Good morning, everyone, and welcome to Geodrill Limited's Second Quarter 2025 Financial Results Conference Call. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be given at that time for you to queue up for questions. If anyone has difficulties hearing the conference, please press star zero for operator assistance at any time. I would like to welcome everyone that this conference call is being recorded today, August 11, 2025. 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.
Thank you, operator, and good morning, everyone. I'm actually going to begin with the disclaimer. There is, in our hotel, the fire alarm that they just announced is about to come on. If we could...
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Oh, my goodness.
Attention.
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I do apologize. Thank you, operator, and good morning, everyone. Welcome to Geodrill's Q2 2025 Results Conference Call. Joining me today on the call is Greg Borsk, our CFO. Today, we are proud to announce exceptional financial and operational performance for the second quarter, marking a pivotal chapter in our growth trajectory. Quarter two, the company posted record...
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For quarter two, the company posted record revenue and record EBITDA for the period. In fact, in doing so, we broke our previous records for revenue and EBITDA set in the previous quarter, quarter one, thus rounding out the blockbuster H1 fiscal 2025 results. Especially noteworthy is that we have, for the first time, entered the $50 million quarterly revenue orbit. Further noteworthy is that we have surpassed, for the first time, $130 million in total shareholder equity, thus both records. These milestone achievements were no fluke. They are a testament to our continued momentum while, at the same time, validating our strategic decision to pivot away from certain regions for better opportunities elsewhere. With that redeployment exercise now well behind us, we are laser-focused on deepening our presence across these key geographies as we continue solidifying our reputation for best-in-class drilling services.
One of the other transformative moves over the past couple of years has been expanding and diversifying our client portfolio. We have intentionally focused on partnering with well-capitalized, top-tier mining firms operating in stable jurisdictions. This approach has not only opened new markets, but also significantly reinforced our operational resilience while reducing our risk profile. As Founder and CEO, I'm incredibly proud of these achievements. Another major driver of our success this quarter stems from our strategic expansion into South America, which has been particularly rewarding. By scaling operations to match rising demand, we are now capitalizing on that momentum. Looking forward, on the ground, the momentum continues.
Whilst our core West African markets are now slowing for wet season, which is always expected, on the flip side, Egypt remains solid, and in South America, we are deploying an additional five rigs to Chile, bringing the total fleet there to 17 drills. It is worth noting the positive backdrop which we are currently operating in. Gold and copper prices have remained strong, a tailwind that has amplified the demand for our drilling services. Our positioning in gold, in particular, comprises 85% of our activities and allows us to seize the opportunity and deliver results. Equally important is that our operations remain unaffected by tariffs, ensuring that our recurring revenues from operations remain steady and predictable. I'll now turn the call over to our CFO, Greg Borsk, to give more details.
Thank you, Dave. I am pleased to report the financial performance for the second quarter of 2025. The company generated revenue of $50.4 million for Q2 2025, an increase of 22% compared to $41.2 million for Q2 2024. The significant increase in revenue is the result of the increase in demand for Geodrill's drilling services, a robust gold price, and the fact that the majority of our clients are mining for gold. The gross profit for Q2 2025 was $11.9 million, being 24% of revenue. Net income in Q2 2025 increased to $5.3 million, or $0.11 per share, compared to $4.8 million, or $0.10 per share in Q2 2024. EBITDA in Q2 2025 reached a record of $13.9 million, or 28% of revenue, being a 31% increase compared to Q2 2024 EBITDA of only $10.7 million.
Our balance sheet remains strong and continues to improve, with total equity of $130.3 million and net cash, excluding lease liabilities, of $4.4 million. Additionally, operationally, we expanded our rig fleet to 99 rigs, enhancing our capacity to meet demand across multiple geographies. At this point, I will turn the call back to Dave.
Thank you, Greg. In sum, quarter two 2025 was an epic quarter, our best ever. The two most significant results being record revenue and likewise record EBITDA, both of which were back-to-back records. If we look at this on a semester-long basis, it really doesn't get much better. As mentioned, there were other records too: total shareholder equity, cash from operations, production, or meters drilled, if you will, which obviously drove our production, etc.
I'm just going to share with you a quick story from this weekend's board meeting, and that was that we were going through our presentation slides, and the term "record" and "record-breaking" was muted so often that one of the directors actually stopped for a minute and remarked by saying, "Hey, breaking this many back-to-back records is equivalent to the Michael Phelps of drilling." Of course, sporting fans will of course know that Michael Phelps was an Olympic swimming champion, best known for continually breaking his own records. Alas, I digress. Back to Geodrill. Looking ahead, the industry outlook is strong and confidence remains high. Despite macro headwinds, like tariff pressures, demand for our services actually continues to grow. Gold and copper, in particular, remain very strong, supporting sustained exploration spending across all of our geographies.
Our bidding pipeline is robust, reflecting healthy industry activity and ongoing interest in our services. For our part, we remain focused on executing our strategy of investing in high-return regions and delivering value at every level. This concludes our prepared remarks on the financial results, and I'll now pass back to the operator for anyone in the queue that has a question. Thank you.
Thank you, ladies and gentlemen. We will now begin the question-and-answer session. Should you have a question, please press star followed by the one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Donangelo Volpe with Beacon Securities . Your line is now open.
Hey, good morning, guys. Glad the fire alarm there doesn't last as long as my building, but I guess the results are a little too hot.
I'm just glad it was just like a drill, you know, it was like a, what do you call it? Could you imagine if I had to actually leave the building?
No, that would have been a fun one to take outside. Yeah, once again, congratulations on the results. I guess first question for me, just looking at the deployment of rigs, you guys have five moving into South America. Just curious what jurisdictions those rigs are moving from.
Some of those are new rigs, actually. They're additional rigs, and some of them are from the West African fleet. Greg, anything to add?
No, just as Dave mentioned, we're heading into wet season in West Africa. This gives us an opportunity to get, it's three moving from West Africa. Instead of them, and they were in very good condition, they're ones that have recently went through the workshop. They went through the workshop before we sent them to South America. There's three going, they're going to start drilling as soon as they get there. There's two additional rigs that are almost finished being manufactured that we will add. The total is three plus two brand new ones. It'll be five additional rigs.
Okay, thank you. Were all costs absorbed this quarter in relation to startup costs? How long do you guys see until you guys, how long do you guys think until you guys get full utilization among those five rigs in South America?
Yeah, there hasn't been a lot of startup costs on those rigs, Donny, other than, you know, shipping. We did get them through the three we sent through the workshop. Where you'll have a bit of startup costs, etc., is once they get into the field and start drilling and we get up and going. That wasn't really Q2. It's Q2. Q2, they were in transit and being manufactured, if you will.
Okay, perfect. Thank you. Just curious what the utilization rate was for this quarter. If you guys still anticipate moving up to about 100 rigs by the end of the year, or if demand is kind of making you guys think about adding more rigs.
Our utilization was 72% on average across the three months. It tailed off in June as it does. It gets, and it picks up again. I think you asked the question, when will we be back at full utilization? I kind of expect somewhere around late September, maybe early October. I'm expecting that South America, the new rigs will be in the field and drilling. I hope that answers your question.
Do you guys, like I believe previous commentary was ending the year around 100 rigs. Is that still within expectation, or do you guys think you would poke above that 100 mark?
No, no, I think that's still on track. That's where the analysts have sort of got us, and that's what I would say I'm comfortable with at this point. Yeah.
Okay. As demand in South America picks up, do you guys anticipate copper exposure starting to pick up in terms of your overall commodity mix, or do we still look at gold as, let's call it in the 85%- 90% range?
We would like to keep moving in the direction of increasing our operations in South America. I think that, you know, with 85% of our revenues coming from gold, it was 90%, so we're moving the needle in the right direction. I'd actually like to get it to more like 60/40 over time. That gives us the ability to pivot from one to the other. Ideally, you really want to have a bit of both, but I think that everything I read, the long-term prospects for gold are very good, whereas the long-term prospects for copper are quite good. We just happen to be long gold. By having a 60/40 or a 40/60 or a 50/50 split, it just gives us the ability to just be able to fray that risk. It gives us a better geographical diversification. Our investors prefer South America to West Africa.
I would just say that we operate in the best West African countries. Africa is made up of 54 countries, and we operate in four of those countries. There are countries where we won't operate. The point that I'll make is when we make a decision to exit a country, it's for the right reasons, and it doesn't take long. I think this was captured best by an analyst who was recently writing a blog and was saying how we have the ability over a period of two or three quarters to be able to pack up the rigs and relocate them. That includes marketing, securing contracts, bringing them through the shop in Ghana to make sure that they're going to be performing when they're going to where they're going. The thing that we have is that we are not bolted to the ground.
We don't, we're not married to any particular jurisdiction. If we decide we don't want to be in Burkina Faso or Mali, it's just a quick decision. We decide we want to pull out. We send the trucks, we bring the rigs back, we put them to work. We're not bolted to the ground. We're not a pub. We're not a hotel. We're not a bank. I think ultimately where we'd like to be heading with this is to satisfy the desire of our investors and to get better shareholder value. I think, you know, we can improve our multiple by improving our jurisdictional risk.
Okay, perfect. I appreciate the color , and congratulations on the results once again. I'll hop back in the queue.
Thank you.
Thanks, Donny.
Thank you.
Your next question comes from Kris Tuttle with IPO Candy. Thank you. I'll join you now.
Hey, great work, Dave. Thanks for taking my question. I'm curious about two things. One is the degree to which you have some pricing power with your customers in the next several months as demand remains high. The second question is, you know, to what degree do you think you can lay your hands on additional rigs, either in the used market or via a small acquisition or something like that? Those are my two questions.
Thanks. Pricing power is moving in the right direction. Drilling prices are on the move. It's a market-driven situation. We don't determine the pricing. Our customers do. That's because they've put all their jobs out to open tender. It's an even playing field. You put your best foot forward, you either win the job or you don't. Not all of the criteria is based on price. It can be based on reputational capital and health and safety and so many other things. Just because someone comes along with a cheaper bid, it doesn't always guarantee them the job. We operate within a bandwidth of about 10%- 15% between the peak and the high watermark and the low watermark. What I will say is this, Geodrill is at the high watermark. There's a reason for that. That is we are a best-in-class drilling service.
Naturally, we would expect to charge a little bit more than, say, a mom and a pop. We've had this before where we come down to meet the low watermark, and the low watermark then becomes the high watermark. It becomes a race to the bottom. Our competitors drop their price to retain the work. We mitigate this by not saturating any particular market. The maximum we would like to have in any particular market is about 30%. Anything over that tends to have an adverse effect on pricing. We let our competitors, there's a marketplace there, and it's good to have a competitive landscape. Sorry, your second question, Kris, was?
It was whether you could lay your hands on more rigs, either through used market or acquisition.
Yeah, exactly. Yeah, no, exactly. Look, we have known it doesn't give us the best bang for our buck, to be honest. We buy rigs that we, you know, buying someone's second-hand car. It's like you don't know anything about that car until you get it out on the highway and go for a run. You might find it, you know, that might be something that you, you know, that you didn't see. We're going through a bit of that where we've had to reach out to the market and we've had to buy rigs in the market. I think the best approach for us is always to build new rigs. If not new rigs, rigs that had come through our own shop, that might be rigs that have spent a good deal of their life in West Africa and now they suddenly need to be redeployed.
We'll bring them back to our main workshop and we'll run over them and give them a rebuild before we send them to far away places, with the intention that, knowing that in a few years down the track, they'll probably need to be rebuilt. By that time, we will have in place all the infrastructure, similar infrastructure to what we have in West Africa currently. It is actually very much our intention. I think the previous caller was asking where will we end up with in terms of the geography split and the operational split. I'd like to get sort of close to half of South America and half of Africa. Why Africa? Because Africa provides us with a risk premium type pricing and margin, whereas South America is more competitive. You've got to be in both.
I think that the intention is to try and mirror what we've done in West Africa, which has been hugely successful. I mean, demonstrably, probably the most successful organically built drilling company in the history of drilling. This company has now been going 27 years. We started with one rig, one contract, and 100% debt. Yet here we are today with approaching, knocking on the door at 100 rigs and $50 million in quarterly revenue, which tells us what? That we're trending, we will eventually reach $200 million in revenue. That'd be an enormously successful story. The fact, what's so remarkable is that it's all been done without one bolt-on. All of this has been 100% organically. So organic. The organic growth gives us our best bang for our buck. Yeah. I hope that answers your question.
Yeah, absolutely. That's great, Dave. Look forward to catching up with you again soon. Thanks a lot.
Good. Look forward to it. Thank you. Thank you.
Ladies and gentlemen, as a reminder, should you have a question, please press star one. Your next question comes from Chris Rehr. Your line is now open.
What I don't understand is how profit or how gross profit margin dropped from 31% to 23.7%. You're living in the lands of plenty here. Gold's up over $3,300. Copper over $4. You seem to be congratulating yourself a little too much here. How can the gross margins drop so much? I just don't understand that. Why are you putting out more rigs in the field?
We're not rigging anymore.
I just don't understand that. Thank you.
Yeah. We tried to put a bit of color in that on the MD&A. There are three reasons. One of the main reasons is the annual increase in salaries. I think if you look at the sector, costs are going up. Costs are going up, and revenue cannot always sometimes go up in conjunction. We have a very senior, very experienced, very professional, capable drilling staff. We knew last Q3, last Q4, we were going to be extremely busy in Q1 and Q2 this quarter. We needed to increase our costs, and we made that decision. The other thing is we do.
You're afraid to lose the work here.
Yeah, no, I mean that's a lot of our contracts.
You're afraid to lose your work too much at the cost of lower margins here. Your costs are going up. You seem to be afraid to.
No, Chris.
What this is.
Yeah, we do increase anytime a new tender comes out, we review it and we put in, we put a lot of work into that. Some of the contracts we have are long-term contracts with tier one miners, and there is room for flexibility there. In the long run, Dave's been doing this for over 30 years. It's all about your people, and you can't always, you know, you have to retain a best-in-class workforce. That will pay dividends in the long run. I think you're also, you know, Q1 and Q2, I would focus on where are we six months into the year. Six months into the year, our revenue has increased 31%. Most of our competitors' revenue is contracting. Here's Geodrill, six months into 2025, we've increased our top line 31%. We've also almost been able to maintain our margin. Our margin through six months.
From 31% to 23.7%, that's a significant decrease.
Chris, I'm not going to argue with you on facts. What I'm telling you is through the year to date in 2025, okay? The quarters are choppy. The quarters, Geodrill, we run up against seasonality. Sometimes we have a strong Q1, and then next year it's a weaker Q1. Sometimes we have a strong Q2 and a weaker Q2. The point I'm trying to make is to kind of balance.
Revenues are up $50 million. Record revenues. It's a strong quarter.
It's a strong quarter, but there's also, like I said, an increase in cost. If you look at the six months, through the first six months, our gross margin is 26%. That's industry-leading. You're right. We had a very strong, when you're just doing a delta comparison to the 31%, if you remember, our Q1 2024 was quite weak, extremely weak, and the margins made up for that in Q2 2024. I'm hoping I'm answering your question. The margins do move around, but through the first six months, Dave and I are very comfortable with a 26% gross margin.
Just quickly, Chris, also, you only need to Google the Ghana cedi. It's a local currency, okay, in Ghana. It improved by 40% in the month of April, 40%. Imagine what that does to your salary bill. There were a number of factors that caused there were a few things that went up and a few things that went down and a few things that went sideways. Overall, I'm very happy with these results. There's just things like, you know, if the Ghana cedi goes up, that comes out of the left field. We have no control over those things. We can't hedge against it in the short time that it captures a soft guard. The good news is it's now stabilized. I expect that things will normalize. Greg's not giving you the detail, as much detail as perhaps I'd be more comfortable with.
That's just one thing that I can tell you. One of our biggest costs is salaries. When your salaries go up for a large percentage of your workforce by 40% in one month, that's going to hit your margin. We're through it now. Post-April, it's now normalized, and I expect things will normalize. It's just, you know, if you look at things on a quarterly basis, you know, EBITDA goes up, revenue goes up, occasionally gross margin is affected. Overall, where are we going to be at the end of the year? The analysts have made their predictions, and I'm still very comfortable with their forecast.
Ladies and gentlemen, as a reminder, should you have a question, please press star one. One moment, please. Your next question comes from Paul Dahonik. Your line is now open.
Oh, hi. Good morning. I was listening to your last conference call previous quarter, and there was some talk about starting a dividend. Has there been any discussion with regard to that on the board? Can you give us an update? Thank you.
Hi, Paul.
Yeah.
Yeah, we go through this at the board level every quarter. We really weigh the cash that's needed in the business, and the return on investing in ourselves. We look at the potential of reinstating a dividend. Thirdly, we also have an NCIB in place where we're able to buy back a certain amount of our shares. Every quarter, we look at and do a cash flow. We discuss this with the board and what is the best use of cash. For this type of growth, year-to-date 31% in growth, as Dave mentioned, we're still trying to focus and grow out South America. The discussion on the dividend, I think we will look at where we are in Q4 and make that decision in Q4. Right now we're extremely busy with operations, so it makes sense to put any excess cash flow from operations back into the business.
The other thing you'll see is, Q2, the working capital gets quite large. With a record Q1 and a record Q2, a lot of the working capital, our receivables are large. It takes a bit of time to get that money into the system, from receivables to cash. Hopefully I'm answering your question. It'll be discussed again in Q3 and Q4 with the board.
Yeah, thank you for your comments.
Thank you.
Thanks, Paul.
There are no further questions at this time. I will now turn the call over to management for closing remarks.
Thank you very much for attending today's call. Thank you. Cheers.
Thank you.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.