Geodrill (TSE:GEO) reported a nearly flat top line for the first quarter of 2026, but profitability declined sharply as higher costs, currency movements and the continued ramp-up of its Chilean operations weighed on margins.
On the company’s May 11 earnings call, President and Chief Executive Officer Dave Harper said drilling demand remained strong across Geodrill’s core markets, including West Africa, Egypt and Chile. He said the company’s fleet averaged 76% utilization during the quarter and that activity levels were “healthy” across those regions.
Revenue Edges Lower as Margins Compress
Chief Financial Officer Greg Borsk said revenue for the quarter ended March 31, 2026, was $48.4 million, down approximately 1% from the first quarter of 2025. He attributed the modest decline to a slightly slower start in West Africa, partly offset by higher activity in Chile.
Gross profit fell to $7.2 million, representing a gross margin of 15%, compared with a 28% gross margin in the prior-year quarter. EBITDA was $5.9 million, with an EBITDA margin of 12%, also down from 28% in the first quarter of 2025.
Geodrill posted a net loss of $116,000, or effectively nil per share, compared with net income of $5.6 million in the first quarter of 2025.
Borsk said the year-over-year earnings decline reflected the margin pressures experienced during the quarter. He cited higher labor and operating costs, currency movements and ramp-up activities in Chile as the main factors behind the weaker profitability.
West Africa Costs and Ghana Currency Drive Pressure
During the question-and-answer portion of the call, Beacon Securities analyst Donangelo Volpe asked how much of the margin compression was tied to elevated labor costs in West Africa versus growing exposure to South America.
Borsk said the “majority” of the compression related to West Africa. He pointed specifically to wage increases implemented on April 1, 2025, which affected the first quarter of 2026 but were not present in the first quarter of 2025.
He also cited the appreciation of the Ghanaian cedi as a contributor. Borsk said the cedi appreciated significantly last year, but that appreciation did not begin until the second quarter of 2025, making it another year-over-year headwind in the latest quarter.
“Really, the majority of the margin compression is two components,” Borsk said. “It’s the salary and wages increase that we put in Q2 2025, and the appreciation of the cedi.”
Chile Expansion Remains a Long-Term Focus
Harper said Geodrill continued to advance its South American expansion strategy, particularly in Chile. He acknowledged that the growth phase brings short-term operating and repositioning costs, but described the investment as important for long-term diversification and earnings power.
Borsk said margins in South America are expected to become more normalized as the region ramps up. However, he said the company does not budget or forecast South American margins to match those in West Africa, describing it as a different drilling environment for Geodrill.
“We do expect to improve throughout 2026,” Borsk said, adding that the company expects margin improvement in both the West Africa and Egypt region and in South America.
Management Points to Improving Trend Through the Quarter
Despite the weaker first-quarter results, management emphasized that profitability improved as the quarter progressed. Borsk said the company had a slow start to the period, but margins rose month by month, with March delivering the highest monthly margin and February the second-highest.
He described that trend as “a positive indicator” heading into the second quarter.
Harper said demand for drilling services remains robust, supported by favorable gold and copper prices and an active bidding environment across African and South American markets. He said Geodrill is focused on improving operational efficiency and restoring margins as the year progresses.
The company ended the quarter with total shareholders’ equity of $118 million and net cash of $1.9 million, according to Borsk. He also said Geodrill has sufficient banking facilities to provide financial flexibility while continuing to invest prudently in fleet upgrades supporting long-term multi-rig contracts.
Harper said Geodrill remains focused on execution, cost management and ensuring its growing South American footprint delivers expected returns over time. He said the company remains confident in its strategy and capital allocation discipline as margins normalize.
About Geodrill (TSE:GEO)
Geodrill Ltd is an exploration drilling company. It mainly operates a fleet of multi-purpose, core, air-core, and grade control drill rigs. The company provides reverse circulation, diamond core, air-core, grade control, geo-tech, and water bore drilling services to major, intermediate, and junior mining companies.
