Morning, ladies and gentlemen. Thank you for standing by. For today's call, phone 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. 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 Wednesday, May 12th at 10:30 AM Eastern Standard 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 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. I would now like to turn the call over to the President and CEO of Geodrill Limited, Mr. Dave Harper, who will review the company's operations and performance of the quarter. Geodrill CFO, Greg Borsk, will then give us a more detailed review of our first quarter financial results, followed by an outlook from Mr. Harper. I will now turn the call over to Mr. Harper.
Thank you, operator. Good morning and welcome to Geodrill's Q1 2021 financial results call. I hope you and your families are staying well. As I report to you today from our head office in Accra, Ghana, I'm cautiously optimistic of a return to normalcy in coming months as vaccinations roll out. I also look forward to seeing our analysts and shareholders again in person in due course. Today, I'm pleased to report Q1 was an exceptional quarter. In fact, it was our strongest ever in the history of this company. As reported earlier today, we generated record quarterly revenues of $30.7 million, which is a 70% year-over-year increase. We recorded EBITDA of $10 million or 33% of revenue, which is a 350% year-over-year increase. We realized strong profitability, significantly increasing net earnings to $5.7 million.
We generated a return on capital employed of 22% and a return on equity of 17%. We also increased rig utilization to 75%, up from 50% a year ago. Throughout the quarter, we continued to sharpen our focus on our capital markets objectives as we undertook strategic initiatives to drive the long-term growth of the company. We leveraged opportunities by continuing to diversify geographically and increasing our revenue exposure beyond the shores of West Africa to Egypt in North Africa and Peru in South America. We also continued to benefit from a robust exploration environment, as evidenced by the extension of contracts in our core operations in Ivory Coast, Burkina Faso, Ghana, and Mali. Throughout the quarter, the company also made significant strides towards meeting its environmental, social, and governance objectives. Geodrill has always considered our ESG initiatives first and foremost, and at the center of everything we do.
Operating in the mining sector, our impact on the environment has been a key focus of the company as we continually strive to improve the way we operate. Our social impact has been focused on the communities we work in by giving back to the orphanages, schools, and shelters, but also making sure we transfer the expertise and knowledge of our most experienced employees in developing local content. During quarter one, Geodrill took steps to systematically integrate ESG climate and broader sustainability factors into our operations, beginning with energy solutions, including converting the company's head office in Accra, Ghana, over to solar power and taking this facility 95% off grid. In summary, Q1 was a defining period for Geodrill. It is a quarter in which we proved our strategy is working, and that now is the time to accelerate it. I'll now turn the call over to Greg.
Thank you, Greg.
Thank you, Dave. As a reminder, all figures are reported in US dollars. The company generated record revenue of $30.7 million in Q1 2021, an increase of $12.7 million or 70% when compared to $18 million in Q1 2020. This is a significant achievement for the company. The company's revenue of $30.7 million also represents an increase on a quarter-over-quarter basis of $6 million or 24% for Q1 2021 compared to Q4 2020. A strong gold price and strong industry tailwinds continue to drive demand for our drilling services. A sustained gold price in and around 1,800 supports strong activity. The junior mining companies have raised significant capital for exploration, while the intermediate and senior mining companies continue to generate significant cash flow from their operations and are expanding their exploration budgets.
The gross profit for Q1 2021 was $9.6 million, being 31% of revenue, compared to a gross profit of $3.1 million, being 17% of revenue for Q1 2020. The company realized record EBITDA in Q1 2021 of $10 million, being 33% of revenue, compared to $2.2 million, being 12% of revenue for Q1 2020. The company also realized record net income for Q1 2021 of $5.7 million or $0.13 per share. To keep pace with the increase in activity in Q1 2021, subsequent to quarter end, we increased our credit line to $10 million and secured a new medium-term loan facility of $6 million. Cash and working capital remains strong. We ended the quarter with cash of $5.9 million and still have $10 million available on our banking facilities.
Our working capital in Q1 2021 was $39.6 million, and we believe we are well-positioned to keep up with the increased demand. At this point, I will turn the call back to Dave.
Thank you, Greg. It is clear from our financial operational performance is a testament to the strength of our business and the demand of our drilling services. Before we move to the Q&A portion of the call, I'd like to provide a brief outlook for the remainder of 2021. We entered 2021 with strong market fundamentals, robust demand for drilling, and strong tailwinds to drive another strong year. Our edge is our style of operating. Geodrill's aim has been to build a company to stand the test of time by differentiating itself from its competitors. To digress a little here, when I arrived in Ghana in 1998, I had the privilege of meeting legendary boxer Azumah Nelson, and we became good friends. Now, most boxing fans and historians would know the name Azumah Nelson very well, as he was a Triple Crown WBC super featherweight champion.
Nelson's story is not that different to Geodrill's. He was relatively unknown in Ghana when, in 1982, he was the decisive underdog in a WBC fight held at Madison Square Gardens. Though he lost on that occasion, his stock as a boxer rose to international prominence, and so he stuck with it, and two years later, he would eventually become the world champion. As a champion, he reigned for the next 11 years, undefeated and never faltering. In doing so, earned the respect from the entire boxing community worldwide. Though he has long since retired, Azumah is still today considered one of the greatest pound-for-pound boxers to have ever entered the ring. Now, all of this captures one simple truth, and that is that every champ was once the contender.
Like Azumah, Geodrill sets audacious goals every day, striving to push limits of our potential and our unwavering commitment to our customers and our stakeholders. When Geodrill went public 10 years ago, we were the little guy, and along the way, we certainly had our share of trials and tribulations. Today, rig for rig, pound for pound, Geodrill is demonstrably punching above its weight, certainly compared to its peers. I do believe that today's Q1 results bear testament to this. As I look ahead, I'm confident that Geodrill has the right platform and is investing in the right areas at the right time. We are deepening our competitive advantage and setting the foundations for sustained, profitable growth. Thank you. This concludes today's prepared remarks. Thank you very much for participating in today's call. We'll now be pleased to answer any questions that you may have.
At this point, I will ask the operator to provide directions to anyone who has a question.
Your first question comes from the line of Anthony Prost from Stifel. Your line is open.
Hey, good morning. Wanted to start off by asking about your activity in South America. How many drills do you currently have turning? Wanted to know if, given the strong price movements for base metals, if you could provide some additional color on your bidding?
During the quarter, we really just before the end of quarter four, we started in our first hole. We didn't even get on the radar in quarter four. Quarter one was the first month of activity that we had. We have three rigs currently in South America, and one of those rigs is employed. At this point in time, it's starting as you would expect any normal startup. It'll be a case of 30% utilization, and then as the other rigs come online, the utilization will increase. What I can say is that and from our initial kickoff contract, the customer is extremely happy actually with the work and the performance and the cost per meter. We have recently had that contract extended well and truly over and beyond what was originally proposed.
That's now turned from a short-term contract, and I guess a starter contract, if you like, to something much more substantial. It is a base metals project. Of course, base metals are kind of in vogue at the moment. The other thing I can say is that we are receiving a lot of interest. Whenever there's a new driller in town, you always get the opportunity, right? We're bidding a lot of jobs at the moment, and I expect to see full utilization of those three rigs directly, imminently in the coming months. Beyond that, we'll then probably take a strategic decision as to the need to introduce more capital to service what we believe will be a fast-growing market for us.
Great. Thank you. Switching gears a little bit, it seems that ESG is sort of increasing in importance for you right now, and I wanted to know, do you have a formal plan in place? If not, when can we expect one, given the growing importance both for you and for investors?
Sorry, just repeat the question, Anthony. I didn't catch that.
Oh, sorry. Just wanted to gain a better understanding of how big a plan do you have in place for ESG? Do you have a formal plan in the works right now, and if, when can we expect one?
ESG is becoming, and ESG reporting is something we're going to hear more of imminently. It's happening. You can't turn on the television today without you don't even necessarily need to be on the business channel to see that probably 10% of air time is now being taken by the ESG stories. ESG is not a new thing. It's been getting around for a long time, although it's probably in most cases, been under the guise of CSR. At Geodrill, we believe in doing what is right, not just doing what is required. At the core of our vision and our values is a commitment to communities and environment in which we operate. For us, corporate responsibility means running our business with honesty and integrity. All of that stuff that we've been doing for many, many years.
it's basically taking on a kind of a different format these days. we've recognized that, and we've realized, we recognize how important that is. We recognize that unless companies are ESG compliant in ESG reporting, that they will miss out on investment dollars. it's important now that we take our erstwhile, already robust CSR programs and essentially ramp them up into ESG. The program has been going on for about. It's always been going. It's just that we've never truly operationalized it or formalized it. it is our intention now to be ESG reporting by the next quarter. until now, people we've done sort of things in the community, we've just loaded them on our website and left it at that. now there seems to be more of a focus and an attention being placed on reporting.
of course, reporting agencies are all getting involved and at the moment, we're kind of at the stage where we're just positing ourself as to how we deal with that and how we truly measure that, all of the great stats that we've been producing. Just by example, in this last quarter, as I said on my notes, we solarized the Accra office. That's not a small exercise. That's a significant exercise, taking a commercial building and taking it completely off grid. Aside that, in the same quarter on a project that we were previously working on, which was a safe shelter for victims of domestic abuse, one of our projects called Pearl Safe Haven, where we'd previously built the upper story for them and the following quarter, we drilled a water well for them.
Well, now we're looking at it and saying, "Well, perhaps we need to turn that water into potable water." We've just bought them in this quarter a purification plant. I'm just giving you an example of some of the projects as I'm running through them on the list here that I'm looking at. We're very strong on sports and education, farming projects. Yeah, it never seems to stop. Now essentially, we're just taking our CSR programs and we're ramping them up and putting them on steroids and converting them into ESG reporting. We're looking forward to it because we're in a great position. The good news is we've already got all of this stuff already done, and we've received enormous amount of accolades from, one from the president of Ghana to the former Australian high commissioner who is out here.
yeah, I think we're in pretty good shape. I think Geodrill has always been a company that has been best in class. what we do and how we do it as far as ESG goes will not be any different.
Okay, thank you.
Let me just quickly add on that too, and Dave did an excellent job. We're very excited about ESG, and as he said, we've done this since 1998. We've invested in the communities, and so for us, I think what you'll see as we roll out Q2, Q3, and the other quarters, just a bit of a different reporting and maybe a little more emphasis on how we train our local people and the local content. Not only what we give back to the communities in terms of CSR, but also transferring talent and skill sets. We're pretty excited about the ESG initiative. </edited_transcript
Perfect. Thanks. One more question before I pass the line, just a small housekeeping one. Can you remind me how many drills you're sending to Egypt?
Two.
Two. Thank you. That's all for me.
Sending, sent. They're on the way. They're on the high water, high seas as we speak.
Anthony, that's initial too. I mean, the plan is just like Peru and like every other country that we've went into. We get into a country, we get a contract, we prove ourselves, we deliver, and then we also use some of that local currency, et cetera, to continue to leverage and build out our presence in that country. I would just say two rigs have been sent and that's just the start.
Great. Thank you.
Again, if you would like to ask a question, please press star and then one on your telephone keypad. Your next question comes from the line of Ahmed Shaath from Beacon Securities Limited. Your line is open.
Hey, good morning </edited_transcript
Ahmed
Dave and Greg. Congrats on a great quarter.
Thank you.
I guess, Dave, my first question on the South American front. Are we purely focused on Peru or are you seeing the landscape there in other countries? Potentially, is there any discussion for other commodities as well, or is it too soon to tell?
We have a completely open mind. We've already visited one South American country where we have incorporated with the intention that we will be expanding into that country imminently. At the moment, I'm actually short of rigs, I'll be honest. It's the only reason we're not there. We see that that country has enormous potential. We visited another country where we've also actually been tendering. We actually love South America. If you look at South America, and it was connected to West Africa. Drilling in West Africa, drilling in South America, is actually quite similar. The ground conditions are quite similar. The terrain's quite similar. It's just a different continent. It's all part of the strategy of growing up and growing out. We recognized a long time ago we need to kind of ramp this up a bit.
It's all been driven by customer demand. Happy customers in West Africa, two friends tell two friends who tell two friends, and suddenly you go from one rig to 68 rigs in 20 years. Well, South America is really because customers of ours in West Africa have turned up, working on projects in South America, and they've realized that there's an acute, let's say, deficit in the level of service that is on offer. One thing that we do in West Africa is provide first world drilling. We're basically a first world drilling service in a developing nation. I think that what happens in a lot of cases is contractors tend to think, "Well, because I'm in a developing nation," and it tends to kind of garner this near enough's good enough approach. That's just not the way we operate.
Folks who have worked with Geodrill in West Africa and then have to go to South America and work with some of the contractors over there, I think they'll be bitterly disappointed. That's where the opportunity came for us. Some of our customers said, "Look, get some rigs over here. We think there's a market here." I have to agree with them. It's looking really, really interesting. Really, really interesting. It's all part of also diversifying away from gold. We're already 90% gold, and some battery metals. Doing a bit of lithium drilling at the moment. There's not really a lot of base metals in West Africa to drill for. If you go to Liberia and countries like that, there is, but those markets just don't seem to be working that well at the moment.
For us, there's a very viable market in South America. Early stages are, it's just the altitude, that's the challenging thing. We're at 6,000 meters and things are looking up. Great. Amazing.
That's great to hear. What I gather from you is like you guys are tendering on three countries in total in South America at the moment, which is good diversification for you guys. I guess secondly, maybe more for Greg, just on the working capital drag. If I understand correctly from the language in the MD&A, it looks like you guys will be just doing the collection just post the quarter, so we should expect a nice bump in cash flow in Q2?
Yeah. Exactly. If you look at the working capital, the significant increase was the increase in the trade receivables, and that's pretty typical. The industry, some of the accounts wait till after quarter ends to pay. Collections subsequent to the quarter were very good. Again, we're busy. We continue to be busy in Q2. I think you're right. You will see the working capital, mainly the receivables normalize. That was the increase in working capital in Q1.
That's great. Last one for me, Dave. You mentioned you're short of rigs. What is the internal thinking or discussions that you guys are having on expanding the rig fleet? I'm not sure how far have you got along with discussions with your supplier, I guess Sandvik, and their availability to provide rigs and the lead times. How are you seeing that and what should we consider as your options to grow your rig fleet? Is that the bottleneck for you to get more contracts in South America, specifically?
We haven't reported it yet because we're still in the planning stages, but we've actually got eight rigs in the pipeline. Four of those rigs are being built in country at Geodrill at our facility. Four of those rigs are being sourced externally in kit form, and they will be assembled in country by us. There's a number of reasons for that. I'm going to drag you into the esoterics of it here, but maybe that's another conversation at another time. For the meantime, high level, eight rigs are currently being planned. Exploration rigs.
And so-
Sorry, Dave, finish off.
No, go ahead.
No, I was just going to say, and that's just very consistent growth. That eight rigs you will see kind of spread out over the year, the way we do things. With 68 rigs already, and the last rig we put an order in was last year, which we'll take delivery of at the end of Q2. It depends on the type of rig and what we're seeing from our clients. Certain rigs, definitely there's more demand. Those are the ones that we have in the queue and we're lining up. As Dave said, there's a few in the workshop that we're busy. This is one of the things I try to communicate in the MD&A, is the Geodrill, our secret sauce or our success has been reinvesting in our balance sheet.
It's either reinvesting in our PPE or reinvesting in our inventory. You can see healthy levels of inventory support activity in Q2. A lot of rigs, so we're really ready to go. Hopefully that helps.
No, that's great to hear, and I appreciate that color. That's it for me. For now, we'll jump back in the queue. Thanks again, and congrats to you on a huge quarter this.
Thanks. Thanks, Ahmed.
Thanks, Ahmed.
There are no further questions at this time. I turn the call back over to Mr. Dave Harper.
If there's no further questions, I'll thank everybody for making time to get on the call today. Have a wonderful day.
Thank you.
This concludes today's conference call. Thank you for participating. You may now disconnect.