Travelers Companies Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 12, 2024

There are 7 speakers on the call.

Operator

Good morning, everyone, and welcome to the Geldrills Q2 20 24 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 and instructions will be provided at that time for you to queue up for questions. I would like to remind everyone that this conference call is being recorded today, August 12, 2024. 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.

Operator

Please refer to the company's press release and MD and A for more details on these risks and uncertainties. I would now like to turn the call over to Mr. Dave Harper, President and CEO of Geodrill. Please go ahead.

Speaker 1

Thank you, operator, and good morning, everyone. Thank you for joining us today to discuss Sheryl's financial and operational results for the Q2 of 2024. Joining me on the call today is Greg Borsk, our CFO. Now let's dive into the financial highlights for the reporting period. In the Q2, we achieved 2 consecutive months of record breaking revenue.

Speaker 1

Building on the momentum witnessed in the Q1, we realized unprecedented revenue peaks, firstly in May, then immediately followed by a further increase in June, both of which surpassing all previous historical benchmarks. Overall, quarter 2 revenue was a significant 26% year over year increase as well a robust 19% quarter over quarter improver. Net income was an impressive year over year surge of 147 percent as well a remarkable quarter over quarter increase of 130%. And for EBITDA, we recorded a substantial year over year increase of 72% as well a 60% quarter over quarter improvement. Additionally noteworthy, we increased our cash position by 27% during the quarter and also reduced the company's debt by 9%, achieving an overall debt to equity ratio of 8%, which underscores our dedication to maintaining a solid balance sheet position.

Speaker 1

Also importantly in the quarter, we made significant investments amounting to USD2.8 million in the upgrade and maintenance of our modern fleet of drill rigs and equipment. This investment ensures that we will continue to lead the industry with state of the art equipment, ensuring us to deliver exceptional service to our clients and maintain our competitive edge. These financial decisions are a testament to our disciplined approach to managing resources and our continued excuse me, our continuous effort to enhance shareholder value. And we are confident these actions will contribute to our sustained growth and the success of the business. Now looking at the operational highlights, we ended the quarter we ended quarter 2 with a total of 91 rigs in our operational fleet to meet on growing demand.

Speaker 1

We also reached a new safety milestone achieving 17,500,000 hours without lost time injury. Recall in the first half of twenty twenty four, we secured contracts totaling more than $150,000,000 which will significantly contribute to our revenues and profitability over the next 3 to 5 years. These contracts include 2 substantial long term agreements with top tier mining companies or multiple rigs. Our operations in Egypt, Chile and Peru continue to excel supported by long standing contracts with Tier 1 minuteing companies and multi year agreements. Our strategic focus with senior miners through long term contracts is directly contributing to our goal of delivering sustainable results to our shareholders.

Speaker 1

These contracts are not only a reflection of our commitment to stability and growth, but also an affirmation of the trust placed in us by industry leaders. Moreover, growing mineral drilling market largely fueled by strong gold price has created favorable conditions for our operations allowing us to capitalize on the opportunities presented by the buoyant mineral filling market. The synergies of these two factors, our strategic long term contracts and the robust gold price market positions us exceptionally well to continue our trajectory of growth and success. I will now turn the call over to our CFO, Greg Bors, who will review our financial performance in detail. Thank you, Greg.

Speaker 2

Thank you, Dave. I am pleased to report that our financial performance for the Q2 of 2024 has been exceptional. We achieved record breaking quarterly revenue, the highest in the company's history, which is a testament to our strategic planning and execution. The company generated revenue of $41,200,000 for Q2 2024, an increase of $8,500,000 or 26% when compared to $32,600,000 for Q2 2023. The gross profit for Q2 2024 was $12,700,000 being 31% of revenue compared to a gross profit of $7,800,000 being 24% of revenue for Q2 2023.

Speaker 2

EBITDA for Q2 2024 was 10,700,000 dollars or 26 percent of revenue compared to only $6,200,000 or 19 percent of revenue for Q2 2023. The net income for Q2 2024 was $4,800,000 or $0.10 per share compared to $2,000,000 or $0.04 per share for Q2 2023. I would also like to highlight other key financial accomplishments in the second quarter. We generated net cash from operating activities of $5,900,000 which reflects our strong operational performance and efficient cash flow management. We also increased the company's cash by 27% over Q1 2024 while reducing total debt by 9%, ending the quarter with net cash excluding right of use liabilities of 300,000 Echoing Dave's comments with the gold price well above $2,400 global exploration spending continues to be strong and provides strong fundamentals for the company going forward.

Speaker 2

At this point, I will turn the call back to Dave.

Speaker 1

Thank you, Greg. Our focus on securing long term contracts has provided us with a stable and predictable revenue stream, which is crucial in the cyclical business of mineral drilling services. This approach has allowed us to optimize our resource allocation and operational efficiency resulting in improved profitability as evidenced by our results today. Looking ahead, we remain optimistic about the future. The demand for our services continues to grow and with a strong foundation laid in the first half of twenty twenty four, we are confident in our ability to maintain success and deliver increased shareholder value.

Speaker 1

To this end, I would like to extend our gratitude to all our stakeholders, including our dedicated employees, our shareholders and our loyal customers for their continued support, which has been integral to our success. We are committed to maintaining our high standard of service and to furthering our position as a leader in the mineral filling industry. This concludes our prepared remarks on our financial and operational results. I'll then hand over to the operator, who will pass it back to listeners on the call for Q and A session. Thank you.

Speaker 1

Thank

Operator

Your first question comes from Dave Kegler from Private Investor. Please go ahead.

Speaker 2

Good morning, Dave. Congratulations on the great results. Good morning.

Speaker 1

Thank you.

Speaker 2

Just a quick question. With long term profitability looking forward, are you planning on reinstating your dividend?

Speaker 1

Yes, we will at a point in time. We do have competing priorities at this point in time, which Greg will probably be the better person to speak to. But perhaps I'll just the short answer is yes, not today.

Speaker 2

Thank you. Yes. I think the sorry? Just if you look at the I think one of the things we highlighted was if you look at Q1, the company actually we invested quite significantly in the Q1 for the large contracts. And in doing that, we ended Q1 with actually we were in a net debt position.

Speaker 2

We hadn't been in a net debt position for quite a while. So one of the things we're trying to highlight this quarter just through efficient cash management, etcetera, we've changed that. We ended Q2 with cash of $9,700,000 and debt of $9,400,000 So we actually ended Q2 with net cash. So the what we're going to do throughout the rest of the year is continue to execute, add rigs where it makes sense, etcetera, where we have client demand. So I think the just to echo what Dave said, I think right now the objective is to continue to build up cash and pay down debt and then we will revisit the dividend at a later date.

Operator

Your next question comes from Jerry Yonovich from Private Investor. Please go ahead.

Speaker 3

Thank you. Is your rig utilization still 75%? And do you think this can be maintained or even modestly improved upon?

Speaker 1

So through quarter 2, utilization of the fleet reached 75%. It actually reached slightly higher than that, but it actually averaged 72% for the quarter. And historically, I'm not sure how long you've been an investor or if you are in fact indeed an investor today in Geodal. But historically, if you know anything about Geodal, we traditionally had our strongest quarter in quarter 2. What happens then is we experience a bit of seasonality in some of the markets that we operate in.

Speaker 1

So we take that opportunity to bring the rigs in, do some maintenance. And it tends to be a slower quarter through quarters 34. So to put a comparable in there at the moment, utilization as I sit here and speak before you today is currently just hovering marginally above 60%. So we've gone from 75% to 61%, which is expected. It's normal.

Speaker 1

And we made it tends to increase as we exit quarter 3 and it tends to improve a bit through quarter 4. But then what happens is we slow down for the Christmas holiday season and then it picks up again in quarter 1. So I think today's results were evidence of it's our strongest ever quarter in the history of this company. And it is a clear signal that after a couple of underwhelming quarters that we had through 2023 for, again, competing priorities, we basically decided that we're going to exit a couple of jurisdictions and we did. And in doing that, well, of course, it had an effect on the business.

Speaker 1

Today's results are, I think, clear evidence that we're back. We're going to be doing our best work from here going forward. But I wouldn't, at this point in time, expect a quarter that we've just delivered. But you will see a solid quarters going forward. And yes.

Speaker 3

Right. In May, you stated that your immediate short term goal was to get back to the best of time of 2022. In that year, you earned $0.41 Is it reasonable given the backlog and visibility you have going forward that this goal could be achieved of $0.41 for this fiscal year?

Speaker 1

Sorry, is that in net earnings?

Speaker 3

Yes. I believe in 2022, you earned $0.41

Speaker 2

Yes. Dave, let me just I think the other thing we've mentioned is that we've morphed away from the we've morphed the business to be more predictable, drilling more for the majors. We announced the 2 significant contracts in Q1, the 150,000,000 dollars So when the drilling that we're doing now is you're not going to see as high margins, etcetera. You're going to see still industry leading margins. But to go back and compare to 2022, 2022, we were doing a lot of exploration drilling.

Speaker 2

And if I remember, we had one exceptional quarter that kind of skewed things. So I think where we are now, if you look at halfway through this quarter, we're at $0.15 and we're very comfortable with that. Q1 was weak and Q2 sorry, Q1 was extremely weak and we put in a $0.10 quarter. But to try to get back to $0.41 what we did in 20 22, we're sitting here half way through the year at $0.15 I don't see it happening. But again, this is a strategic decision and it flows through not only in the earnings, it flows through in getting paid.

Speaker 2

When you're drilling for the Tier 1 customers, the Tier 1 clients, we're getting paid on time. That's very important in our industry. If you look at the one of the things we disclosed is the aging of our receivables, and you can see significant improvement just over December of last year in our over 90 days, etcetera. So it's more of a stronger company, a more balanced company drilling for Tier 1 companies, etcetera. And we're still expecting exceptional earnings and exceptional earnings per share, but I don't think we'll get back to $0.41

Speaker 3

All right. And my final question is just to follow-up on that. So you did $0.10 this quarter. The 3rd and 4th quarters are traditionally, as you said, a little slower. Is it reasonable given your visibility to expect we could at least earn the $0.10 for the next 2 quarters per share?

Speaker 2

Is that the $0.10 between the two quarters? Is that your question like

Speaker 3

No, my question is could you you earned $0.10 this quarter, could you earn $0.10 in the 3rd and $0.10 in the 4th?

Speaker 2

No, no. The Q2 is an exceptional quarter for us. This was a record breaking quarter. Q3, rigs come in for maintenance, etcetera. So just to be clear, this is in the 25 years of GeoDryl, Q2 has always been our strongest quarter.

Speaker 2

So we were able to earn $0.10 this quarter. We will not be able to earn $0.10 in Q3.

Speaker 3

All right. Thank you. And congratulations on the incredible quarter. Thanks. And

Speaker 1

if I can just add to what you began by saying that I had said that we're going to get back to the best times and we will surpass our best years. I believe I may have been in fact, I'm sure I was referring to revenue top line. So with that comment, I would stand by that comment. I believe that this year we will surpass all previous years. As for I think what Greg was alluding to there was margin compression.

Speaker 1

So the big thing that's happened is that we've taken a strategic decision to move away from juniors and companies that are beholden to the capital markets, which were causing us a bit of angst in terms of getting paid and so on and so forth. And we've moved our business model to Tier 1 cash producing gold and base metal miners. Now the that has the advantages of 1, we don't struggle to get paid. 2, we're not looking for work all the time for customers that are not sure whether they're going to raise money or they're not. And so we benefit.

Speaker 1

But with that, there has to be a trade off. Drilling for the Tier 1 minuteers, there is margin compression, absolutely margin compression. But we've just delivered a 25%, 26% EBITDA result. I would say that's outstanding, probably industry leading at this point in time. I don't know any drillers that's out there doing 26% EBITDA at the moment.

Speaker 3

Thank you.

Speaker 4

Thank you. You're welcome.

Operator

Your next question comes from Don Angelo Voep from Beacon. Please go ahead.

Speaker 5

Hey, guys. Good morning. Thank you for taking my question and congratulations on the excellent results. First question for me is just going to be focused on Egypt and South America. So I guess like you can see the top line revenue increases from the contract wins announced last quarter.

Speaker 5

That was in West Africa. But can you guys talk about the pipeline for Egypt and South America? Can we just any color there?

Speaker 1

Yes. So we're basically as I said, we're coming off the back of a very successful contract win that actually began in quarter 3, quarter 4 last year. And by quarter 1, we secured some contracts, put some contracts to bed. We've since added some contracts across a number of regions. And if well, when you say add some color, I guess, signing new contracts for us is a normal day in the office.

Speaker 1

We're from contracting firm. So by definition, we work to contract. But it is if we look at historically, the last time we had a contract haul similar to this one that we've just come through, we'd have to go back 3 or 4 years. And that took us that cadence, if you will, on the beginning of that new wave of successful haul of contracts took us from 80 $1,000,000 zip code revenues into the 100s. We ended the 100s with a 1 $15,000,000 and we did a $138,000,000 last year because of this strategic decision to move away from one of the restive jurisdictions that we operated in, our revenues fell away.

Speaker 1

And so we came over the top. We summoned it in 2022 and then we came off in 2023. What's happened now is that gave us the rigs and the ability to go out with the marketing department and find new work for those rigs. Evidently, we were successful in doing that. And so what we're witnessing now, although our quarter one was a bit slow, you've seen a very solid quarter 2, and you'll see robust numbers from here going forward.

Speaker 1

Now where will it take us to? That's really the big question. At this point, rather than make any wild predictions, I'll just say that investors can expect to see solid growth for the next 3 to 5 years.

Speaker 5

Okay. Thank you. And then just moving over to the adjusted EBITDA margin. Yes, this quarter was very strong at 26 0.7%. It's just a slight drop compared to 2022 levels.

Speaker 5

I know you said that's a bit because of the shifts going towards more majors than juniors. But can we kind of expect close to these numbers moving forward? Or was there were there some one off items that kind of impacted this quarter more than other quarters moving forward?

Speaker 2

No, there's not no one off items. It was just and you see it everywhere. You see we had a very healthy gross margin. We target between 25% to 30%. We actually exceeded that.

Speaker 2

The gross margin in the quarter was 31%. Our SG and A, SG and A was we kind of budget that at about 11%. So that came in as expected. In the past, Dave referred to last year, we had some provisions we had to take, which skewed that number. So there's nothing exceptional in this quarter other than like the top line.

Speaker 2

And then everything followed that $41,200,000 in revenue, we were able to see the margin we wanted, the gross margin we were able to keep the spending in line, etcetera. So it all fell down to the bottom line and the EBITDA where we came in at 26% EBITDA. So nothing really to report on any exceptionalities in the quarter, just a really strong quarter.

Speaker 5

Okay. Thank you for taking my questions guys. I'll hop back in the queue.

Speaker 1

Thanks. Thank you.

Operator

Your next question comes from George Melas from MKH Management. Please go ahead.

Speaker 6

Great. Thank you. Thank you for taking my question. Quick question on the contract that you have secured in the first half of twenty twenty four. Can you tell us about where they are from a geography perspective?

Speaker 6

And have you started to recognize revenue on these contracts? Or have you not really started them yet?

Speaker 1

No. We certainly have started them, and they are well and truly underway. And we've signed contracts in Ghana, Ivory Coast, Senegal, Egypt and Peru and Chile, and basically all of our jurisdictions, all of our jurisdictions where we're currently operating at.

Speaker 6

Great. Thank you very much.

Speaker 1

Thank you, sir.

Operator

Your next question comes from Mark Gomez from Pipeline. Please go ahead.

Speaker 4

Hey, Dave. Congratulations. Great work on the shift. Just to clarify from the questions that were asked 5 minutes ago. If we take into account your seasonality and when you have to take rigs up and down, Taking that into account, would we expect going forward, as we say, the next 1, 3, 5 years, we should see continued positive comps to the year ago quarters, so taking those that seasonality into account?

Speaker 1

That is certainly the hope. That is certainly the hope. I mean, no guarantees. I mean, notwithstanding any exogenous sort of out of the left field events, certainly, the intention would be with this large amount of multi rig, multiyear contracts, that would certainly be the intention, yes. But Yes, intention was

Speaker 4

what I was looking at.

Speaker 1

Any wallet predictions, but in principle, yes.

Speaker 4

Right. I mean, there's nothing happening right now that would stop this current quarter that's extraordinary in this quarter relative to what you did in this quarter last year in terms of operations, right?

Speaker 1

Correct. Yes. I mean, I think you could I think we could say, at this point in time, we're halfway through quarter 3. Are we looking at a year over year improvement? Certainly trending that way at this point in time.

Speaker 1

And if you remember, quarter 3 last year wasn't a bad quarter. It was okay. But it's not going to be a sequential it's not going to be a quarter over quarter improvement because we've done a record and we're entering into traditionally a quieter quarter.

Speaker 4

Will we continue to improve?

Speaker 1

Sorry?

Speaker 4

Yes. I mean that's typical though, right? That's the typical cycle pattern.

Speaker 1

It is. It's totally normal. But the first thing that would normally happen is when you put out a bang it out of back quarter, everybody says you're going to do that next quarter. And you've got to think of it like what is topical at the moment is the 400 relay. It's made up of some fast sectors and some fastest sectors.

Speaker 1

No 4 sectors are the same. Historically, we know that quarter 2 is our strongest quarter and we've just come through our quarter 2. So looking comparing it to last quarter 2 And perhaps what's more importantly is quarter 2, our strongest ever quarter that we'd recorded previous to this, we've also exceeded by a significant margin. So we it was a great result and it's been a few quarters in coming. You've got to remember that we've repositioned our rig fleet out of a restive region.

Speaker 1

And these things these decisions are not taken lightly and they take quite a while to put into play for them to play out from the decision to exit, which was taken basically for the reasons of safety of our workers, we took a decision that affected us through 2023. And so that gave us the opportunity to go out, find new work, which we've done. And I think it demonstrates just how agile and fleet of foot we are when you consider that the region that we moved out of Burkina Faso was once our largest market. We've managed to actually replace that and come back with record breaking revenues. So I think it's a good demonstration of how fleet of foot or how agile we can be in an ever changing environment where the only thing that we can truly be certain of is change itself.

Speaker 1

Now where will we go to from here from this new found or this recently signed bunch of this contract haul with an ever you got to remember that the cash that we generate from operations always goes into increasing the fleet size. We're now at 91 rigs. And so what will happen is we will continue to operate at 70% utilization through the strong quarters, probably 60% through the slower quarters as we are at the moment, but that's on an ever increasing rig fleet. So I think that it would be safe to say that from here going, notwithstanding any exogenous left field type events, you can expect to see year over year improvements, yes.

Speaker 4

Yes, that's what I was getting at. I mean, that question put a little cold water on the call when in actuality you have not since 2016 put up a stronger Q3 over a Q2. So it's not something that I thought anybody should expect. But year over year, I mean, that's why we have those year over year comparisons. That's where as long as all else is equal, you continue to expect year over year comparison strength, yes?

Speaker 1

Correct. Yes. Certainly, to the top line. And yes, and as we've been open and transparent about our business model shifting from junior exploration companies beholden to the capital markets who are giving us problems getting paid to your more top tier, Tier 1 cash producing gold mines and base metals mines gives us the added advantage of not chasing money all the time, the cost of financing outstanding debtors for long periods of time. But that comes with margin compression and that's normal.

Speaker 1

You would expect that on the economies of scales. But to put out the result that we just have, I'm telling you, it exceeded my expectations.

Operator

And there are no further questions at this time. I will turn the call back over to Dave Harper for closing remarks.

Speaker 1

And I have no other remarks other than wherever you are. I hope your team managed to win some nice gold medals during the recent Olympics. And thank you all for participating on today's call. So good news, Gold. Thanks very much.

Speaker 1

Cheers.

Operator

Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank

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Earnings Conference Call
Travelers Companies Q2 2024
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