Good morning, ladies and gentlemen. Thank you for standing by. For today's call, phone participants are in listen-only mode. Following the prepared remarks, the company will conduct a question-and-answer session and instructions will be provided at the time for you. If anyone has any difficulties hearing the call, please press star followed by the zero for operator assistance at any time. I would like to remind everyone that this conference call is being recorded on Thursday, November 11th, at 10:00 A.M. Eastern Standard Time, and it is being broadcast 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 the market and general economic conditions and the risks and uncertainties detailed from time to time in company's SEDAR filings. I will now turn the call over to President and CEO of Geodrill Limited, Mr. Dave Harper, who will review the company's operations and performance for the quarter. Geodrill CFO, Greg Borsk, will then give us more detailed review of our first quarter financial results, followed by an outlook from Mr. Harper. I would now like to turn the call over to Mr. Harper. Please go ahead.
Thank you, operator. Good morning. I hope you and your families are staying well. Momentum in the first half of 2021 continued into the third quarter. This resulted in another strong quarter for Geodrill. Despite Q3 typically being our weakest quarter due to wet season, we delivered a solid operating performance and significant revenue growth. During the quarter, we generated a 44% year-over-year increase in revenue. We maintained strong profitability. We generated a return on capital employed of 21% and a return on equity of 16%. We also secured significant multi-rig, multi-year contracts, and we ended the quarter with an increased rig count of 71 drills. During the quarter, we demonstrated strong and consistent operational execution. These core strengths drove momentum throughout the quarter and powered double-digit revenue and profit growth in our year-to-date results.
Year-to-date, we have generated $88.5 million in revenue, representing a 53% year-over-year increase. Significantly, this result eclipses our 2020 fiscal year and equals our best ever fiscal year in 2018. We also strengthened our year-to-date profit with a 67% year-over-year increase in EBITDA, being $22.1 million, and increased net earnings to $11.4 million or $0.27 year- to- date. These results build on the strong operating momentum that our team has achieved over the long term, enhancing our position of strength as we close out the final quarter of the year and we move into 2022. I'll now hand the call over to Greg to comment on the quarter's overall financial performance in more detail. Thank you.
Thank you, Dave. As a reminder, all figures are reported in US dollars. The company generated revenue of $27.2 million in Q3 2021, an increase of $8.4 million or 44% when compared to $18.9 million in Q3 2020. The increase in revenue is a result of the increase in demand for the company's drilling services. With the gold price in the first nine months of 2021 averaging approximately $1,800 an ounce, global exploration spending continues to increase. Approximately 95% of Geodrill's clients are exploring for gold, so we have benefited from the momentum over the past year and are well positioned for the remainder of 2021 and 2022.
The gross profit for Q3 2021 was $5.6 million, being 21% of revenue, compared to a gross profit of $4.3 million for Q3 2020. The lower than average gross profit margin in Q3 2021 and Q3 2020 is characteristic of the wet season, typically our weakest quarter. The EBITDA for Q3 2021 was $4.7 million, being 17% of revenue. On a year-to-date basis, EBITDA is $22.1 million or 25% of revenue, reflecting the strong demand for the company's services throughout the year. The net income for Q3 2021 was $1.7 million or $0.04 per share. On a year-to-date basis, we have more than doubled our net income from $5.4 million to $11.4 million.
Another highlight, as at September 30, 2021, the company significantly increased its cash position to $15.8 million and ended the quarter with a net cash position of $5.5 million. At this point, I will turn the call back to Dave.
Thank you, Greg. Before we move to the Q&A portion of the call, I would like to provide a brief outlook for the remainder of 2021. 2021 to date has been marked by robust demand for drilling, strong gold prices, and increased utilization. With these strong market fundamentals, our outlook for the remainder of the year remains exceedingly positive. Consistent with our long-standing commitment of being equipped with a modern fleet of rigs and a clear business vision, Geodrill remains a serious contender in our industry as we remain focused on growth and on being drill-ready in 2022 and beyond. Thank you for participating in today's call. We'll now be pleased to answer any questions you may have. At this point, I'd like to ask the operator to provide directions to anyone who wishes to ask a question. Thank you very much.
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star followed by the one on your touch tone phone. You will then hear three-tone prompts acknowledging your request, and your questions will be pulled in the order that they are received. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speaker phone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question does come from Ahmad Shah from Beacon Securities. Please go ahead.
Good morning, guys.
Hey, Ahmad.
Congrats on a solid top line. I guess my question is mainly around the gross margin. Like, what do you see in the cycle that is gonna help us understand how these gross margins are gonna look? I mean, activity looks very strong and continues to be very strong, but the gross margin looks like a bit of a moving target. Like, any color on that and why the weakness this quarter despite the strong top line?
Greg.
Go ahead, Dave, and then I'll just. If you wanna start, and then I'll just dive in, or I can start.
I'll give you my explanation, Ahmad, from an operational perspective. You know, I'm dealing at the front face of the business, and I see the rigs come in the door and out the door and come in for maintenance and so on and so forth. Whereas Greg gets to sort of break it down into numbers. Basically, you know, quarter three is always a bit of a slippery slope because it's our wet season quarter. What typically happens is rigs come in from the field, and when the revenue stops, unfortunately, costs do not stop on the same day. What happens is the rigs, you know, have to basically be demobilized back to base.
For a period in time, we still have the costs without the revenue. Where this quarter was a little peculiar, as compared to quarter three in 2020, is that we had the costs as the rigs came in from the field. The wet season ended rather more quickly than expected. We actually had the costs in at the tail end of September, where the rigs were going back out to the field. At this point in time, when we remobilize back to the field, we have the high costs of you know, training and you know, preparing the guys so that they go out to the field and do the job safely. Again, this comes with without revenue.
Essentially what happens is we have the costs, either side of the parabolic in this particular quarter, as opposed to quarter three last year. We had the costs without the revenue. This year it was a factor of two versus last year. If you recall last year, we had a slow quarter one, and then we had COVID, so we had a reasonably slow quarter two. As we ended quarter three, things started to pick up and the run rate at the end of quarter three was reasonably strong. That resulted, if you recall, in a record quarter four.
The difference really between this quarter and the quarter a year ago is that we didn't have the revenues and therefore we didn't have the costs on the left side, if you like, or the July side of the quarter. We only had the costs as the rigs exited and went out to work. That was point number one. There was a couple other things. We had a different mix of drilling. We drilled basically a higher percentage of diamond core drilling in this particular quarter, versus, you know, reverse circulation and just different cost structures and different profits for different services.
The other thing is we had less multi-rig jobs, and that was just characteristic of this particular quarter. Basically, what this all resulted in was lower revenue per shift per rig. Look, I think as Greg was pointing out as he was speaking through the financials, I think the thing we really need to focus here on is the strong result that was achieved thus far year-to-date. At that point on, and I'll just hand that over to Greg.
Let me add on to that, Ahmad. I mean, I think the way we look at it from the finance perspective is if you look at Geodrill's gross margin for the last three years, and I'm talking annual, for 2020, 2019 and 2018, we have a 25% gross margin, which is the highest in the industry. We have a very strong gross margin. What you're seeing in Q3 is typically we view it as almost an investment quarter in the business. We expect a lower gross margin in Q3 for the points Dave mentioned. What you really have to focus on is the year-to-date margin.
The year-to-date margin, because we had an extremely busy Q1 and Q2, as Dave said, we entered into wet season a little earlier, and we're out of it a little earlier. Q3 is wet season. Year-to-date, you know, our gross margin is 27%. You know, that's an exceptional gross margin. We tried to communicate. I think when we were in Q1, you know, we had a 31% gross margin. We were trying to communicate to people that's really on the high end. That was reflective of an extremely busy Q1. Same in Q2. Q2, the margin was 27%.
Hopefully we're explaining, I think for Geodrill and just the exploration in general, a lot of this is the first half of the year loaded. Then what happens is wet season, wet season's upon us. Geodrill, we take advantage of that. We continue with a very active workshop to make sure we have rigs ready for Q4 in 2022, but we don't slow down. We used to. We actually used to manage Q3 just to break even or make a penny. It truly is an investment quarter for us. You know, this Q3, we were able to earn $0.04 a share, $1.7 million. We're very, very happy with the outcome of this wet season.
That's great. If I understood correctly from a year-over-year comparison, there was remobilization costs within this quarter that it was not present in last year's quarter. That's one of the factors, right?
I'm sorry. I just missed that, Ahmad. What was that?
There was remobilization costs because I think, Dave mentioned that you guys had to put the rig back out on the field.
Correct.
During the quarter as well, right? Okay.
Yeah, exactly.
That's great. That should benefit also the Q4, right? 'Cause those normally come in Q4.
Yeah. You really have to average out the quarters for us. I mean, again, when we had such an exceptional Q1 and Q2, we tried to let people know, you know, look at the averaging for us because then we had rigs coming back off.
That's great. Just in general trends, how are you guys seeing the pricing trends amid this increased activity? Are you starting to see any pushback on prices? Just trying to think how we should look into 2022 bidding season.
Pricing's on the move, Ahmad, but costs are as well. As pricing increases, it tends to move in lockstep. You would hope as the industry gets a little busier, then it might get a little bit more pricing power. At the moment, we're seeing some unusual things going on. You know, we're living in a very different world. Shipping costs, I can tell you, have doubled, if not tripled. You know, the cost to move one 20-foot container used to be $3,500. It's now $7,000 or $8,000. You know, that's just because as the world sort of is coming out of COVID and there's a shortage of ships, suppliers are all starting to raise their prices. The cost of hiring people generally is increasing.
As a result, we are having to increase our pricing to capture some of those costs. The margin squeeze that you see in this particular quarter has nothing to do with that. It was really just as I was saying, either side of the parabolic, this particular year, we had some costs and we didn't have that last year. When you look at it on a year-over-year basis, I mean, the obvious question is how did revenues go up 44% for a relatively flat EBITDA result or, you know. It's kind of a bit confounding when you first look at it. When you break it down, it's quite easily explained in two or three things.
One was the, you know, the double costs of the mobilization and the demobilization and all the salary costs without the revenue. Essentially, we had the fixed cost, but our revenue, you know, without the revenues. A certain portion of it was also in the mix. You know, we just had an unfavorable mix in this particular quarter. That had a little bit to do with the geographical mix. Most of the business moved into a region where they just happened to drill a less favorable mix for us. I expect things should normalize as we exit quarter three and we enter quarter four in 2022 and beyond. I would never encourage anyone to judge us based on our Q3 results.
We normally look at Q3 and say, "Hey, if we can make $0.01, maybe $0.02, that'll be a great year." We've made $0.04, so we're pretty happy.
That's great. Thank you. Thank you guys for the call and congrats again on the solid quarter. Thanks.
Thanks, Ahmad.
Thanks, Ahmad.
Thank you. Ladies and gentlemen, as a reminder, should you have a question, please press the star followed by the one. Your next question comes from Daryl Young from TD Securities. Please go ahead.
Morning, guys.
Morning, Daryl.
Morning, Daryl.
Just following up on a lot of questions about some of the added costs that went into Q3. Does that position for a strong growth quarter in Q4 and revenue quarter in Q4?
The Q4, well, when you say strong again, our two strongest quarters are Q1 and Q2. I think, you know, we're comfortable. October is behind us and November. Then, you know, you hit Christmas season here. Q4 is looking strong. Again, when we look at this business, we look at it annually. Really we're seeing a lot of the 2022 is gonna be exceptionally strong. That's gonna be exceptionally strong, again, because you're gonna have the Q1 and the Q2 in there. Hopefully I'm answering your question. Q4 is gonna be another solid quarter. I think where we're really gonna see the strength again.
In gold, you know, we put in the press release, you know, 95% of our clients drill for gold. Gold is $1,860, so there's tremendous demand. A lot of our clients start their programs in the new year. Expect a solid Q4 and an exceptionally strong 2022.
Okay, great. When you're talking about 2022, is there any change in the mix of drilling that you've got planned for 2022? Just thinking in terms of some of these new exploration contracts versus maybe more mine site drilling and if we should be aware of any margin impacts, you know, a 12-month run rate for 2022 versus what you guys have been doing thus far from the recovery of drilling cycle.
I think if you average it out, we take your revenue for 2022, whatever you build your model to be, I think where I would be guiding you to is work on across the four quarters an average of 25%. 24%, 25% over the four quarters of next year. I think that's pretty much where we're gonna end up this year. Which in itself is a reasonable result. I think, looking at your, while you guys have been speaking, I've just pulled up where you're at for your 2021. I think we're gonna land about there.
I think you can just basically put in an increase in revenues for next year. We would say that the margins that you've got in there look about right.
Okay, perfect. No real change in the drilling mix either?
Well, we don't really know because we provide a service where the rigs that we provide, you know, the customer has the option of being able to switch from one to the other. We never really know on any given day what percentage it's going to be across the various quarters. As the 365 days of next year are gonna play out, I think that if you're shooting for a zip code, I'd work on 25%.
Got you. Okay. Thanks very much, guys.
Same. Daryl, the mix is also a function of the type of drills we have. If you look at, again, we put significant through the first nine months in PPE, but it's consistent among the types of drills. We'll add, you know, we'll add an underground drill rig because we need that. We'll add a couple of multipurpose. We'll add a core, et cetera. The mix should stay the same.
Okay, great. Thank you.
Thanks, Daryl.
There are no further questions at this time. You may please proceed.
Okay. No further questions. I'll just thank everyone for being on the call today. Thank you very much. Have a great day and be safe.
Thank you.
Ladies and gentlemen, this concludes your conference call for today. We thank you very much for participating and ask that you please disconnect your lines.