Good morning, ladies and gentlemen. Thank you for standing by. For today's call, foreign 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, please press star followed by zero for operator assistance at any time. I would like to remind everyone that this conference call is being recorded on Friday, November 11 at 10:00 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 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. At this time, I would like to turn the conference over to President and CEO of Geodrill Limited, Mr. Dave Harper. Please go ahead, sir.
Thank you, operator. Good morning and welcome to Geodrill's Q3 2022 financial results call. I will begin with an overview of our operations and performance for the quarter. Our CFO, Greg Borsk, will then give us a more detailed review of our third quarter financial results, after which I will discuss our outlook for the remainder of 2022. In the third quarter, we achieved a number of financial and operational milestones. High-level, revenue increased 29% year-over-year to $35 million. EBITDA was $9.3 million, or 26% of revenue, and that's up 96% year-over-year. Net income basically doubled to $3.6 million or $0.08 US per share.
We also continued to strengthen the balance sheet, increasing total equity to $103.6 million, up 22% year-over-year. We generated a return on capital employed of 26% and a return on equity of 18%. We ended the quarter with net cash of $5.7 million. That's up 100% on the previous quarter. Now, operationally and strategically, we expanded into a new geographical location by securing a contract in Chile. We were also awarded two additional surface drill contracts in Egypt. We completed our listing on the OTCQX with a goal of increasing shareholder visibility. Our strategic decision to diversify geographically has been critical to achieve this growth trajectory.
New long-term contracts with major exploration partners not only provides future cash flow, recurring revenue and visibility, but it also solidifies our reputation as a drill services provider on the borders of West Africa. Our focus on executing on our growth strategy has put us in a strong position to continue to benefit from the strong demand for our services as we remain focused on our operational excellence and driving profitability. I'll now pass over to Greg Borsk to discuss our financial performance. Thank you, Greg.
Thank you, Dave. As a reminder, all figures are reported in U.S. dollars. Geodrill reported our best third quarter ever. Record revenue, EBITDA and net income, all on the back of strong demand in all geographical locations for our drilling services. The company generated revenue of $35.2 million for Q3 2022, compared to $27.2 million for Q3 2021, representing an increase of 29%. The increase in revenue is a result of the increase in demand for the company's drilling services. In addition to West Africa, in Q3 2022, Geodrill also generated revenue from both Egypt and Peru. The company has invested significant amounts into capital, into its drill rig fleet and has advantages in the form of experience in the marketplace, accuracy, reliability and safety, which positions Geodrill to secure contracts.
The gross profit for the third quarter of 2022 was $10.9 million, being 31% of revenue, compared to a gross profit of $5.6 million, being 21% of revenue for the third quarter of 2021. EBITDA for Q3 2022 was $9.3 million, being 26% of revenue, compared to $4.7 million or 17% of revenue for Q3 2021. Lastly, the net income for Q3 2022 was $3.6 million or $0.08 per share. Compared to $1.7 million or $0.04 per share for Q3 2021. At this point, I will turn the call back to Dave.
Thank you, Greg. It's clear our financial position is a testament to the strength of our business and the demand for our drilling services. Before we move to the Q&A portion of the call, I would like to provide a brief outlook for the remainder of 2022. Today, Geodrill is better positioned than it has ever been, both financially and operationally. Supply and demand for many commodities, particularly gold, have started to reflect years of reduced capital expenditure and underinvestment. Demand for commodities, on the other hand, despite efficiency gains and substitution, continues to grow, especially in the EV metal space. It is in this landscape that forms our view that we are in the early stages of a period that should see higher commodity prices and returns. The set of circumstances against the backdrop of global uncertainty, more specifically inflation, creates a unique investment opportunity.
Expansion into new geographical regions as part of our growth strategy is pivotal to both revenue and profit going forward. With an established business and an impressive financial performance, we continue to believe Geodrill is strategically positioned to create higher returns for investors than other industry players. This concludes our prepared remarks on our financial results. Thank you for participating in today's call. We will now be pleased to answer any questions you may have. At this point, I will ask the operator to provide directions for anyone who does have a question. Thank you.
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 a new request. If you would like to withdraw from the question queue, please press star followed by two. If you're using a speakerphone, please lift the handset before pressing any keys. Please go ahead and press star one now if you have a question. Your first question will be from Daryl Young at TD Securities. Please go ahead.
Hey, good morning, everyone.
Morning, Daryl.
On a great quarter.
Thank you.
Thanks, Daryl.
Just hoping to get a little bit more detail on the contract that you signed on for in Chile.
It's a specialized drilling contract, and it is with a copper company. It involves directional drilling. We'll basically be drilling multi-intersectional deep holes down to sort of 2,000 M and then doing multiple daughter holes type drilling. We have a previous history with the players in this particular company. We had a great association with them back in West Africa. You know, they're well backed. They've got good history. We think that that's gonna be a great contract. The size and the scope of the program was enough to give us the encouragement to mobilize a couple of rigs down there.
It would seem it's off to a pretty good start. Actually a very good start. I think it's gonna be great, yeah. A new country, new commodity, new customer, basically we're stepping up and stepping out.
Let me just add to that, Daryl. As like Dave said, this is now our second country in South America, so that's exciting for us. It's a large enough contract that allowed us to invest, you know, to actually set up in Chile here and take that contract on. We're very excited about that new contract.
Okay. Perfect. It sounds like the bidding environment has still remained quite healthy. I would imagine maybe some fall off in some of the junior customers, but maybe you could just give us an overview of what you're seeing right now in terms of the juniors and where the demand is?
The juniors have fallen off a little bit, Daryl, but any slack is being taken up by the mid-tiers and the producers, and the Tier ones. You know, you can imagine it is a bit tough in that junior space, which is beholden to the capital markets. Capital markets are not performing that well, unfortunately. Anyone that's producing gold, you know, call it $1,600-$1,700. $1,750 seems to be moving around a bit, but you know, it's very pleasing to see it's now moving in the right direction.
You know, the advantage of being in a market like we're in is that, you know, for the most part, our customers are all, you know, in the sort of $1,000 per ounce all-in sustaining cost quartile. Whether gold goes to $1,600, they're still profitable. They're just less profitable. They're very busy replacing ounces that they're always taking off, they're mining off their balance sheet. As I say, juniors, there's a bit of pushback in the junior space, but it's only being picked up again. Any shortfall there is being taken up in the producing space and some.
Got it. Okay. When I look at the results for Q3, I'm assuming a lot of strength is from the new geographies you've added. How was the rainy season in West Africa compared to prior years? I guess what I'm just trying to get a sense of is this the type of quarter that you could post up in the future through the rainy season? Was it an abnormally good rainy season?
It's a good question. It was actually a very peculiar wet season in that it came very late. Very late. At one stage, we were even wondering whether it was gonna come at all. It did eventually arrive in. I'd call it the last month of the quarter,TI the last third of the quarter. There will be some follow-through where it basically chases us into Q4. I mean, wet season aside, if I was to just you know back out that it would have been a normal wet season, it was a great quarter. Yeah, it was a great quarter.
Final question would just be on thoughts on additional rigs, just given how high the utilization has remained. Is that in the pipeline for 2023?
Well, we continue to grow the rig fleet. Whenever the utilization gets to 70%, we start looking around at you know what cash we've got to reinvest in expanding the fleet. I think what we do need to do, though, is start to focus on what we accomplished in the last few years and consolidate for a little while before we can sort of you know we need to build you know the next launchpad or platform of growth. If you look at what we've done in years gone by, we sort of go you know from the 60s, and then we'll spend two or three years there. Then we were a few years in the 80s, and now we've.
Since then we've you know jumped from $87 to I think last year was $115. This year we're gonna end up I don't know I think analyst have got us about $130-ish. You know we're very comfortable with that. You know I'm not sure we're really ready to take on another 15% or 20% jump in the next year. Not because the demand is not there. It's just because it's not how we operate. We you know need to spend a bit of time here solidifying and making sure that you know just having the rigs is one thing but you've got to have the you know the workers and you know trained technicians and the vehicles and the support equipment.
You know, the way we do things with wherever we operate, we roll out a you know, a network of facilities. We've expanded into a couple of new regions recently. We need to look at those regions and say, "Well, how can we bring those regions up to the Geodrill standard," as it were. I wouldn't be predicting at this point in time another year at the same trajectory. I think what we need to do is just catch our breath, plateau for a little while.
Not saying we'll go sideways, but I'm just not sure that we'll be growing at the same rate next year as we were in this year that we're currently in, following on from the year before, because we really need to just solidify and consolidate our position before we can, you know, whilst we build, call it the launchpad, you know, if you like, for the next level.
Yeah. I think, Darryl, let me just add to that, too. I think the important thing that we try to communicate to the investors and the analysts, it's, you know, we're all about reasonable growth and maintaining our margins. It's not growth at any cost. If you look at where we, like Dave said, from 2020- 2021, we went from 80- 115. We grew by 40%, and we were able to have a healthy margin, 27%. This year, you know, if we grow at 15%-20%, year to date, our margins is, you know, we're up to 31% gross margin.
Growth is important, but it's also maintaining that, you know, our high kind of industry-leading margin and expanding into some of these territories that we've committed capital and resources to. That's why I was talking about Chile with the first job. It's, you know, if you look at the totality of things, but it's not significant, but it is our first job in Chile, and it allows us to, you know, bid the second and third job, et cetera. Same with some of the other recent countries we've been in, Peru and Egypt. It's more of a focused approach as to where do we wanna grow strategically and making sure we're maintaining our profitability as we do that.
Okay, perfect. That's great. Great color, guys. Thanks very much, and I'll get back in the queue.
Thanks, Daryl.
Thank you.
Thanks, Darryl.
As a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad. Your next question will be from Gordon Lawson at Paradigm Capital. Please go ahead.
Hey, good morning, everyone. Could you please add some color on the location of remaining rigs in Burkina Faso with respect to the ongoing coup there? If there's plans on relocating these to safer or more profitable jurisdictions.
In Burkina at the moment, just pulling up my internal files. We've only got a few rigs running up in Burkina Faso. We're looking after our key customers. It's, you know, very important that we make sure that they're well-serviced. They're operating in areas that they're comfortable with and we're comfortable with. You know, the thing with gold mining, Gordon, is that it doesn't stop because there's some political situation that's going on in any one of the 55 countries that make up the continent. At any one point in time, you can be sure one of them is gonna be blocking the property books. It's not gonna stop gold mining. They never stop mining.
Where coups occur, it is usually in the capital cities. It's never around a gold mine. The last thing they would do is shut down the gold mining because it provides the country with, you know, much needed forex. Our operations have been relatively unaffected. We are slowly reducing the amount of numbers that we have in Burkina Faso. That is more because we have better opportunities elsewhere. It's just a competitive market space, that's all. If we see a better opportunity in another jurisdiction, we'll take that opportunity. At the moment we're inundated with inquiries from some of our other regions, and we have a competitive market space in Burkina Faso.
The best thing we can do is leave that to some of our competitors while we take our rigs away and put them onto more profitable jobs in other jurisdictions. Does that make sense?
Yeah, it's fair enough. It's just other some of your competitors have commented on moving away from Burkina Faso. Obviously, they're also not drilling at the capital, but there's still an ongoing risk that something could happen. That's the only reason why I asked. Moving on, in terms of-
We're not expanding our operations there.
Yeah.
We're also mindful that we have customers there, and we need to keep those customers serviced. I have no feelings either way for Burkina Faso, positively or negatively. For me, it's just about opportunity, and I have better opportunities, better commercial opportunities in other jurisdictions. I'll take the risks out. In the meantime, the risks that are there are working and they're making money, then I'm happy for that to remain.
Okay, understood. In terms of segment and revenue, are you able to give us an idea of how much revenue you're currently generating in Latin America? Can you give some expectations from the new Chilean contract as you have with other, new customers who you announced earlier this year?
That's more of a financial disclosure, and it's not really significant yet, Gordon. Like I said, we're still predominantly a West African driller. Where we've made significant strides are in North Africa and Egypt. In terms of South America, it's still early stage for us. When I say early stage, if you look at the number of rigs over there compared to the total rigs in the fleet, the Geodrill model, what we do is we start with one contract, usually 3-6 rigs in any location. As that becomes successful, we grow organically in that territory. What we'll do, we'll reinvest our cash. In Peru, we've added another rig.
You know, there's another rig, you know, forecasted again for that. Chile, well, you know, we just started in Chile, really near the end of Q3, so we'll probably be able to give you a little bit more color on that, when we speak in early 2023. It's very early stage for us, but it's starting off well with contracts in two countries now.
Okay. Thank you very much. That's it. That's it for me.
Thank you. At this time, Mr. Harper, we have no other questions. Please proceed with any closing remarks.
Well, that's us. Thank you very much for everybody that made time to jump on the call today. I'll say farewell. Thank you very much. Cheers.
Thank you, sir.
Thank you.
Ladies and gentlemen.
Thank you.
This does indeed.
Thank you, operator. Bye.
You're welcome, sir. This does indeed conclude your Conference Call for today. Once again, thank you for attending. At this time, we do ask that you please disconnect your lines. Have a good weekend.