Good morning and afternoon, ladies and gentlemen, and welcome to the Foraco International SA third quarter 2023 earnings conference call. At this time, all lines are in a listen-only mode, but following the presentation, we will conduct a question- and- answer session. And if at any time during this call you require immediate assistance, please press star zero for an operator. Also note that this call is being recorded on October 30th, 2023. And now I would like to turn the conference over to Tim Bremner. Please go ahead, sir.
Thank you, Sylvia. Good morning, everyone, and thank you for taking the time to join us on our Q3 2023 results conference. I'm Tim Bremner, CEO of Foraco International, and joining me today from France is Fabien Sevestre, our CFO. The news release of these results was issued this morning prior to the opening of the TSX through CNW Newswire. If you didn't receive a copy for some reason, it will be at our website, www.foraco.com. After the outline of the financial results, we'll open the call for your questions, moderated by our operator, Sylvia. Q3 was another good quarter, with revenue of $96.1 million, up 4% from the same quarter last year, making it the 19th consecutive year-over-year quarterly increase.
Our Trailing Twelve Month revenue now stands at $368 million, with an EBITDA of $85.1 million, up 17% and 45% respectively, compared to one year ago. These results are a direct result of the ongoing excellent performance across all of our regions globally. Our utilization rate for the quarter remained flat at 58% compared to a year ago, and TTM net profit now stands at $38 million, up 79% year-over-year. Once again, this performance is a direct result of the dedication and competence of our teams around the world, especially the men and women in the field, who we wish to thank for their ongoing commitment and contribution. Our outlook for the business remains unchanged. The Metals Price Index, which earlier this year decreased by 8% since January, has been relatively stable for the last four months.
We continue to experience a sustained demand for drilling services, both in mining and water, against, again, mainly related to EV metals in the primary mining jurisdictions globally. It would seem that our customers see it the same way as well, as we continue to work through, and in some cases, renew our long-term contracts. I'm now pleased to pass the conference over to Fabien, who will walk you through the financials in more detail. Fabien?
Thank you, Tim, and good morning, everyone. First of all, and as a reminder, Foraco reports in full IFRS and in U.S. dollars. Revenue for Q3 2023 amounted to $95 million, compared to $91 million for the same quarter last year, a 4% increase. By reporting segment, the mining segment represented 88% of Q3 2023 revenue, and water represented 12%. Asia Pacific and North America recorded the highest increase in revenue. Revenue in Asia Pacific increased 28% at $19 million, reflecting a quarter-over-quarter increase in demand and the company's capacity to acquire and commission new rigs. In North America, revenue amounted to $32 million in Q3, a 15% increase driven by long-term contracts renewed last year with senior customers. Revenue in South America remains stable at $30 million.
Revenue in EMEA over the quarter was $14 million, compared to $19 million in Q3 2022. The activity was stable in Europe and Africa, but the activity decreased in Syria due to the political and economic uncertainty in the region. In Q3 2023, the geographical mix was North America, 34%, South America, 31%, Asia Pacific, 21%, and EMEA, 14%. During this quarter, the gross margin, including depreciation within cost of sales as per IFRS, was $27 million, versus $24 million for the same quarter last year, a 10% increase. Ongoing contracts continued to report solid performances. SG&A increased by 6% to $6.7 million, compared to $6.3 million for the same period last year. That was stable as a percentage of revenue at 7%.
The EBIT of the operating result was a $20 million profit, versus $18 million in Q3 2022, an 11% increase. The EBITDA amounted to $25 million, or 23% of revenue, a 9% increase compared to $23 million in Q3 2022, or 8% of revenue. I would like to take the opportunity to stress that we do not report Adjusted EBITDA or any other adjustment to our IFRS figures. On a nine-month basis, revenue amounted to $284 million, compared to $246 million in year-to-date Q3 2022, 16% increase. This increase in revenue is due to favorable market dynamics, with the company having renegotiated and extended its long-term running contracts since the previous year, coupled with the company's proven capacity to deliver. This has generated significant growth.
Revenue increased 32% in North America, 33% in South America, and 33% in the Asia Pacific compared to year-to-date Q3 2022. Revenue decreased 31% in EMEA due to political and economic uncertainties in key areas. The year-to-date 2023 gross profit was $74 million versus $53 million for the same period last year, a 40% improvement, mainly due to increased activity and the capacity of the company to deliver good performance on contracts. The year-to-date 2023 EBIT was a positive $53 million compared to $34 million in the same period last year, a 55% increase. The year-to-date 2023 EBITDA for the nine-month period was positive $68 million compared to $49 million in the same period last year, a 38% increase.
For the nine- month period ended September 30, 2023, the working capital requirement was $23 million, compared to $18 million for the same period last year. This increase is mainly the result of a ramp-up of activity. CapEx amounted to $21 million in cash, compared to $14 million in cash in year-to-date Q3 2022. This CapEx is related to the acquisition of rigs, major rigs overhaul, steering equipment, and robots. As of September 30, 2023, our net debt, including lease obligations, amounted to $79.5 billion versus $76 million at September 31, 2022. Our leverage ratio improved to 0.93. Finally, the TTM net profit of $38 million translates to an earnings per share of $0.44, which is double last year's. I will now hand the call back to Tim for his closing remarks. Tim?
Thank you, Fabien. Another great quarter. Three weeks ago, we held our first global senior management meeting under the new leadership team here in France. During the course of the meeting, we prepared our plans for 2024, but also took the opportunity to review and update our five-year strategic plan with very meaningful input from all of the regional VPs and senior managers. No question that the global demand for primary EV metals and water remains strong, and we continue to see the demand for our services from our main customers in both of these areas.
In addition, we look forward to concluding the refinancing arrangement that will significantly reduce the lending costs as we work to further deleverage the balance sheet, enabling us to fully execute our five-year strategic plan. I really want to thank you for your time and interest in Foraco today. I'll now turn the call over to Sylvia, who will take the first question. Sylvia?
Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your touchtone phone. You will then hear a three-tone prompt acknowledging your request. If you would like to withdraw from the question queue, you will need to press star followed by two. If you are using a speakerphone, we do ask that you please lift your handset before pressing any of your keys. Please go ahead and press star one now if you do have a question. Your first question will be from Steven Green at Ordinance Capital. Please go ahead.
Yes, hi, how are you? Welcome to your first call. I'm glad to see that you're continuing to handle those great, great numbers. Really, these are really great numbers. The question I had, first question I had was... I see your utilization rate is about 58% now, and I think, is there further growth ahead as you improve the utilization rate? And also, as you improve the utilization rate and get revenues up, will the model, will the margins increase? Because I see that as your volume goes up, your margins increase. So it seems like you're right at the tipping point of really accelerating the model. So I was hoping for two things was, can you tell us if you're gonna increase the utilization rate, and if there's room to grow here?
Hi, Steven. It's nice to hear from you again. Yeah, the utilization rate is relatively flat. But you have to take into consideration the changes in the market that we've experienced, primarily in the CIS, where the utilization rate has been, you know, significantly, and also in Africa because of the challenges that we all hear about in that. So in those two areas, there's been some decrease in the utilization rate. The other regions have seen improvements in utilization rates, which is creating the offset and bringing us back to 58%, 50%-90%. The increase in revenue can be attributed to a couple of things. In Australia, primarily, where we have a lot of rotary rigs doing water work.
Many of these rigs have gone to double shifting now, versus the single shift operation. And, you know, that dramatically increases the revenue with the utilization rate... That also means that the mix of rigs that generate more revenue is increasing. So that's one of the biggest increases seen. There have increases in rig utilization in North America. It's improving in Latin America as well. In Chile and Argentina, we come out of the winter and go back into the season. So I think we're gonna see it relatively stable. I don't see it decreasing or increasing slightly. But that's where we are with the utilization. And what was the second part of your question? I'm sorry.
No, I was saying that as you increase revenues, it seems like the model is really accelerating because it seems like your gross margins go up quite significantly as the revenue goes up.
Well, they're improving for a couple of reasons. If you... A year ago, or maybe even a little bit longer, we were launching a lot of new long-term projects, and starting them up is difficult. But we were coming out of Covid. A year ago, we had some significant labor shortages, and now we've worked through a lot of those individuals that were, you know, really on the B and the C team, and we've optimized the field operations. So as we said in the call, the operational performance in the field is really being fine-tuned and improved, and that's where we're getting the majority of the margin increase and the increase in revenue. You know, there are fewer missed shifts, more productivity, fewer mistakes, all of the above, you know, drive the top line and the-
That's great. My last question is one of, I guess, frustration. I've been a shareholder here for 10 years or so, and we can't... Why can't we get any recognition for what we're doing? We're trading basically near real earnings now. You're at $0.44 in earnings, and you're selling basically at 3x real earnings, and you're basically 1x EBITDA. I mean, how do we get the market to realize what we're doing here and how much cash you're generating? And you're gonna pay all your debt down shortly, I'm sure. You're gonna try to pay to restructure it, and you're gonna have a stable, great balance sheet go forward. I don't... How do we get the market to realize what we're doing here?
So, you know, as we mentioned three months ago, the microcap market is tough. The metals market is mixed. The interest hasn't been where it should be, and we are undertaking to change that. I've begun to do some marketing in Toronto and meet with some investors. If you look at the volume, the volume has recently been much, much better. So that to me, in my limited view, would mean that, you know, we are working through perhaps some negative overhang, if you will. Now, more significantly than ever before, that negative overhang was there, but now it's moving out.
And I'm optimistic that we're near the end, I hope. I certainly have some very positive feedback from the calls that I've had. There's been some genuine interest. And you know, the next press release that we put out soon, hopefully, will add to that optimism. So we, you know, sincerely appreciate your patience. We're with you as shareholders and understand the frustration.
Would you guys, would you guys return share capital to shareholders through dividends or a special dividend? Or I guess buying back the debt is great too, but would you ever think about increasing it or instituting a dividend?
You know, certainly, it's certainly on our radar, and we certainly know that that is of significant interest to shareholders. But the first thing to do once this refinancing is completed and we can continue to deliver good results, is to revisit our capital allocation policy. You know, that is part of it. But at the moment, Steven, I'm not aware of any pending discussion on beginning or restarting a dividend payment. Suffice it to say that we're going to be reviewing the capital allocation policy soon.
My last question: Is the refinancing with the same lender, the same Marathon Capital, or are you going to different lenders now?
No. No, there's going to be different lenders and commercial banking relationships, at much more favorable rates.
All right. Good. Well, thank you for doing everything you're doing. The numbers were amazing, so I really... This thing should be so, this thing should be so exciting to investors. I don't know why, but you'll get it there, I hope.
Yeah.
Thanks.
That's our job.
Thank you. As a reminder, ladies and gentlemen, if you would like to ask a question, please press star followed by one on your touch-tone phone. Your next question will be from Steve Kammermayer at Clarus Securities. Please go ahead.
Good morning, guys. ... Just on the, hi, just on the utilization here at 58%, heading in maybe flatter, even a little bit above next year. How much of that utilization is currently covered by these long-term contracts, and how does that change heading into the new year?
So if you, if you look at our, our revenue distribution between the majors and the senior mining companies and the juniors, we're at about an 86/14 split. So 86% of that, 58% utilization rate would be linked to the, to the long-term contracts. And, you know, it's looking... You know, with, with a long-term contract, it's pretty much a rollover of, of, of next year. There certainly could be some upside with, with those customers, all results dependent. But I think that a baseline of 58% is pretty solid. We are going to be introducing additional heavy rotary rigs, in, in, in the future , and that will help with the revenue per shift.
But, you know, unless there's a change in the junior market, I don't see us, you know, really getting out a bunch of our lighter, smaller rigs that are more suited for greenfield operations . This includes the Fly rigs. You know, those are kind of single-purpose rigs that, you know, you can't use on every project. So I see the utilization rate as being relatively constant.
Okay. No, that's a fantastic answer. I appreciate that. And just heading back to the debt refinancing, I assume you're still hoping for that sometime before year end? And assuming that it does get done, on our numbers, it seems like it could be a significant amount of cash annually. What do you have immediate plans for that, or are we waiting for sort of the capital allocation update you expect in a few weeks?
In terms of, for the refinancing, we are working with commercial bank, as Steve mentioned, some minutes ago. We are close for a deal, but after, you know, you have all the concern working and all the paperwork, paperwork to do. So this is depending from third party, but as a target and hopefully before end of year, we will be in a good position to close the refinancing.
Okay. That's, that's fantastic, guys. Thanks. That's all the questions I had.
Thank you. At this time, Mr. Bremner, it appears we have no other questions. Please proceed with any additional comments.
Thank you, Sylvia. Well, we really appreciate your attending the call, and thank you very much for the great questions. We look forward to speaking to you again at the end of Q4. And again, thank you very, very much for your interest in Foraco, and enjoy the rest of your day.
Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending, and at this time, we do ask that you please disconnect your line.