Welcome to the Chrysos Corporation Limited First Half 2023 Results Conference Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Dirk Treasure, Managing Director and CEO. Please go ahead.
Thank you very much, and good morning, shareholders. Thank you for joining us today for our first half FY23 results presentation. Slide three please, operator. I'd like to start off with a bit of a recap of what we do as a company. Very briefly, we build big equipment called PhotonAssay units. We deploy them to our customers, which are miners and laboratories, and then we charge them a fee for use over a long equipment lifetime. PhotonAssay is an analysis technology which uses high-powered X-rays to measure gold and other elements in a sample. Analysis is a non-discretionary spend for miners, and we're displacing the slow, hazardous, and laborious fire assay process, which has been used for hundreds of years. We're seeing rapid adoption of our technology all over the world, basically because it is far superior to that fire assay technique.
First developed by CSIRO, PhotonAssay is significantly faster, reducing analysis time from hours to minutes. It's more accurate, particularly where miners have complex mineralogy. It allows reduced sample preparation, which reduces overall analysis cost. It's completely automated, with a technician only needing to place a sample onto an input conveyor and then remove samples from an output conveyor post-analysis. It has reduced labor requirements. We actually have a couple of laboratories that we work with that have both fire assay and PhotonAssay in the same facility, and they've informed us that they require one-third of the labor to run PhotonAssay compared to a similarly sized fire assay. We substantially improved health and safety for operators, which are no longer exposed to hazardous lead and hot fumes that are common to fire assay.
Every sample processed with PhotonAssay in place of fire assay leads to reduced carbon dioxide emissions, and we produce zero lead waste, which is an ongoing problem for fire assay. Finally, PhotonAssay samples are 10-20 times the sample mass, leading to a more representative sub-sample for analysis. As a snapshot of our company operations and business model, Chrysos has had PhotonAssay commercially available since the middle of 2018. We've successfully deployed now across three different continents. Those are representing our key target markets for the technology. We've now analyzed in excess of 5 million commercial samples and have been used extensively by major miners and major laboratory companies around the world. Our customer contracts work on a long-term service and lease agreement with high-quality counterparties.
These are typically for a period of five years, plus five years on average, and the 49 contracts that we have in place generate between 47%-82% of the billed value as a return on invested capital on an annual basis. Each of our agreements includes a minimum monthly payment due to Chrysos by the customer, providing secure, forecastable baseline revenue. We also make additional revenue when customers run samples in excess of their monthly commitments, which accounts for around 20% of our revenue for the first half FY23. On the back of continued global uptake of our PhotonAssay technology, we have lease agreements for new deployments stretching out into 2025, which is supporting our ongoing manufacturing growth.
The technology is well protected by a mosaic of patents on a global basis. PhotonAssay is far superior to any of the other incumbent techniques available for gold analysis. The technology has quickly become accepted by the industry and has been used in JORC and NI 43-101 compliant releases. We're seeing fast penetration into our total addressable market, which is estimated at over 600 deployments worldwide. On an annual basis, we've been growing more or less exponentially since our first deployment in 2018. We're on track to do so again in FY23. Slide four please, operator. For the presentation today, I'll be providing an update to our first half FY23 results. Chrysos' CFO, Brett Coventry, will step us through the detailed financial summary. We'll move to outlook and questions to wrap up. Next slide, please, operator.
Moving on to the results. Starting with revenue. We had total revenue for the half of AUD 11.5 million, which is a 109% increase on our first half results for FY22. We're on track to meet our FY23 prospective target of AUD 26.6 million, which is an 86% uplift on FY22. Our first half EBITDA grew by AUD 0.6 million to AUD 0.63 million and is reflective of our on of our revenue growing at a greater rate than our expenses, in line with our growing deployment base. As with revenue, we're on track to meet our FY23 prospective guidance of AUD 3.2 million for the full year. Total contract value is a measure of the minimum future income that we'll receive from our 49 existing contracts.
It's effectively the sum of the minimum monthly payments due over the expected term of those contracts. On a contract-by-contract basis, our TCV has increased over time, reflecting improved contractual terms for Chrysos in new lease agreements. We currently have AUD 714 million of TCV, which will unwind over the length of our contracts. From a funding perspective, we currently have AUD 81 million in the bank, and we continue to generate positive operating cash flow.
In addition to cash on hand and cash generation, we've been pleased to announce today that we have an expanded debt facility with the Commonwealth Bank, which has gone from AUD 7.5 million now up to AUD 30 million. Our initial facility there was negotiated when we had only 4 units operating, and this expanded facility reflects conversations that we've been having with the bank regarding appetite for increased lending as the business expands. Combined, this leaves us with about AUD 105 million available for new PhotonAssay units, equating to an expanded fleet of around 30 additional units on top of the 15 that we currently have operating. We currently have 49 contracted units made up of 15 deployed units and a further 34 units to be deployed over the coming years, stretching out into 2025.
The substantial number of units that we have pending deployment supports our growth and manufacturing capacity, which is on track to increase to 18 units per year by the start of FY 2024. Demand and interest in PhotonAssay remains strong. This has given us the opportunity to be selective on new agreements. We're targeting those opportunities that provide strategic advantage to Chrysos, whether they be major gold miners with direct site deployments or major laboratory companies to support uptake in our key markets. Lastly, we have 15 operating units that are concurrently, and are concurrently deploying 4 additional units around the world. Over the last year, we focused on growing our international capability for deployment and support of units. Our ability to have 4 concurrent installations occurring is really a testament to that growing team.
With 15 units currently deployed and four undergoing installation, we're on track to have 21 deployed units by the end of FY 2023. Next slide, please, operator. The chart on the left-hand side represents the breakdown of Chrysos' total revenue. This is substantially dominated by our minimum monthly assay payments, which increase in line with each newly deployed unit and provide a forecastable annuity-style revenue. Combined minimum monthly assay payments across the 15 units currently deployed is running at AUD 1.7 million per month or AUD 20 million annualized. This is the minimum revenue across the deployed fleet and is completely irrespective of the number of samples processed by each of our units.
Additional assay charges, or AAC, make up around 20% of our first half FY23 revenue and total AUD 2.1 million for the half, which is up 83% on the first half FY22. These are the charges that are linked to the utilization of the unit, providing considerable upside on revenue per unit when sample volumes are high. The final component of our total revenue is the supply of PhotonAssay consumables, which we undertake to ensure continuity of supply of these consumables to our customers. This accounted for AUD 0.6 million during the half. Next slide, please, operator. Our growing operational footprint is best shown here on the world map on the left-hand side.
Over the past few years, we've completed technical due diligence studies for most of the biggest gold miners in the world and have then followed that up with PhotonAssay deployments into our key target markets. We're currently operating in North America, where we now have a presence in both of Canada's major gold mining regions. That is the Abitibi region, bridging Ontario and Quebec, and in British Columbia. In East Africa, our Bulyanhulu unit at the Barrick Gold Mine has been running for about 16 months, leading now to deployment of our second unit into East Africa, also at a Barrick mine site, Kibali, which has been up and running now for about a month. In West Africa, our operations continue to expand, and we will soon have multiple units in Ghana, both with Intertek and MSALABS, to be operating PhotonAssay in that region.
In the year ahead, we'll also be making our first foray into South America with the units slated for Ecuador in the first half of FY 2024. On the right-hand side, we have unit utilization and samples processed. In the previous slide, we discussed the link between additional assay charges and our deployed unit utilization. Shown in yellow on this chart is utilization for the past 18 months, overlaid by the black line, which is absolute number of samples processed per month. We have sustained utilization throughout the first half with an average of 58%, which is in comparison to our prospectus expectation of 55% for FY 2023. Utilization in excess of minimum commitments continues to drive our additional assay charges, with approximately 20% of our first half revenue originating from AAC.
We're repeatedly hitting record volume months, as we deploy additional units around the world, we would fully expect for this to continue. I'm now gonna pass across to Brett Coventry, Chrysos' Chief Financial Officer, to talk us through the financials.
Next slide. Thank you, Dirk. It's great to be able to talk today around the continued maturing of our business. Next slide. Thank you. Thanks for the detail around total contract value or TCV. These future revenues are the foundation of our growth as we continue to deploy units and recognize increased minimum monthly assay payments. As we can see here, we are working with a range of high quality clients to continue to deploy our technology. Next slide, please. As we deploy PhotonAssay units, the minimum monthly assay payment or MMAP continues to drive the growth in our revenues, which is increasingly in excess of the cost base of the platform we have put in place to operate a global business.
We frequently talk about the business doubling each year, we can see in this period the 109% growth in revenue. This is the benefit of the additional units deployed, we will see further growth through the second half as we deploy the remaining six units for this financial year. From an IPO, we have spoken regularly about building a platform to support a global business, a material step-up in our expenses, which we are now starting to see the benefits of seeing this operating platform deliver and generating operating positive cash flow with growth in expenses being at a lesser rate than increased revenues. I wanted to call out our travel and marketing expense increase here. We have hired employees across the globe in all capabilities.
To onboard and develop our global team, there has been significant investment. This is about having a global team, the global platform to run our business. For example, to have the ability to deploy from a geographically local team. We have a global business, we'll always expect a significant travel and marketing spend. We do not expect this high rate of acceleration of expense to continue. Next slide, please. Continuing growth in our operating cash flows on the back of predictable MMAP revenues see cash being generated by the business to contribute to the future growth. We touched on capital expenditure at our 4C presentation, the year through 31 December is slightly less than expected, primarily around timing of capital expenditure in the December quarter.
Moving forward, we expect to see CapEx cash flows back in line with expected spend rates of about AUD 10 million per quarter for this financial year. Dirk spoke to before, it's great to see the Commonwealth Bank continue to grow with us, and we continue to have meaningful discussions of the future growth opportunities in these facilities. With the bank's support, we now have over AUD 100 million to fund growth. Without considering additional revenue generated from these future deployments, that's roughly 30 units to deploy. Next slide, please. Our balance sheet position remains strong and we continue to convert cash into revenue generating PhotonAssay deployments, meaning we are well positioned for our growth. We have also brought back a small deferred tax asset and net position of AUD 795,000 reflective of the future profit outlook of the group.
Overall, we are pleased with the growth we have achieved and are looking forward to continued deployment of PhotonAssay units on the back of the strength of our balance sheet. With that, I'll hand back to Dirk.
Thank you, Brett. Slide 15, please, Brenda. Outlook for Chrysos and for our PhotonAssay technology remains very robust. We've expanded our deployment capacity to support the increase in manufacturing from 12 units per year up to 18. This accelerated rollout is very well supported by our committed contracts, which extend out into 2025. We continue to focus on our global infrastructure to support further deployments and are well-placed now for additional units to be deployed into each of our key markets. FY 2023 continues to be a story of establishing the building blocks for accelerating growth. We're very pleased how this is progressing around the world. We're on track to meet the key metrics that we outlined in our 2022 prospectus.
These include total revenue of AUD 26.6 million, EBITDA of AUD 3.2 million, and 21 units deployed. Each of these metrics represents considerable growth, and their achievement provides a solid base as we close out FY 2023 and into FY 2024. With AUD 81 million of cash on hand, positive operating cash flow, and our expanded AUD 30 million debt facility with CBA, we are very well funded to support our future growth. This leaves us with a long runway and clear visibility for the remainder of FY 2023 and into FY 2024. I'll close there and open to questions.
Thank you. We will now begin the question and answer session. If you'd like to ask a question, to join the question queue, press star then one. If you would like to remove yourself from the question queue, press star then two. If you're using a speakerphone, it may be necessary to pick up your handset before pressing any keys. We will pause momentarily to assemble the question roster. The first question comes from Sam Webb with Barrenjoey. Please go ahead.
Good day, guys. Thanks, thanks for the opportunity. The first question is just around unit economics. I just want to get a sense of how they're holding up versus your initial expectations. That's the first question. The second one is just, I mean, understandably the growing expenses, ticking up with you deploying more, but just trying to get a sense of how much of the tick up was maybe out of your control. Like sort of higher than expected increase in wages, higher increase in travel costs, et cetera, and whether that was a material amount.
Good, good questions. Thank you, Sam. I'll answer those backwards. Look, the cost uptick was certainly something that we were expecting. A large part of that is really about opening up these new markets. You know, what we've done here with the technology is we've seeded each of our key markets in a way that enables us to start working early on with miners in those regions and build the same following and understanding of PhotonAssay that we have in Australia into these new regions. We always knew that as we entered these new regions, there would be a step up in costs. We've talked previously about the idea that, you know, the sort of 12 to 18 months of building out this platform into those different regions is a relatively expensive one for us.
We look to cluster units into these regions. What we do there is we end up with two things happening. As you've penetrated those markets and you drive interest in the technology, we end up with further samples coming into the units, so we end up with improved revenue in the units. As you place more and more units next to each other, you end up having a decrease in unit cost, or unit by unit cost by having this clustering and allowing the same maintenance service management structure to now be looking after more and more units. Look, I think it was fairly well in line with expectations. Obviously throughout COVID, you know, there were changes in shipping costs and this type of thing. We've now seen those moderate.
I think the big question at the moment is around things like availability of staff and staff costs increasing. The interesting thing for us is that that seems to be very much in what I would say is sort of the Western world. You know, yes, it's a common theme in Australia and across in North America, but it's a less common theme in Africa. You know, we're finding that we are able to get very good people still at reasonable rates in that side of the world. When we have significant expansion going into Africa, that supports us over there. Look, I think I've probably covered both questions there. Sorry, I was gonna go into the unit economics against expectation. Just to wrap that first question up then is, with regard to the unit economics, we...
Our unit economics are driven by throughput or volume going through each individual unit. I think when you look at the first half running at 58% utilization against an expectation within the prospectus of 55%, you can see that those sort of revenue numbers are more or less in line with expectation. Then again, the fact that we're on track to hit EBITDA target for the year, and revenue target for the year, you can see then that the costs are relatively well on track as well.
Makes sense. While I've got you, I mean, just to that chart you've got on slide eight with the tick down on fleet utilization in December. I don't wanna put words in your mouth, but I assume that if we roll forward for January, that ticks up again. That's just a seasonal down tick in December.
Look, I can't provide the January number right now until we provide it. What I would say is, you know, there is a seasonality, particularly in Australia. If you look at that chart and look back to the December 2021 number.
Yeah.
You do see around that time a dip going into sort of December that then starts to recover into the new year.
Yeah.
You know, as we get more and more units around the world, we fully expect to continue to be breaking records with regard to monthly sample volumes.
Excuse my ignorance if this has been disclosed already or maybe it hasn't, but at a group level, when do you give it to positive free cash flow, do you think? Have you guided to that? That's probably a number I should know, but just wondering.
No. Look, at the moment-
A date or something.
We haven't really given guidance out that far. Obviously in the close of FY 2023, we'll be looking then at what kind of guidance we're providing into FY 2024. The way that we kind of put this at the moment is really around cash on hand, cash generation, available debt, how many units does that get us, and then, you know, what's the individual unit economics look like to build up that story. We really haven't provided specific guidance on free cash flow.
Yeah. I'd again, don't put words in your mouth, but, you know, well done on the increase in the debt facility. Is that the view that that is, that's sufficient now, for your internal needs and budgeting, that AUD 30 million facility?
Look, it's certainly, sufficient at this point in time. Obviously the structure of the facility and the, and the method that we draw down means we're not just sitting on a, on a pile of additional cash. I think the other aspect there really is we negotiated the original, agreement with CBA back when we had four units. You know, and it was four units and we got a seven and a half million dollar facility. What we've seen now is that growth to AUD 30 million, so 4 times the size of facility when we've got 15 units, so roughly 4 times the number of units. You can see that sort of ongoing committed growth.
The fact then that we've got enough cash available to now deploy another 30 units, so, you know, 3 times the existing fleet, gives an indication of our expectation of sort of further funding available as and when we need it.
Makes sense. Thanks very much.
Welcome. Thanks for the question.
Again, if you'd like to join the question queue, press star then one. We still have time for questions. No one has currently joined the queue. Star then one to join the queue. We have a question from Lachlan with One Fifteen Capital. Please go ahead.
Hi. I just wanted to get some more clarity on how the employment of people is going. You're not seeing any shortage or struggling to get people to meet your targets going forward? Cheers.
Good question. I think that is a common theme at this point. I touched on that in answering Sam's question. You know, where we look at something like Australia or North America, you know, we did see a sort of a difficult market with regard to labor. At that time, we've been doing a lot of growth into Africa, where we're not really seeing that difficulty in getting good people. What we've been able to do is really get the right people on the ground in each of our key markets, and that's been a big part about building up the kind of the management layer of these teams. Bringing in more maintenance engineers, support engineers, is now supported by a really good team of people.
Over the last 12 months, no, we really haven't had that much difficulty picking people up, but a lot of our growth has been outside of Australia with regard to number of people. We're probably a little bit shy of where we expected the number of people to be against the prospectus. I think there's some detail in there about the number of people that we were hiring over time. That's really just a case of improved efficiency for us. Like, we're actually seeing that we're able to achieve what we want to achieve around the world with a few less people than expected. It's not an indication of having difficulty hiring people. It's actually an indication of improved efficiency.
Okay. Good to hear. That's all from me.
Thanks, Sam.
Again, star then one to join the question queue. We still have some time for questions. We have another question from Sam Webb with Barrenjoey. Please go ahead.
Thank God. I might as well hold the line here. Just going back to slide seven, just interested in or just, you know, the additional assay charges that are going through your existing units. Is that trending in any direction? Are you finding that that will grow in time? Just, just interested in the level of work just in the industry, you know, behind your behind these machines and the desire of your customers to push more volumes through them at sort of this point in the cycle.
Yeah, absolutely. I think, you know, we've seen turnaround times reduce back to what I would call normality. You know, last year, turnaround times for assays were running at 12-16 weeks, and it was very, very difficult to get your assays done. You know, at that point, we were running at about 20% AAC. We're still running at about 20% AAC. The nice thing is that, you know, we're really seeing continued use of our units even when you have seen that turnaround time decrease back to kind of an industry norm of 4 weeks.
Even if we were kind of picking up more customers during that really long turnaround point because it was, you know, 16 weeks to fire assay or come along and use PhotonAssay, now what we're seeing is sustained use of PhotonAssay even though fire assay turnaround times have returned to normal. That's very positive from our perspective. Then, you know, what you see and I guess coupling that slide with the following slide is that we do have that latent capacity around the world. As we continue to bring more and more customers across to PhotonAssay, there is that latent capacity that can turn on in these PhotonAssay units and then drive revenue up for those units as well.
What's the variability of the units that you've rolled out so far in terms of utilization? I mean, I know you're running at 58%, but what would be the worst one performing out and the best one?
Interesting question. Interesting phrasing. For us, there's a differentiation between laboratories and miners specifically that kind of needs to come into this as well. For a laboratory, the business model is very much that we compete on their cost of fire assay. We aim that a lab company would receive roughly the same profitability from running a PhotonAssay as they would a fire assay. We have the customers driving the adoption of PhotonAssay there at the same price. The laboratory side is really a case of trying to drive high volume at those somewhat locked-in prices. The miners are very different. The miner, a lot of the benefits that I was talking about right at the start of the presentation, a lot of those benefits are particularly important for the miner.
You know, if you consider that you can have one-third of the labor running a PhotonAssay compared to a fire assay, your labor costs in a mine site, once you couple that with charter flights, camp costs, and the fact that you're paying fly-in fly-out personnel, are substantially higher than that of a laboratory company. Other things like getting consumables out to site and getting waste away from site, there's other aspects there. That basically means that for a miner, we're not necessarily competing at that high volume price that we are with the lab. Very short way of saying, a miner may pay a higher price per sample than a laboratory would, and we may expect then the mine would run at a lower throughput than the laboratory would.
You almost need to separate the utilization of the two. You know, we have some units sitting on mine sites that might be running at 40% or 50%, and then some sitting in laboratories that might be running at 80% or 90%. The unit economics actually end up roughly the same for those two circumstances.
Okay. Yeah, that makes sense. Thanks for the differentiation. Thanks, Dirk.
Sure.
This will conclude our question and answer session. I'll turn it back over to Dirk Treasure for any closing remarks.
Thank you very much. Look, we're really pleased with the performance of the company this first half. We're excited to be able to reaffirm guidance for the full year. Thank you all for attending, and we look forward to providing further updates.