capacity in conjunction with clients' needs. Gross profit was $8.8 million, generating a gross margin of 16%, compared to 24% in the prior year period. EBITDA for the quarter was $7.9 million, with an EBITDA margin of 14%, compared to 28% in the same period last year. The margin compression was primarily driven by higher labor and operating costs, the appreciation of the CD, and operating losses associated with our Chilean operation. Overall, the net loss for the quarter was approximately $200,000, or effectively nil on a per share basis, compared to net income of $5.4 million in Q2 2025. In relation to the net loss, we are currently evaluating the group's operations in Chile, with a view to streamlining operations to improve margins and enhance productivity. From a balance sheet perspective, we ended the quarter with shareholders' equity of approximately $118 million, maintaining financial flexibility while continuing to invest prudently in fleet upgrades and infrastructure to execute our drilling programs. Relating to the balance sheet, we have again reviewed our return on capital options to our shareholders. and we have determined at this time to maintain cash in the business to support operations. Future decisions regarding share buybacks and or the payment of dividends will be reviewed again on a quarterly basis. We are also able to update the progress with the Cote d'Ivoire tax authorities. Despite having the tax receipts for the missing payments, as we disclosed in Q1, 2026, we entered into a memorandum of understanding to repay the amounts in order for us to continue to operate and support our clients in Cote d'Ivoire. In Q2, 2026, we requested to reduce the monthly installments from approximately $900,000 and made monthly $450,000 payments in May, June, July, and August. Through June 2026, we have repaid approximately $4.5 million of the scheduled $8.4 million repayment. We also continue to pursue legal remedies available to us. However, it is inappropriate at this time to comment on that matter. Closing remarks. Let us close with this. The foundation of this business remains extremely strong. We have a modern fleet, long-standing customer relationships, established infrastructure across companies, key mining jurisdictions and a team that has successfully navigated multiple commodity cycles over the past several decades. We have built a strong platform and we are seeing robust demand across our markets. But our profitability has not yet cut off with the level of activity that we are delivering. We believe Geodrill is well positioned to translate today's strong demand environment into improved profitability as we move through the balance of the year and beyond. So while Q2 demonstrated what Geodrill can achieve from a revenue and market position standpoint, the next chapter is about execution, efficiency, and converting that demand into stronger earnings for our shareholders. That's where our focus is, and that's where we believe the opportunity lies. Thank you for joining us today. Operator, if you can please open the line for any questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star 1 on the telephone keypad. Should you wish to withdraw your question, you may press star 2. Once again, that is star 1 should you wish to ask a question. And your first question is from Don Angelo Volpe from Econ Securities. Your line is now open.

Good morning, guys. Just wanted to focus on Chile here. So just wondering what some of the actions you guys are looking at taking in the region. Are we looking at potential reduced headcount, demobilization of some rigs? Just any color there would be helpful.

Don, what we're doing in Chile is we look at it on a client-by-client basis. We look at it in terms of profitability. Are we getting the productivity? As Dave mentioned early in the call, some of these are long-term multi-rate contracts. When we bid the contracts, we anticipate, we forecast certain productivity. And for some of these clients, for some of these contracts in Chile, that hasn't come to fruition. So what we're doing in Chile is client by client, we're assessing each client and where it makes sense to wind up the contract, finish drilling, etc. Maybe we don't re-tender, etc. So it's on a client-by-client basis. I don't want to give you any indication that we're looking at Chile as a whole. The way we're approaching Chile is... look at the unprofitable clients, quickly try to wind up that drilling. With the profitable clients, is there an opportunity to continue to try to increase profits there, etc.? But it's going to be a process over the next couple of quarters for sure.

Okay, and then just to follow on there, because I can't remember if it was last year or two years ago, some of these long-term contracts were signed, so like Are they still in the startup phase in some of these, and are they expected to generate acceptable returns once fully operational, or is there just potentially pricing a little bit off with what's called inflation on some costs?

Yeah, I don't think that they were – and we're not unique or we're not alone in Chile. You know, some of our competitors are facing similar problems. And it's not really pricing. The pricing there, the issue is productivity. As you know, we drill meters and we get paid by the meter. And we're just not getting the productivity. And when you're there, you're at the rig and you have the staff and you have all the associated other costs. You need to get meters. You need to get productivity. And for some of these accounts, it's just not happening. So Some of them are, you know, I'm not going to take you through every account, but on a positive, we do have some very good accounts in Chile. And they're going to continue, you know, continue for at least into 2027. High level, the plan is for unprofitable accounts to try and address those as quickly as possible and then focus, like I said, continue to focus on the profitable accounts in Chile.

Okay, thanks for that. I'm not sure if we can answer this one, but if we could potentially strip out Chile, just wondering what gross margins would have looked like respective to the 24% last year.

Yeah, sorry, Don. I don't have that at my fingertips. But, you know, the regions in West Africa that are two primary countries, Ghana, Cote d'Ivoire, and then, to a lesser extent, Senegal, and are in the MENA region. Currently, we're only operating in Egypt, but we're profitable in all of those regions. So, the... The good news is, you know, in West Africa and MENA, the group's doing well. We have to address Chile.

Okay. Yeah, I was curious there just because I think we're entering wet season for Q3, so I was just trying to get an idea of the impact we would see for Q3 margins. But we can discuss offline. I'll head back to you. Thank you, Donnie.

Thank you. Once again, please press star 1 should you wish to ask a question.

Okay.

Operator, there's no other questions. I guess I can thank everyone for listening and thank Donnie for the questions.

Thank you, ladies and gentlemen. That concludes our conference call for today. Thank you all for joining. You may now disconnect your lines.

Thank you.