Good morning, ladies and gentlemen. Thank you for standing by. For today's call, 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. If anyone has any difficulties hearing the call over the phone, please press star zero for operator assistance at any time. I would like to remind everyone that this conference call is being recorded on Monday, March fourth, at 10 A.M. Eastern Time and is being broadcast live via the Internet. During today's call, management will make statements regarding management's expectations for the company's future financial and operational performance. These statements are considered forward-looking statements.
Each forward-looking statement speaks only as of the date of this call, and actual results may differ materially from management's expectations for a variety of reasons, including market and general economic conditions and the risks and uncertainties detailed from time to time in the company's SEDAR filings. I will now turn the call over to the President and CEO of Geodrill Limited, Mr. Dave Harper. Please go ahead, sir.
Thank you, operator. Good morning, and welcome to Geodrill's Quarter Four and 2023 fiscal year results. I will begin with an overview of our operations and performance for the fiscal 2023. After which, our CFO, Greg Borsk, will discuss and present a detailed analysis of our results. Additionally, I will provide some insight into our outlook for quarter one 2024 and beyond. In the latter half of the year, Geodrill encountered significant challenges. However, we firmly believe that the underlying fundamentals of our industry provide us with a strategic perspective. The market forces that affected overall performance over the past two quarters are, in our assessment, independent of the sustained development for resources in growing production economies. This demand is expected to persist over the long term. Operationally, we faced hurdles related to rig repositioning following our exit from Burkina Faso.
South America also posed unexpected delays, impacting both revenue and costs. Specifically, the winter shutdown in the region affected rig utilization, while operational costs remained high as we maintained readiness for Q4 ramp-up. On the financial front, in fiscal 2023, our auditors enforced IFRS 9 due to an enduring aging debtor situation. This resulted in a non-cash provision totaling $5.4 million profit for the year. Despite these challenges, Geodrill remains resilient. As we pivot away from junior exploration companies, we recently secured a number of multi-rig, multi-year contracts with Tier One miners, including First Quantum, Rio JV in Peru, Antofagasta, Barrick JV in Chile, and in West Africa, we secured a number of multi-rig, multi-year contracts with Tier One customers.
Geodrill has operated in West Africa for 25 years and has invested a significant amount of capital into its drilling fleet. We believe Geodrill is poised to navigate the complexities of our industry with determination, adaptability, and an active and experienced management team. I'll now turn the call over to Greg, our CFO, to review the financial highlights for fiscal 2023 and quarter four in detail. Thank you.
Thank you, Dave. As a reminder, all figures are reported in US dollars. We generated revenue of $130.5 million for 2023, representing a decrease of $8.1 million, or 6%, when compared to $138.6 million for 2022. In Africa, our three primary countries in which the company operates, being Ghana, Côte d'Ivoire, and Egypt, revenue increased on a year-to-year basis by $6.7 million. Notably, in Burkina Faso, revenue decreased by approximately $11.2 million on a year -to-year basis. Geodrill made a prudent decision to wind up its drilling programs due to the security concerns and redeployed the rigs to other countries. In Chile, revenue increased by $4 million.
However, revenue decreased by $1.8 million in Peru, as the company only recommenced drilling in Peru in the latter part of the Q3. Overall, gross profit for 2023 was $30.6 million, being 23% of revenue, compared to a gross profit of $40.6 million, being 29% of revenue for 2022. EBITDA for 2023 was $20.6 million, or 16% of revenue, compared to EBITDA of $38.4 million or 28% of revenue for 2022. The net income for 2023 was $3.8 million, or $0.08 per share, compared to net income for 2022 of $18.9 million, or $0.41 per share. We ended the quarter with net cash, excluding right-of-use liabilities, up $3.7 million.
With the gold price well above $2,000, we are optimistic that global exploration spending will continue to be strong and will provide strong fundamentals for the mineral drilling industry going forward. At this point, I will turn the call back to Dave.
Thank you, Greg. As we transition to the Q&A segment, I will now share an outlook and highlight growth opportunities for the remainder of quarter one 2024 and beyond. We commenced 2024 on a positive trajectory. Our operations in Ghana and Egypt continue to excel, bolstered by partnerships with Tier One mining companies and robust multi-rig, multi-year contracts. Also, notably, our utilization in South America has increased and currently stands at 85%. Our 2024 outlook is robust, with a strong order book in our core regions. Excuse me. South America, in particular, is poised for significant to be a significant contributor to our revenue. Turning the corner, we firmly believe the changing quarters are now in our rearview mirror. Our strategic adjustments and resilience positions us for a positive trajectory.
We continue to leverage our experience, drawing upon decades of industry experience, and we remain committed to operations, operational efficiency, and allow our seasoned approach to guide us. Our business philosophy embraces flexibility within the day-to-day realities, while our commitment to our core values ensure shareholders is unwavering. This concludes our prepared remarks on our financial calls, and I'll hand over to the operator to commence the Q&A. Thank you.
Thank you, Mr. Hopper. Ladies and gentlemen, if you would like to ask a question at this time, please press star followed by one on your touchtone phone. You will then hear a three-tone prompt acknowledging your request, and if you would like to withdraw from the question queue, simply press star followed by two. If you're using a speakerphone, you will need to lift the handset before pressing any keys. Please go ahead and press star one now if you have any questions. Your first question will be from Gordon Lawson at Paradigm Capital. Please go ahead.
Hey, good morning, everyone. My questions mostly revolve around modeling and helping to forecast some sort of EBITDA multiple here for valuation purposes. So are you able to expand on your outlook for 2024 in terms of regional growth and perhaps what we should expect for total revenue?
Sure. Regional growth, it's kind of the same. Right now, what we do, we're continuing, as I mentioned in my commentary, West Africa is, we're doing extremely well in West Africa. Our three primary countries being Ghana, CI, and Egypt. We're continuing to add rigs for clients there. We're also securing new jobs. We're securing larger jobs, multi-rig jobs, a few more on the horizon that hopefully we can announce later in this quarter or in Q2. So, very strong foothold in West Africa, and we expect that to continue in 2024.
In Peru, Egypt—again, Egypt—we do extremely well in Egypt, and we're actually in the process of adding rigs there also for existing clients and new clients. In South America, South America was challenging for us in 2023. We were really impacted by the weather, the winter shutdown. We made the decision to, you know, to keep our staff there, keep our infrastructure, keep everything. Really, 2023, we needed to invest in South America. And what Dave said, now, and what you're seeing, we're busy in South America. We're drilling both in Chile and Peru, and we're looking at a few more opportunities. So we're optimistic geographically that our existing markets will continue to improve. We'll continue to add rigs.
For South America, we think we have that one. Starting 2024, and as we get through Q2, Q3, Q4, we're a lot more optimistic on South America this year than we were in 2023.
Yeah, I mean, I understand 2023 had some certain political issues, pulling out of countries, and that's seeing your costs increase through the year. Can we expect that to return to levels maybe pre- as high as 2022, where your gross profit was 29%. But, would a midpoint between this year's 2023 and 2022's number be a reasonable assumption?
Yeah. We target a gross margin between 25%-30%. And, you know, if you go back years, it was 26, 26, 26. It spiked up to 29% in 2022, and I think we've tried to tell everyone, 2022 was a record year for us. Revenue went up 20% over 2021. We went from $115 million all the way up to about $139 million. So that's why you really saw that, call it an average of about 25%-26%. 2022, we got up to 29%. 2023, we were below our expectation. We were below 25%. And we talked about the reasons. South America is one, I won't revisit that.
But the pulling out of Burkina was a strategic decision we made, and it's for the long term of the company. It's truly an investment. We had significant revenue in Burkina. We had very good accounts in Burkina. We, you know, we did well in terms of drilling and profitability, but it just it wasn't safe. The security concern in Burkina, it just we had to move those rigs. And you just don't move rigs, it takes multiple quarters. But what we try to communicate in the MD&A and when we're talking to analysts and investors, we're out of Burkina. We are totally out of Burkina. Those rigs have all been moved now. They've all been redeployed, and most of them are out drilling in other countries for other customers.
So, we really have Burkina Faso behind us now.
The other-- Yep.
Agree.
I'll just quickly jump in there, if you don't mind, Gordon, and just add a little bit more color to what Greg is saying. That is that in taking that decision strategically to pivot away from Burkina, we also looked at our customer spread and realized that a lot of our problems were coming from, you know, as we alluded to on the call, the fact that we had to take a provision for some, you know, problematic customers in terms of not being able to raise capital, and so on and so forth. So while making this big adjustment, this big pivot that we did through quarter two, three, and four, we've also really focused our marketing efforts towards the Tier Ones. And we've been very successful.
We've actually come away, following that exercise with probably one of the largest haul of contracts that I have ever seen in the history of this company. Now, a lot of these things are still being inked. We have provisional letters of intent in place, and rigs are actually currently mobilizing. But we'll be talking more about that a little later, probably, probably somewheres around when we announce our Q1, I guess, because we'll have everything inked and rigs will be mobilized, and we'll be turning and earning. Then, and only then, we'll truly have an idea of what that margin is going to look like.
But you can appreciate that working for a junior and an intermediate versus working for a Tier One on a, you know, a 3- to 5-year contract with, you know, double-digit numbers, comes with margin compression. You appreciate that, I'm sure. On the flip side of that, we're, you know, working for cash generating customers that are not beholden to the capital markets, and this literally secures our future for the next wave of growth. So I'm really, really excited to be talking about that in small part now, but we'll be able to expand on that commentary as the year progresses.
In the past, you've provided separate press releases on major contracts. Is that something we should expect in the coming quarter, too?
Yes. We will.
Okay. Excellent. Thank you very much.
Thanks, Gordon.
Thank you.
Thank you.
Next question will be from Brad Virbitsky at Equinox Partners. Please go ahead.
Morning, Brad.
Hi. Hi, good morning. How are you, how are you guys?
Good.
Good morning.
Good day, Brad.
Thanks. Thanks for taking my questions. One question regarding the receivables. So there are $15 million of receivables that are 90 days or greater. And I guess the $5 million provision you took, so I'm curious if that's like a company that's now defunct, and the remaining $15 million is, you know, with companies that are still around? Or is there just $20 million of receivables with a bunch of different companies that you're taking a provision and assuming that, you know, or just taking some provision there because 90 days or greater? I'm just wondering if there's any sort of more color you can give around those receivables and sort of the probability that they get paid?
Yeah. Yeah, it's actually the latter, the last one you mentioned. It's what we're—we have to look at this on a portfolio... It's—we disclose it on a portfolio basis, so you're seeing-
Overall, but within that, there's different companies. Management goes through an exercise where we look at, you know, the company, what is the expectation for us, for us to get paid from that company? You know, are they a junior? Are they gonna need to raise capital? We look at, you know, are they a private company versus a public company? The, some are, some are even larger, you know, some are, some are producers that are just taking longer to pay. So it's, it's not just one company, Brad, and, and it's, you know, we, we do a probability analysis. We put a lot of time and effort into this, and, and we update our models every quarter. So it's... And we monitor them, we have discussions with them.
So, a quick answer is, it's just not one company. It's kind of a basket of all of our receivables. We look at all of our-
receivables. Some we don't have any provisions for.
Some may actually pay early, and they want a discount. But, you know, there are these a few companies that are taking longer, and it's skewing our aging, so we've taken a provision on them.
Are there... You know, 90 days and greater, are there any that are 180 days or greater, or 360 days or, or greater?
Well, yeah, some are old. We just disclose them at over ninety, and then we have to take our percentage on that. But, yeah-
We're working through... You can tell that. I think we started really. We disclose this every year, so we had the over 90 last year.
Some get paid. You know, they, most pay the older balances, and then, if we're still drilling for them, we switch to current, if you can follow that. But yeah, there are some that are over-
Well over 90 days.
How, what's your rule in terms of when you write them off? Like, are they written off completely after a year? Obviously-
No.
you still go after them, but-
There's no real rule.
What's your rule around that?
Well, it's when do you fully provide for them? And that's,
Right.
When we have an expectation that we don't think we're gonna get paid, we may then, you know, have to involve our corporate lawyers. Some of them, they just, you know, they're not. They don't have the ability to pay. Some of them,
You know, what's happened in most of these situations is, if it's a junior, we'll take a deposit and we'll drill. Sometimes they go slightly over.
and some of these ones are older ones that, you know, we drilled for years. I think their expectation at the start of 2023 was that they would be continuing to raise money, and that wasn't as easy as they thought. You know, this has really been a 2023 problem. If you look at Geodrill 2021-2022, we did not have significant provisions. There'd be the odd one, but
... we really saw in 2023, and mainly with the juniors, in the past, accounts that would raise money and drill, and raise money and drill, et cetera, go through that cycle, they weren't actually able to raise that money. So we're continuing to work through these. We, you know, some, some we're talking about being creative. Others, we have on, you know, small payment plans. But it's just a bit of a function of 2023, and I think the capital markets, and as Dave said, we're moving away from these kind of accounts, and it's - I think everyone is. Because they're-
The capital markets for juniors are pretty tough, and it's easier for us to, you know, get the larger accounts that have the ability to pay the producers. They wanna pay early, et cetera. So, but yeah, there are some receivables that we're continuing to work with.
So, have you changed your rule in terms... Like, it seems like it would be prudent for you, going forward, to change how you're deciding to get paid or-
Oh, absolutely.
Maybe you're not gonna get paid. Like, I'm just curious-
Right.
Yeah. What have you changed there?
These days, Brad, in cash we trust. And as we take on a new client these days, we'd like to see their financials. If they're a private company with intentions of going public, it's cash up front. At least 50% of the contract will be upfront before we mobilize, and that puts us in a situation where we have revenues coming in, and we wouldn't have worked out that 50% by the time the account is due. And so if the account is not paid within our standard 30-day terms, would you turn the rig off? Just have to demobilize. Now, we're not gonna find ourself in a situation like we found ourself in 2023. You know, the 2023 problem is, you know, we've been operating for 25 years.
For 25 years, as Greg mentioned, we've only had one or two. You know, it's a rare occasion when we have to take a provision. Last year, 2023, we were hit left, right, and center. And what's... You know, just look out the window, what's happening out there? You can... Capital markets are in a mess. You know, mining is not sexy. Very, very difficult for our customers to raise capital. So what are we doing about it? Well, first of all, you haven't got money, you can't demonstrate... You know, you can't come with a story that you're raising capital. That just doesn't work for us anymore. It's cash up front, and we turn the rig off when you stop paying.
The other thing, of course, is that we've pivoted away from the junior end of town, and we've and even the mid-tiers to an extent, and focusing on those large names. Those large names, you know, producing gold at $2,000, I think today's price $2,100 an ounce, with an all-in sustaining price of $1,100-$1,200 an ounce, which would be the average, average across our customer base. So they're churning cash out. They're not having any problem at all drilling and paying. And so that's where we plan to be, and that's where we're going to settle for now. That's what we're doing. That's what we're doing. We're not, you know, we're not sitting around waiting for this problem to sort itself out. We're fixing it, you know.
To do that, and to take that decision that we're gonna pivot away, it's not a five-minute exercise. It takes time. You know, you have to... Winning a job with a Tier One, it can take from the time of bid to the time of mobilization, it's a six-month process.
And Brad, let me add, like, if you look at our balance sheet, you know, we have $110 million in shareholders' equity. Even, we look at our accounts receivable, even after the provision, our trade receivables, we're, you know, $32.7 million. Our payables are only $23.4 million. So we still, like, we've had these collection issues and these collection problems, but in terms of Geodrill and the strength of our balance sheet and our 25-year history, we've made the decision to pivot away from the juniors, unless they can give us a significant deposit. But, you know, we'll get over this. It's not a-
It's something that, you know, we've dealt with in 2023, and, you know, we'll continue to, we'll always continue to support the juniors and drill for the juniors. It's just they have to pay a significant amount of the drill program, if not at all, upfront now. So, and then if you look at the rigs, you know, look at our rigs, just the strategy of moving towards the Tier One, there's less rigs available for the juniors. So, we're working on it, and I think as we get through 2024, we'll continue to work, we'll work its way out for us.
Okay. Thanks for that color. Just one more question for me is, when I'm thinking about your SG&A for this year, obviously you had the $5 million, I guess $5.4 million write-off last year in it. If I were to think... If I were to model it going forward, it would be, you know, the 2023 number minus the $5 million, or is there, are there other costs in there that should be lower, or how should I think about that?
Yeah, no, we're able to keep it. That's a good, good, good question, good point. The SG&A was skewed significantly by the allowance provisions. We try to model our SG&A at about 10%-11% of revenue, okay? So, we're hoping our SG&A is exactly what you said. We're hoping to get the revenue up and only increase the SG&A incrementally.
Okay. That's it for me. Thank you.
Thanks, Brad.
Thanks.
Once again, ladies and gentlemen, if you do have any questions, please press star followed by one on your touch-tone phone. At this time, since we have no other questions registered, it does conclude your conference call for today. We would like to take time to attend, to thank you for attending today's call and ask that you please disconnect your lines. Have a good day.