In the news release, CATHEDRAL ENERGY SERVICES CONSOLIDATION STRATEGY PRODUCES RECORD THIRD QUARTER RESULTS, issued
CATHEDRAL ENERGY SERVICES CONSOLIDATION STRATEGY PRODUCES RECORD THIRD QUARTER RESULTS
/NOT FOR DISSEMINATION IN
Dollars in 000's except per share amounts.
This news release contains "forward-looking statements" within the meaning of applicable Canadian securities laws. For a full disclosure of forward-looking statements and the risks to which they are subject, see "Forward-Looking Statements" later in this news release. This news release contains references to Adjusted gross margin (gross margin plus non-cash items of depreciation and share-based compensation), Adjusted gross margin % (adjusted gross margin divided by revenues) and Adjusted EBITDA (earnings before finance costs, unrealized foreign exchange on intercompany balances, taxes, depreciation, non-recurring costs (including acquisition and restructuring costs and non-cash provision for bad debts), write-down of equipment, write-down of inventory and share-based compensation). These terms do not have standardized meanings prescribed under International Financial Reporting Standards (IFRS) and may not be comparable to similar measures used by other companies, see "Non-GAAP Measures" later in this news release.
FINANCIAL HIGHLIGHTS
Dollars in 000's except per share amounts
Three months ended | Nine months ended | ||||||||||
2022 | 2021 | % change | 2022 | 2021 | % change | ||||||
Revenues | $ | 107,846 | $ | 20,127 | 436 % | $ | 169,883 | $ | 38,814 | 338 % | |
Adjusted gross margin % (1) | 31 % | 27 % | 29 % | 19 % | |||||||
Adjusted EBITDAS (1) | $ | 28,065 | $ | 5,433 | 417 % | $ | 37,903 | $ | 3,365 | 1026 % | |
Cash flow - operating activities | $ | 5,481 | $ | (1,800) | n/m | $ | 8,234 | $ | (4,100) | n/m | |
Free cash flow (1) | $ | 22,870 | $ | 4,169 | 449 % | $ | 25,390 | $ | 827 | 2970 % | |
Income (loss) from operating activities | $ | 15,397 | $ | 1,708 | 801 % | $ | 15,923 | $ | (5,935) | n/m | |
Basic and diluted per share | $ | 0.08 | $ | 0.02 | 300 % | $ | 0.11 | $ | (0.10) | n/m | |
Net income (loss) | $ | 8,658 | $ | 403 | 2048 % | $ | 8,077 | $ | (7,529) | n/m | |
Basic and diluted per share | $ | 0.04 | $ | 0.01 | 300 % | $ | 0.06 | $ | (0.13) | n/m | |
Equipment additions | $ | (7,730) | $ | (1,471) | 425 % | $ | (17,252) | $ | (2,799) | 516 % | |
Weighted average shares outstanding | |||||||||||
Basic (000s) | 197,085 | 74,425 | 142,727 | 59,920 | |||||||
Diluted (000s) | 199,163 | 75,359 | 145,158 | 60,420 | |||||||
2022 | 2021 | ||||||||||
Working capital | $ | 35,528 | $ | 14,117 | |||||||
Total assets | $ | 336,429 | $ | 75,423 | |||||||
Loans and borrowings | $ | 89,593 | $ | 6,035 | |||||||
Shareholders' equity | $ | 139,701 | $ | 42,504 | |||||||
(1) Refer to "NON-GAAP MEASUREMENTS" | |||||||||||
"n/m" = not meaningful | |||||||||||
2022 Q3 KEY TAKEAWAYS
- Consolidated revenue of
$107,846 is the highest quarterly revenue in the Corporation's history. - Adjusted EBITDAS also posted a new record for any quarter in Cathedral's 24-year history, reaching
$28,065 . - 2022 Q3 achieved net income of
$8,658 compared to$403 in 2021 Q3. - Net income margin (net income divided by revenues) was over 10% for the first time in over six years.
- Highest level of quarterly revenue on record for the Canadian division.
- The highest level of revenue ever generated by the Company's US division.
- The Corporation generated free cash flow (see non-GAAP measurements) of
$22,020 in the quarter. - Cathedral significantly increased its North American footprint and cemented one of the top positions in market share for the onshore US directional drilling market with the acquisition of
Altitude Energy Partners for$131,711 . - Canadian directional drilling market share averaged 24.3% in 2022 Q3 vs. 17.7% one year ago.
U.S. directional drilling market share grew to 6.5% in the quarter due to the AEP acquisition.- As a result of the AEP acquisition, the Company closed
July 2022 with loans and borrows less cash of$91,180 which has subsequently been reduced to$81,786 bySeptember 30, 2022 . - With a constructive outlook for 2023, the board has approved a preliminary net capex budget of
$35,000 which will enable advance orders of strategic equipment. - Subsequent to 2022 Q2, Cathedral furthered its consolidation strategy and announced the formation of a
Marketing and Technology Alliance and acquisition of the operating assets and personnel of Ensign Energy Services' directional drilling business. The Marketing and Technology Alliance further differentiates Cathedral and represents a key alliance with a second major North American drilling contractor.- A strengthened US dollar also positively impacted results during the third quarter.
Comments from President & CEO
Since March of 2021, we have executed on our strategy of size and scale, focused on downhole directional drilling services and our proprietary technology rental product offering. Through
The third quarter of 2022 was a transformational one for the Company on both sides of the
Our CAD
Cathedral continued its testing of the D-Tech RSS (rotary steerable system) tool in
With increased size and scale and corresponding free cash flow we anticipate being able to fund capex and further differentiate ourselves in the market with the expansion of our technology platforms and make significant progress towards further reducing our debt levels in Q4 2022 and through 2023. The board has approved a preliminary net capital expenditures budget of
In the beginning of the fourth quarter 2022, we completed another transaction and added a complementary customer base with the acquisition of the Canadian directional drilling assets of another major land driller, Ensign Energy Services Inc. In this transaction, we added some operating capacity with the addition of assets and welcomed into Cathedral some experienced key personnel. Similar to our previous acquisition of Precision's directional drilling business, Ensign's Canadian directional drilling business unit forms an excellent addition to Cathedral's existing platform and should help propel our market share in
With the recent acquisition, we now have two strategic Marketing and Technology Alliances with both Precision Drilling and Ensign. These alliances are contributing to revenue growth, integration of directional drilling services with drill rig services, improved drilling performance, and reducing field labour costs.
Although we have been very busy in 2021 and 2022 and grown considerably, management believes that the Company still has considerable runway to build out a much larger North American technology business that has directional drilling as its core. We remained focused on our strategy and excited about the opportunity grow Cathedral into one of
The purchase price allocation related to the acquisition is preliminary and may be subject to adjustments, which may be material, pending completion of final valuations. In a business combination, it generally takes time to obtain the information necessary to measure fair values of assets acquired and liabilities assumed. Changes in the provisional measurements of assets and liabilities acquired may be recorded as part of the purchase price allocation as new information is obtained, until the final measurements are determined no later than 12 months after the acquisition date. The Company is still in the process of identifying the assets acquired and liabilities assumed and assessing the fair value allocations relating to the inventory and intangible and capital assets acquired. Fair value is estimated using the latest available information as at the date of the financial statements. As a result, these preliminary allocations may change.
A summary of the acquisitions for the year are as follows:
Discovery | Compass | LEXA | Altitude | Total | ||||||
Consideration: | ||||||||||
Cash | $ | 18,160 | $ | 4,000 | $ | - | $ | 87,245 | $ | 109,405 |
Common shares | 2,732 | 4,315 | 1,117 | 36,867 | 45,031 | |||||
Lease liabilities assumed | 1,579 | 240 | - | 2,354 | 4,173 | |||||
Deferred tax liabilities assumed | - | 647 | 109 | 5,245 | 6,001 | |||||
Total consideration | $ | 22,471 | $ | 9,202 | $ | 1,226 | $ | 131,711 | $ | 164,610 |
Allocation of purchase price | ||||||||||
Working capital | $ | 3,283 | $ | 444 | $ | 250 | $ | 13,568 | $ | 17,545 |
Equipment | 17,609 | 8,518 | - | 45,393 | 71,520 | |||||
Right of use assets | 1,579 | 240 | - | 2,354 | 4,173 | |||||
Intangibles | - | - | 976 | 34,433 | 35,409 | |||||
- | - | - | 35,963 | 35,963 | ||||||
Total | $ | 22,471 | $ | 9,202 | $ | 1,226 | $ | 131,711 | $ | 164,610 |
The Company purchased the shares of
On
The Company has accounted for this transaction as a business combination. The amounts below are based on management's preliminary estimates of fair value at the time of preparation of these financial statements based on the best available information. Amendments may be made to these amounts as the values subject to estimation are finalized. The Company has allocated the purchase price as:
- Cash
$70 ; - Net working capital
$180 ; - Deferred tax liability (
$109 ); and - Intangibles
$976 ;
The deferred tax liability was subsequently offset by the benefit of unrecorded tax attributes.
To date, the Company has not expensed any costs related to the Transaction. Prior to the acquisition, Cathedral was the only revenue source for LEXA so there are no revenues or operating profit before depreciation and interest to report.
On
Altitude was a privately-held,
The amounts below are based on management's preliminary estimates of fair value at the time of preparation of these financial statements based on the best available information. Amendments may be made to these amounts as the values subject to estimation are finalized. The Company has allocated the purchase price as:
- Working capital
$13,568 ; - Equipment
$45,393 ; - Right of use asset
$2,354 ; - Intangibles
$34,433 ; and Goodwill $35,963 .
The intangibles assets consist of customer relationships, non-compete agreements, brand names and an assembled workforce and will be amortized over periods from 1 to 6 years.
As the acquiring entity, Flight, is incorporated in the
To date, the Company has expensed
For the period of
On
As part of the Transaction, Cathedral and Ensign entered into a
The Company has 2 operating segments based on its geographic operating locations of
Revenues | 2022 | 2021 | ||
$ | 36,520 | $ | 16,118 | |
71,326 | 4,009 | |||
Total | $ | 107,846 | $ | 20,127 |
Cost of sales | $ | (83,557) | $ | (18,131) |
Gross margin | $ | 24,289 | $ | 1,996 |
Gross margin % | 23 % | 10 % | ||
Adjusted gross margin (1) | $ | 33,633 | $ | 5,365 |
Adjusted gross margin % (1) | 31 % | 27 % | ||
Income (loss) before income taxes | ||||
$ | 6,986 | $ | 2,030 | |
$ | 9,765 | $ | (463) | |
Corporate services | (8,006) | (1,164) | ||
Total | $ | 8,745 | $ | 403 |
(1) Refer to "NON-GAAP MEASUREMENTS" | ||||
Revenues and cost of sales 2022 Q3 revenues were
Gross margin for 2022 Q3 was 23% compared to 10% in 2021 Q3. Adjusted gross margin (see Non-GAAP Measurements) for 2022 Q3 was
Adjusted gross margin, as a percentage of revenue, increased due to lower field labour and a reduction in fixed costs as percentage of revenue partially offset by increased repairs and third party equipment rental costs.
Depreciation of equipment allocated to cost of sales increased to
Canadian revenues increased to
Based on publicly disclosed Canadian drilling and directional drilling days, Cathedral's market share for 2022 Q3 was 24.3% compared to 17.7% in 2021 Q3. Day rates in 2023 Q3 increased as 2021 Q3 was negatively impacted by lower drilling activity during COVID-19.
Canadian cost of sales, excluding non-cash items, as a percentage of revenue were 4% lower due to lower third party equipment rental costs and a reduction in fixed costs as percentage of revenue, partially offset by higher field labour and repair expenses.
The
Based on publicly disclosed
Selling, general and administrative ("SG&A") expenses SG&A expenses were
There were increases in SG&A wages, commissions, insurance and general increase in all other expenses, such as travel and promotion, which had been reduced to minimal levels due to COVID-19.
Technology group expenses Technology group expenses were
Gain (loss) on disposal of equipment During 2022 Q3, the Company had a gain on disposal of equipment of
Finance costs Finance costs consisting of interest expenses on loans and borrowings and bank charges were
Finance costs lease liability Lease liability interest increased slightly to
Acquisition and restructuring costs Acquisition and restructuring costs were
Foreign exchange The Company had a foreign exchange loss of (
Income tax Income tax expense is booked based upon expected annualized rates using the statutory rates of 23% for
Revenues | 2022 | 2021 | ||
$ | 75,010 | $ | 27,426 | |
94,873 | 11,388 | |||
Total | $ | 169,883 | $ | 38,814 |
Cost of sales | $ | (139,490) | $ | (40,564) |
Gross margin | $ | 30,393 | $ | (1,750) |
Gross margin % | 18 % | -5 % | ||
Adjusted gross margin (1) | $ | 48,740 | $ | 7,365 |
Adjusted gross margin % (1) | 29 % | 19 % | ||
Income (loss) before income taxes | ||||
$ | 5,260 | $ | (2,906) | |
$ | 14,442 | $ | (2,899) | |
Corporate services | (12,294) | (1,724) | ||
Total | $ | 7,408 | $ | (7,529) |
(1) Refer to "NON-GAAP MEASUREMENTS" | ||||
Revenues and cost of sales 2022 revenues were
Gross margin for 2022 was 18% compared to negative 5% in 2021. Adjusted gross margin (see Non-GAAP Measurements) for 2022 was
Adjusted gross margin, as a percentage of revenue, increased due to lower field labour, repairs and a reduction in fixed costs as percentage of revenue partially offset by increased third party equipment rental costs.
Depreciation of equipment allocated to cost of sales increased to
Canadian revenues increased to
Based on publicly disclosed Canadian drilling and directional drilling days, Cathedral's market share for 2022 was 20.6% compared to 12.7% in 2021. Day rates in 2023 increased as 2021 was negatively impacted by lower drilling activity during COVID-19.
Canadian cost of sales, excluding non-cash items, as a percentage of revenue were overall unchanged, but the components changed with reductions in repairs and a reduction in fixed costs as percentage of revenue, offset by higher field labour.
The
Based on publicly disclosed
Selling, general and administrative ("SG&A") expenses SG&A expenses were
There were increases in SG&A wages, commissions, insurance and general increase in all other expenses, such as travel and promotion, which had been reduced to minimal levels due to COVID-19.
Technology group expenses Technology group expenses were
Gain (loss) on disposal of equipment During 2022, the Company had a gain on disposal of equipment of
Finance costs Finance costs consisting of interest expenses on loans and borrowings and bank charges were
Finance costs lease liability Lease liability interest decreased slightly to
Acquisition and restructuring costs Acquisition and restructuring costs were
Foreign exchange The Company had a foreign exchange loss of (
Income tax Income tax expense is booked based upon expected annualized rates using the statutory rates of 23% for
Overview On an annualized basis, the Company's principal source of liquidity is cash generated from operations and proceeds from equipment lost-in-hole. In addition, the Company has the ability to fund liquidity requirements through its credit facility and the issuance of debt and/or equity. Cash flow - operations for the three and nine months ended
Working capital At
Contractual obligations In the normal course of business, the Company incurs contractual obligations and those obligations are disclosed in the Company's annual financial statements for the year ended
As at
The Company has issued the following six letters of credit ("LOC"):
- three securing rent payments on property leases and renew annually with the landlords. Two LOCs total
$700 CAD for the first ten years of the lease and then reduce to$500 for the last five years of the leases. The third LOC is currently for$630 USD and increases annually based upon annual changes in rent; - two securing the Company's corporate credit cards in the amounts of
$75 CAD and$175 USD ; and - one in lieu of cash deposit for utilities in the amounts of
$55 CAD .
Share capital At
In 2022, the Company issued the following stock options to staff:
- 2022 Q2 - 380,000 stock options with an exercise price of
$0.77 ; and - 2022 Q3 - 12,320,300 stock options with an exercise price of
$0.60 .
During the nine months ended
Nine months ended | ||
Equipment additions: | ||
Motors | $ | 14,701 |
MWD | 2,512 | |
Other | 39 | |
Total cash additions | $ | 17,252 |
The additions of
With a constructive outlook for 2023, the board has approved a preliminary net capex budget of
Financial markets are in a turbulent phase against a backdrop of increasing pressure from central banks to bring down key inflation rates. Oil and natural gas prices have reflected this underlying backdrop of high volatility and have mostly traded lower as a result. WTI oil prices started the quarter near US
Notwithstanding underlying commodity price volatility, the energy service sub-index and broad energy indices continue to outperform the underlying market. Investors may be slowly realizing that there is duration to this upcycle despite the risk of recession in major economies worldwide. Most oil and gas analyst research puts field-level cash flow reinvestment rates at between 30-40%, which is vastly lower than the +/- 100% levels seen for many decades. As a result, reinvestment in new oil supply is not happening at the same rate that it has in prior upcycles. The extreme tightness in labour markets has also made it very difficult to find the skilled people for energy service providers to grow quickly. These reinvestment and supply chain issues are leading to a much more muted production response (especially on the oil side), which ultimately creates a better base for Cathedral to grow in 2023 and the years forward.
Consensus analyst forecasts point to approximately 3% growth in the Canadian drilling rig count in Q4-22 vs Q3-22 and approximately 2% sequential growth in the US count. Turning to 2023, analysts are slightly more bullish on the US drilling market. The average of seven Canadian-based investment banks' drilling activity forecasts is 768 active US rigs in 2023 vs 704 in 2022, growth of 9.0%. In
This news release contains certain forward-looking statements and forward-looking information (collectively referred to herein as "forward-looking statements") within the meaning of applicable Canadian securities laws. All statements other than statements of present or historical fact are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "achieve", "believe", "plan", "intend", "objective", "continuous", "ongoing", "estimate", "outlook", "expect", "may", "will", "project", "should" or similar words suggesting future outcomes. In particular, this news release contains forward-looking statements relating to, among other things: we continue to be constructive on further execution of our strategy, focused on consolidation opportunities, technology development, and internal growth; we expect Cathedral's service and technology offering will continue to differentiate itself in the North American directional market; with increased size and scale and corresponding free cash flow we anticipate being able to fund capex and further differentiate ourselves in the market with the expansion of our technology platforms and make significant progress towards further reducing our debt levels in Q4 2022 and through 2023; Ensign's Canadian directional drilling business unit forms an excellent addition to Cathedral's existing platform and should help propel our market share in
The Company believes the expectations reflected in such forward-looking statements are reasonable as of the date hereof but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon.
Various material factors and assumptions are typically applied in drawing conclusions or making the forecasts or projections set out in forward-looking statements. Those material factors and assumptions are based on information currently available to the Company, including information obtained from third party industry analysts and other third party sources. In some instances, material assumptions and material factors are presented elsewhere in this MD&A in connection with the forward-looking statements. You are cautioned that the following list of material factors and assumptions is not exhaustive. Specific material factors and assumptions include, but are not limited to:
- the performance of Cathedral's business
- impact of economic and social trends;
- oil and natural gas commodity prices and production levels;
- the ongoing impact of the global health crisis and COVID-19;
- capital expenditure programs and other expenditures by Cathedral and its customers;
- the ability of Cathedral to retain and hire qualified personnel;
- the ability of Cathedral to obtain parts, consumables, equipment, technology, and supplies in a timely manner to carry out its activities;
- the ability of Cathedral to maintain good working relationships with key suppliers;
- the ability of Cathedral to retain customers, market its services successfully to existing and new customers and reliance on major customers;
- risks associated with technology development and intellectual property rights;
- obsolesce of Cathedral's equipment and/or technology;
- the ability of Cathedral to maintain safety performance;
- the ability of Cathedral to obtain adequate and timely financing on acceptable terms;
- the ability of Cathedral to comply with the terms and conditions of its credit facility;
- the ability to obtain sufficient insurance coverage to mitigate operational risks;
- currency exchange and interest rates;
- risks associated with future foreign operations;
- the ability of Cathedral to integrate its transactions and the benefits of any acquisitions, dispositions and business development efforts;
- environmental risks;
- business risks resulting from weather, disasters and related to information technology;
- changes under governmental regulatory regimes and tax, environmental, climate and other laws in
Canada and theU.S. ; and - competitive risks.
Forward-looking statements are not a guarantee of future performance and involve a number of risks and uncertainties some of which are described herein. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause the Company's actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, the risks identified in this MD&A and in the Company's Annual Information Form under the heading "Risk Factors". Any forward-looking statements are made as of the date hereof and, except as required by law, the Company assumes no obligation to publicly update or revise such statements to reflect new information, subsequent or otherwise.
All forward-looking statements contained in this MD&A are expressly qualified by this cautionary statement. Further information about the factors affecting forward-looking statements is available in the Company's current Annual Information Form that has been filed with Canadian provincial securities commissions and is available on www.sedar.com.
Cathedral uses certain performance measures throughout this document that are not defined under GAAP. Management believes that these measures provide supplemental financial information that is useful in the evaluation of Cathedral's operations and are commonly used by other oilfield companies. Investors should be cautioned, however, that these measures should not be construed as alternatives to measures determined in accordance with GAAP as an indicator of Cathedral's performance. Cathedral's method of calculating these measures may differ from that of other organizations, and accordingly, may not be comparable.
The specific measures being referred to include the following:
i) "Adjusted gross margin" - calculated as gross margin plus non-cash items (depreciation and share-based compensation); is considered a primary indicator of operating performance (see tabular calculation);
ii) "Adjusted gross margin %" - calculated as adjusted gross margin divided by revenues; is considered a primary indicator of operating performance (see tabular calculation);
iii) "Adjusted EBITDAS" - defined as earnings before finance costs, unrealized foreign exchange on intercompany balances, taxes, depreciation, non-recurring costs (including acquisition and restructuring costs and non-cash provision for bad debts), write-down of equipment, write-down of inventory and share-based compensation; is considered an indicator of the Company's ability to generate funds flow from operations prior to consideration of how activities are financed, how the results are taxed and non-cash expenses (see tabular calculation); and
iv) "Free cash flow" - defined as Cash flow - operating activities prior to changes in non-cash working capital, income taxes paid and non-recurring expenses less cash equipment additions, excluding business combinations or assets added through acquisitions and cash payments on lease liabilities and adding proceeds from disposition of equipment. Management uses this measure as an indication of the Company's ability to generate funds from its operations to support capital expenditures, debt repayment or other initiatives.
The following tables provide reconciliations from GAAP measurements to non-GAAP measurements referred to in this MD&A:
Adjusted gross margin
Three months ended | Nine months ended | |||||||
2022 | 2021 | 2022 | 2021 | |||||
Gross margin | $ | 24,289 | $ | 1,996 | $ | 30,393 | $ | (1,750) |
Add non-cash items included in cost of sales: | ||||||||
Depreciation | 9,116 | 3,337 | 18,027 | 9,049 | ||||
Share-based compensation | 228 | 32 | 320 | 66 | ||||
Adjusted gross margin | $ | 33,633 | $ | 5,365 | $ | 48,740 | $ | 7,365 |
Adjusted gross margin % | 31 % | 27 % | 29 % | 19 % | ||||
Adjusted EBITDAS
Three months ended | Nine months ended | |||||||
2022 | 2021 | 2022 | 2021 | |||||
Income (loss) before income taxes | $ | 8,745 | $ | 403 | $ | 7,408 | $ | (7,529) |
Add: | ||||||||
Depreciation included in cost of sales | 9,116 | 3,337 | 18,027 | 9,049 | ||||
Depreciation included in selling, general and administrative expenses | 3,396 | 134 | 3,644 | 401 | ||||
Share-based compensation included in cost of sales | 228 | 32 | 320 | 66 | ||||
Share-based compensation included in selling, general and administrative expenses | 235 | 52 | 409 | 101 | ||||
Finance costs | 1,500 | 60 | 2,024 | 249 | ||||
Finance costs lease liabilities | 200 | 195 | 584 | 605 | ||||
Subtotal | 23,420 | 4,213 | 32,416 | 2,942 | ||||
Unrealized foreign exchange (gain) loss on intercompany balances | 2,048 | 692 | 2,511 | (230) | ||||
Non-recurring expenses | 2,597 | 528 | 2,976 | 653 | ||||
Total Adjusted EBITDAS | $ | 28,065 | $ | 5,433 | $ | 37,903 | $ | 3,365 |
Free Cash Flow
Three months ended | Nine months ended | |||||||
2022 | 2021 | 2022 | 2021 | |||||
Cash flow - operating activities | $ | 2,880 | $ | (1,800) | $ | 5,633 | $ | (4,100) |
Add (deduct): | ||||||||
Non-cash working capital - cash paid on acquisition (note 3) | 11,310 | - | 11,310 | - | ||||
Changes in non-cash operating working capital | 6,873 | 4,885 | 11,487 | 4,705 | ||||
Income taxes paid | (30) | 47 | (58) | 90 | ||||
Non-recurring expenses | 2,597 | 528 | 2,976 | 653 | ||||
Proceeds on disposal of equipment | 6,970 | 1,980 | 11,294 | 2,278 | ||||
Less: | ||||||||
Equipment additions - normal course | (7,730) | (1,471) | (17,252) | (2,799) | ||||
Repayments on lease liabilities | (780) | (459) | (2,116) | (1,624) | ||||
Free cash flow | $ | 22,090 | $ | 3,710 | $ | 23,274 | $ | (797) |
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Dollars in '000s
(Unaudited)
September 30 | December 31 | |||
2022 | 2021 | |||
Assets | ||||
Current assets: | ||||
Cash | $ | 7,807 | $ | 2,898 |
Trade receivables | 100,065 | 15,609 | ||
Prepaid expenses | 6,515 | 1,438 | ||
Inventories | 23,622 | 8,423 | ||
Current tax recoveries | - | - | ||
Total current assets | 138,009 | 28,368 | ||
Equipment | 109,007 | 35,044 | ||
Right of use asset | 12,710 | 10,520 | ||
Intangible assets | 38,414 | 1,491 | ||
38,289 | - | |||
Total non-current assets | 198,420 | 47,055 | ||
Total assets | $ | 336,429 | $ | 75,423 |
Liabilities and Shareholders' Equity | ||||
Current liabilities: | ||||
Trade and other payables | $ | 82,967 | $ | 11,069 |
Current taxes payable | 106 | 55 | ||
Loans and borrowings, current | 15,763 | 1,000 | ||
Lease liabilities, current | 3,645 | 2,127 | ||
Total current liabilities | 102,481 | 14,251 | ||
Loans and borrowings | 73,830 | 5,035 | ||
Lease liabilities, long-term | 14,833 | 13,633 | ||
Deferred tax liability | 5,584 | - | ||
Total non-current liabilities | 94,247 | 18,668 | ||
Total liabilities | 196,728 | 32,919 | ||
Shareholders' equity: | ||||
Share capital | 173,332 | 98,918 | ||
(959) | - | |||
Contributed surplus | 15,451 | 11,793 | ||
Accumulated other comprehensive income | 21,018 | 9,011 | ||
Deficit | (69,141) | (77,218) | ||
Total shareholders' equity | 139,701 | 42,504 | ||
Total liabilities and shareholders' equity | $ | 336,429 | $ | 75,423 |
Notice of No Auditor Review of Unaudited Condensed Consolidated Interim Financial Statements
Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.
The accompanying unaudited condensed consolidated interim financial statements of
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
Three and nine months ended
Dollars in '000s except per share amounts
(Unaudited)
Three months ended | Nine months ended | |||||||
2022 | 2021 | 2022 | 2021 | |||||
Revenues | $ | 107,846 | $ | 20,127 | $ | 169,883 | $ | 38,814 |
Cost of sales: | ||||||||
Direct costs | (74,213) | (14,762) | (121,143) | (31,449) | ||||
Depreciation | (9,116) | (3,337) | (18,027) | (9,049) | ||||
Share-based compensation | (228) | (32) | (320) | (66) | ||||
Total cost of sales | (83,557) | (18,131) | (139,490) | (40,564) | ||||
Gross margin | 24,289 | 1,996 | 30,393 | (1,750) | ||||
Selling, general and administrative expenses: | ||||||||
Direct costs | (9,293) | (1,692) | (16,119) | (5,167) | ||||
Depreciation and amortization | (3,396) | (134) | (3,644) | (401) | ||||
Share-based compensation | (235) | (52) | (409) | (101) | ||||
Total selling, general and administrative expenses | (12,924) | (1,878) | (20,172) | (5,669) | ||||
Technology group expenses | (403) | (183) | (853) | (533) | ||||
Gain on disposal of equipment | 4,435 | 1,773 | 6,555 | 2,017 | ||||
Income (loss) from operating activities | 15,397 | 1,708 | 15,923 | (5,935) | ||||
Finance costs | (1,500) | (60) | (2,024) | (249) | ||||
Finance costs lease liabilities | (200) | (195) | (584) | (605) | ||||
Acquistion and restructuring costs | (2,598) | (331) | (2,990) | (939) | ||||
Foreign exchange gain (loss) | (2,354) | (719) | (2,917) | 199 | ||||
Income (loss) before income taxes | 8,745 | 403 | 7,408 | (7,529) | ||||
Income tax recovery (expense): | ||||||||
Current | (87) | - | (87) | - | ||||
Deferred | - | - | 756 | - | ||||
Total income tax recovery (expense) | (87) | - | 669 | - | ||||
Net income (loss) | 8,658 | 403 | 8,077 | (7,529) | ||||
Other comprehensive income (loss): | ||||||||
Foreign currency translation differences for foreign operations | 11,380 | 723 | 12,007 | (206) | ||||
Total comprehensive income (loss) | $ | 20,038 | $ | 1,126 | $ | 20,084 | $ | (7,735) |
Net income (loss) per share | ||||||||
Basic and diluted | $ | 0.04 | $ | 0.01 | $ | 0.06 | $ | (0.12) |
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Three and nine months ended
Dollars in '000s
(Unaudited)
Three months ended | Nine months ended September 30 | |||||||
2022 | 2021 | 2022 | 2021 | |||||
Cash provided by (used in): | ||||||||
Operating activities: | ||||||||
Net income (loss) | $ | 8,658 | $ | 403 | $ | 8,077 | $ | (7,529) |
Items not involving cash | ||||||||
Depreciation | 12,512 | 3,471 | 21,671 | 9,450 | ||||
Share-based compensation | 463 | 84 | 729 | 167 | ||||
Income tax expense (recovery) | 87 | - | (669) | - | ||||
Gain on disposal of equipment | (4,435) | (1,773) | (6,555) | (2,017) | ||||
Finance costs | 1,500 | 60 | 2,024 | 249 | ||||
Finance costs lease liability | 200 | 195 | 584 | 605 | ||||
Unrealized foreign exchange (gain) loss on intercompany balances | 2,048 | 692 | 2,511 | (230) | ||||
Cash flow - continuing operations | 21,033 | 3,132 | 28,372 | 695 | ||||
Non-cash working capital - cash paid on acquisition | (11,310) | - | (11,310) | - | ||||
Changes in non-cash operating working capital | (4,272) | (4,885) | (8,886) | (4,705) | ||||
Income taxes paid | 30 | (47) | 58 | (90) | ||||
Cash flow - operating activities | 5,481 | (1,800) | 8,234 | (4,100) | ||||
Investing activities: | ||||||||
Equipment additions - normal course | (7,730) | (1,471) | (17,252) | (2,799) | ||||
Equipment additions - cash paid on acquisition | (54,276) | - | (76,436) | - | ||||
Intangible additions - normal course | (1,456) | - | (1,456) | - | ||||
Intangible additions - cash paid on acquisition | (28,284) | - | (28,284) | - | ||||
Proceeds on disposal of equipment | 6,970 | 1,980 | 11,294 | 2,278 | ||||
Cash acquired on acquisition | - | - | 70 | - | ||||
Changes in non-cash investing working capital | (2,600) | (531) | (1,759) | (649) | ||||
Cash flow - investing activities | (87,376) | (22) | (113,823) | (1,170) | ||||
Financing activities: | ||||||||
Advances of loans and borrowings | 87,291 | 2,345 | 107,150 | 6,004 | ||||
Repayments on loans and borrowings | (6,868) | (1,219) | (23,591) | (3,134) | ||||
Proceeds on share issuance | 218 | 3,014 | 31,378 | 6,407 | ||||
Repayments on lease liabilities | (780) | (459) | (2,116) | (1,624) | ||||
Payment on settlements | - | (38) | - | (113) | ||||
Interest paid | (1,700) | (255) | (2,608) | (854) | ||||
Cash flow - financing activities | 78,161 | 3,388 | 110,213 | 6,686 | ||||
Effect of exchange rate on changes on cash | 229 | 25 | 285 | (4) | ||||
Change in cash | (3,505) | 1,591 | 4,909 | 1,412 | ||||
Cash, beginning of period | 11,312 | 855 | 2,898 | 1,034 | ||||
Cash, end of period | $ | 7,807 | $ | 2,446 | $ | 7,807 | $ | 2,446 |
SOURCE
© Canada Newswire, source