Chrysos Corp Ltd

ASX:C79

Earnings Call Analysis

Earnings Call Transcript 2024-Q4

[Operator]

Thank you for standing by. Welcome to the Chrysos Corporation Limited Q4 FY '24 Quarterly Conference Call. [Operator Instructions] There will be a presentation followed by a question-and-answer session. [Operator Instructions]

I would now like to hand the conference over to Mr. Dirk Treasure, CEO. Please go ahead.

[Dirk Treasure, executive]

Thank you, Rachel, for the introduction. Good morning, shareholders, and welcome to our June quarter 4C investor update, closing out FY '24. As usual, I'm joined by Brett Coventry, our Chief Financial Officer. And together, Brett and I will be running through an operational and financial report for the quarter. After the presentation, we'll be available for a Q&A. Please ensure that you've dialed in rather than connected via the web link if you would like to ask a question.

Slide 3, please, operator. Chrysos has had continued growth in revenue, up 58% year-on-year and 5% quarter-on-quarter. We've closed the year with $45.4 million in unaudited revenue for FY '24. And a substantial component of our revenue is increasingly coming from outside of APAC, with our EMEA revenue up 157% year-on-year, and our Americas revenue up 232% year-on-year. We've achieved another record quarter of sample volume associated with the ongoing global rollout of our PhotonAssay technology and with more and more miners using our technology around the world. This is actually our 22nd consecutive quarter of record PhotonAssay sample volumes.

We remain in a strong cash position with $61 million in the bank and our $95 million Green Loan with CBA, currently undrawn. This nets us $156 million to invest in future growth. We closed the quarter with 29 operating PhotonAssay units, including 2 that were deployed during the quarter and the redeployment of SGS' Perth unit to Kalgoorlie successfully completed. Our focus remains on building out our pipeline of deployment opportunities to realign our deployment cadence with our manufacturing capacity, and I'm pleased to announce that we've entered into 2 new PhotonAssay lease agreements, one with Omni Group and one with Analabs, and they'll both be installing those units into their respective African laboratories in the coming months. The NGM installations for Barrick Gold, which will account for at least 3 units are also set to begin installation in the coming quarter with customer readiness challenges now largely overcome for that site. We currently have 52 contractually committed PhotonAssay units made up of 29 deployed units in 23 still to be deployed.

Next slide, please, operator. We continue to build up our presence in key mining hubs around the world, growing adoption in these regions and driving down costs through our hubbing strategy. Our growing regional sales team is working closely with mining companies and with our laboratory partners both on new unit sales but also on driving additional volume into existing units. During the quarter, we manufactured an additional 3 units, which have passed factory acceptance testing and are ready to be shipped and deployed. There are now 14 units available to support our FY '25 PhotonAssay rollout.

Barrick's adoption of our technology is continuing on a global basis and following successful installation of Barrick's second unit at their Kibali Gold Mine in the DRC, we have now started installing a unit into the North Mara Gold Mine in Tanzania. Once installed, this unit will actually be operated by SGS, obviously an existing customer of ours and one of the world's largest laboratory companies. This installation marks the first expansion of our relationship with SGS since their Perth unit was installed early last year.

As I mentioned in the previous slide, we remain focused on diversifying our customer base and building out our contract pipeline to support ongoing deployment. The addition of 2 new customers is a positive illustration of this model. We're also growing our global sales footprint with an imminent entry into South America, which we see as an excellent opportunity for PhotonAssay, particularly with our ability to also analyze copper.

Slide 5, please, operator, and over to you, Brett.

[Brett Coventry, executive]

Thanks, Dirk. It's great to see these new contracts and the ability to expand PhotonAssay across Africa. Before we move into this slide, I wanted to note our cash collections across the quarter, a significant uplift from previous quarters and more closely aligned to revenues. We are working to ensure this continues noting, of course, some of the regions we operate in, collections take some extra time, but this remains a focus across our team. Considering this slide now, we note the continued growth in revenues in the international markets being the third consecutive quarter of these markets are over half of our revenues, reflective of the diverse regional income we are now earning.

Looking at the trend across the APAC revenues, we see ourselves well placed for any uptake in the industry. Looking at the various other companies' releases across this last quarter, we seem to be at a low point of the cycle despite significant gold prices. Both our international regions have had strong growth throughout the financial year and we look forward to continue to build on this space moving forward with an increased utilization and future deployments across these regions.

Next slide, please. As Dirk mentioned, another quarter of record growth in samples processed. Many of you have seen this slide previously, where the sample is continuing to increase. It would be good to consider how this reaches into the miners, the focus of our sales efforts. Looking at public company releases, we can see that more than 90 unique companies have referenced PhotonAssay in their JORC and NI 43-101 reporting. Obviously, we're keeping an eye on that, but that's a great position to start seeing so many companies across the globe using our technology. This demonstrates the breadth of PhotonAssay used across the world.

Next slide, please.

[Dirk Treasure, executive]

Thank you, Brett. As we kick off FY '25, we're pleased to provide guidance for the year to come. Firstly, on revenue, we are providing guidance of $60 million to $70 million for FY '25, indicating continued strong growth of revenue, approximately 45% growth at the midpoint. Underlying this guidance, the 2 main levers impacting revenue are timing of deployments and revenue per unit. From a deployment perspective, we've aligned our deployment team more closely with the sales team and more specifically as frontline in customer communications. We consider deployment timing to be more predictable now going into FY '25.

On the revenue front, the global gold industry remains in a relatively slow environment with lower exploration spend. Accordingly, the global industry sample volumes remain low even in spite of a very high gold price. We consider that we're bumping along the bottom of this cycle and that Chrysos is incredibly well poised to take advantage of a macro uptick when that cycle turns. The timing of this is uncertain. And for the purposes of guidance, we have assumed no change to the market condition and that revenue per unit will remain similarly stable equivalent to FY '24.

Moving to EBITDA, we're providing a guidance range of $9 million to $19 million with the wide range in EBITDA driven by the revenue range. Our strategy of clustering units in key mining regions is allowing us to control our unit costs. And as we continue to deploy additional units, our overheads do not need to scale proportionately. Therefore, we're able to largely mitigate the impact of inflation and to drive EBITDA margin conversion.

Slide 8, please, operator. Summarizing the quarter, we've had continued top line growth with revenue up 58% year-on-year. We've had our 22nd consecutive quarter of record saleable volumes, which were up 27% year-on-year. There are now 29 PhotonAssay units deployed around the world following the addition of 2 new units during the quarter and the successful redeployment of another unit. We've expanded our relationship with SGS, which will be the operator of Barrick's North Mara operation. This positions us with 3 of the world's biggest laboratory companies operating PhotonAssay on an international basis, being Intertek in Australia and Ghana, ALS in Australia and Canada and now SGS in Australia and Tanzania, complementing our relationships with MSA in Britannia.

We remain well funded for future growth with over $150 million available for investment into PhotonAssay units, mindful that we are operating cash flow positive. And finally, we identified during last quarter our intention to expand our customer contracts and diversify our customer base and we've started that process during the quarter with 2 new customers added with the ability for near-term deployment.

I'll pause there and we can move to questions.

[Operator]

Thank you. [Operator Instructions] Your first question comes from Josh Kannourakis with Barrenjoey.

[Josh Kannourakis, analyst]

Dirk, Brett, can you hear me okay?

[Dirk Treasure, executive]

Loud and clear, Josh.

[Josh Kannourakis, analyst]

The first one is just around the guidance range. So, you mentioned consistent revenue per unit market condition stable. I guess you've given a pretty big range there. Just in terms of the bottom and the top end, like can you give us an idea at the top end of the range, what you're sort of assuming in terms of both market conditions and then also deployments? You've obviously got the team to clearly do out 18-plus deployments per year. How should we be thinking about that as investors on what the bottom and the top end of the range you're assuming across the year?

[Dirk Treasure, executive]

Yes, look, very, very good question. So, the way that we've looked at those levers that impact revenue, so really being the timing of deployment and when revenue turns on for new units. And then what's happening from that macro perspective or rather what's happening on a revenue per unit basis. So, quite intentionally in the presentation they're talking about we're not expecting or we're not banking on any kind of an uplift in the macro conditions. So really, we've allowed for the market remaining where it is. So, if we're at midpoint, the market is broadly where it was last year and deployments are on track compared to our sort of internal deployment cadence.

So, if we can pull forward deployments, we would obviously be driving toward the upper end of revenue. The opposite applies. If we see an uptick in the macro conditions, we would start to see higher revenue per unit, which will drive us towards the top end of that guidance as well. We're certainly not anticipating at this point sort of a downgrade to the macro conditions. But those things would land us on or around midpoint.

[Josh Kannourakis, analyst]

Got it. And just so I'm clear, so you're saying in terms of the -- and obviously, I know you haven't -- as you given deployment guidance for the year, you obviously got some internal targets, and you can sort of do some back working of calculations around that. And I guess, because the units come online progressively, it sort of looks like it's averaging maybe a 16% to 18% sort of unit count. Is that sort of a broadly fair assumption to sort of think about how -- and is that reflective of sort of internal expectations as well if you sort of back work out what your revenue assumptions are?

[Dirk Treasure, executive]

Yes. The big picture for us, I think that we've demonstrated last year that from a manufacturing capacity and certainly from an internal deployment capacity, we can really get up to that kind of 5 units per quarter. So, the plan here over the longer term is to have that deployment cadence matching up with the manufacturing capacity. So, not providing specifically, kind of, quarter-by-quarter deployment expectations, but that is the long-term plan at this point or medium to long-term plan at this point.

[Josh Kannourakis, analyst]

Got it. Okay. And then the second question, just around the demand side of the equation, like obviously, there's some large other miners out there that would make a lot of sense. How are some of those conversations going with say, if we look at, say, the top 5 or 6 gold miners globally? Are there ongoing? Are there chances for more similar sort of global deals? Or how should we be thinking about the cadence of those and the progression of those discussions out there?

[Dirk Treasure, executive]

Yes, absolutely. And I think there was a really nice metric that Brett discussed in his part of the presentation, which is there's more than 90 gold mining-related companies around the world. So, that's the miners and the explorers that have put out JORC compliance or NI 43-101 compliant releases to market referencing PhotonAssay. So, we're certainly getting that breadth of adoption. At the top end of town, that's always been our focus. And obviously, culminating last year in our agreement with Barrick. But a large portion of the biggest gold miners in the world already use the technology at one or more sites and we are seeing that sort of increasing adoption. And I think that, that sort of -- you can see that around the market as well. We've talked this quarter that we're seeing that unclogging of the MGM deployments. So, we should be seeing those starting to install in the coming months. So, that's expanding relationship with Barrick, but this is fairly consistent in our discussions at this point. So, I think that there's a very strong pipeline there.

[Josh Kannourakis, analyst]

Okay. And final one, just MMAP, you guys, you didn't provide that in this one where you have previously. Just can you give us an indication that whether that's sort of being consistent, high or how we should be sort of thinking about that component where there's still sort of the relevant metric to sort of use?

[Dirk Treasure, executive]

Yes, look, fair point. So, we're moving away, and this was just a [ material ] piece of reporting moving away from that level of breakdown and then starting really to talk about and present against revenue per unit as opposed to MMAP and AAC. Certainly, you can assume that the 2 contracts that we've signed and definitely the intention going forward would be relatively consistent with the way that we usually do business, which is that there is an MMAP component, there's a long-term here, all of those sort of things. So yes, nothing inconsistent with previous.

[Operator]

Your next question comes from Jules Cooper with Shaw and Partners.

[Jules Cooper, analyst]

So, just got 3 from me. Great to see 2 new contracts coming after the quarter. And you've just mentioned then that the -- they've been negotiating consistent with prior units and customers. Could you just provide some perspective maybe where you've talked about you expect them to be deployed in coming months? Should we expect, given the lags and the times, et cetera, and getting units to Africa, et cetera, this is more of a second half or a first half deployment potentially for those 2 customers.

[Dirk Treasure, executive]

Great question and intentionally put in there that we would hope to see the installation of those starting within the coming sort of half. The way that we're looking at this is very much how do we bolster the existing pipeline where we have seen some of those delays come through because we've had -- well, we need to spend that time on diversifying the customer base. So, we're now seeing that and those will be near-term deployments really bolstering that pipeline. So, I would expect that we would start to see them installed within the coming 6 months.

[Jules Cooper, analyst]

Got it. And second question is great to see Barrick continuing the rollout. And I assume, given the intention is for SGS to manage this unit that either Barrick or SGS would have to contract for this unit in time?

[Dirk Treasure, executive]

Yes, absolutely. So, that will be operated by SGS, so certainly, there's contracts there pending with SGS for that, which would be an additional contract. We're anticipating that to be fairly soon, turnarounds, given that we're installing that unit. There's an interesting interplay there. From our perspective, we want to see Barrick adopting the technology across all of its sites as quickly as possible. So, we do welcome the idea here of working with SGS on that deployment as well just because it means that we're getting our technology into all of the Barrick sites more quickly by doing it this way. So, that's been really a real positive for us for the quarter.

[Jules Cooper, analyst]

Excellent. And just a last question from me. You've invested close to $58 million in CapEx in FY '24. You've called out 14 units ready to deploy. How should we think about CapEx in FY '25? And is this sort of a reasonable level of inventory that you would expect to be holding moving forward as we sort of go quarter-to-quarter?

[Brett Coventry, executive]

Thanks for the question there, Jules. Obviously, we've got some inventory there at this point in time. We have reasonable trading terms with our suppliers and that might have seen a bit of a falloff in our capital expenditure over this year given those delays. So, we've spoken at length about the units costing around $4 million each. That hasn't changed. That's remaining consistent. So, it will just be timing of cash flows as we obviously deploy those units and we're keen to move them off the shelf as quickly as possible. So, no material impact on that. And obviously, if you work out if we're deploying whatever number you land at per year at $4 million, that's capital expenditure will return going forward.

[Jules Cooper, analyst]

Okay. And maybe just a point of further clarification. If we're sort of looking at a capability across the business to deploy 5 units a quarter in sort of an inventory sense, would you like to have 2 quarters' worth of units ready to go? Or is it more like 1 quarter and you'd sort of be more sort of just in time or just in quarter just as we sort of move out of this period and get to sort of a steady-state run rate for the business?

[Brett Coventry, executive]

Yes, look, that's something that we ponder internally as well. So, it's been actually a nice part of conversation with customers being able to talk about a unit being available as and when they're ready to receive it, whereas previously being very supply constrained before we sort of double manufacturing capacity, it was often conversations of you're not going to get your unit for 9, 12, 15 months. So, I think that we've made that decision that we would like to see some ongoing inventory of units. It's obviously not at the level of 14, but probably somewhere more in the order of 3 to 5. So, a quarter ahead, at least in an ongoing capacity.

[Operator]

[Operator Instructions] Your next question comes from Lindsay Bettiol with Ord Minnett.

[Lindsay Bettiol, analyst]

Can you hear me?

[Dirk Treasure, executive]

[ Perfect ], Lindsay.

[Lindsay Bettiol, analyst]

A quick one, first up, just a clarification point. The guidance, the revenue guidance, you've said assumed a similar revenue per unit outcome for the existing units to what you achieved in FY '24. Just if I have a look at the revenue per unit, it's a lot higher kind of exiting the year versus the beginning of the year. So, should we be thinking about that like on an average across the year basis or kind of the exit run rate we see today?

[Dirk Treasure, executive]

Probably, the best bet on that front would be, if you go back to our last report where we talked about revenue per unit, cost per unit, profit per unit. And look, the intention is to continue to provide that data as well in the half yearly and full year results. So, you'd be looking to take that number and propel that forward.

[Lindsay Bettiol, analyst]

Yes. Brilliant. Okay. Second question, just thinking about -- so when we entered FY '24, the original guidance was for 18 units to be deployed. You kind of finished at 9. And I think the explanation in large part over the course of the year has been some deployment delays and things of that nature. But -- and my math might be a little bit off here. But it kind of your guidance implies like something like, I think, 10 units for this year. So, you've gone from expecting 18 units in FY '24 to now expecting 18 to 20 units over a 2-year period, which feels like it's a little bit more than just timing delays. So, could you maybe flesh out where this year's guidance was perhaps where you overzealous coming into the year versus where you are today?

[Dirk Treasure, executive]

Yes. Look, I think we've been through this in the previous calls, particularly that sort of consolidated customer base. While we had and still have a number of contracts ready to go, the number of customers has not been broad enough. So, when we've had a customer held up for deployment, it has had a flow-on effect to subsequent deployments with that customer or with those customers. And we've just seen that effect during last year. So certainly, what we're doing this year is, okay, if there's further expectation that, that could continue to happen at all. The best way to deal with that is to have return to customers as and when these units are ready to deploy.

So, customer readiness challenges is engaged early with the customer, make sure we're sending our deployment team out early. We're actually getting boots on the ground, looking at the facilities early in the piece, but then as well as that, complementing it with additional companies and site opportunities that we can deploy to such that if site A is not ready to receive a unit, we can instead ship that unit to site B and fulfill site A later on with a subsequent unit. So, we're doing both of these things at the same time to really address those challenges with the intention to move back toward that cadence of having deployment timing manufacturing capacity.

[Lindsay Bettiol, analyst]

Yes. Okay. That makes sense.

[Brett Coventry, executive]

And just to follow on to that one. I think we just need to clarify that a little bit more it's an average across the year, Lindsay. So, if you're taking -- let's look at that last presentation, Dirk just referenced, it's set in there, the rolling 12 months revenue of $1.8 million. If you're taking that and you're deploying the unit now where we get 11 months of revenue, that's over $1.5 million worth of revenue. If we deploy that and it lands in June next year, it could be $150,000 worth of revenue or no revenue if it's the 29th of June. So that's the way that I suppose you're looking at is it feels like it's a whole number as opposed to the staggering of the units across the year.

And obviously, Dirk touched on before with the guidance that the things that influence the guidance is, obviously, there's a little uptick in the market, but also the deployment timing has a material effect. So, the more we're obviously able to bring those forward increases revenues. So, they are the sorts of things that we're looking at as we look at that guidance range. And you're getting to that number I kind of feel like on an average basis and what we need to consider is that, that really needs to be spread across the year of units being deployed throughout the year. Does that help?

[Lindsay Bettiol, analyst]

Yes, it does. I'd kind of -- I'd actually just flat lined it on a quarterly basis, so I had kept it slight over the year, but it sounds like my number was too low anyway, so that's helpful. And then final question for me, just on the cash conversion. It was obviously much better this quarter, but over the year, still that $11 million behind revenue. So, should we expect some sort of catch up over time or just kind of work with this 90% type cash conversion going forward? How should we think about that?

[Dirk Treasure, executive]

We'd like to see a catch-up over time without a doubt, and it's something we're working on. But I also note that working across some of the regions that we work in, particularly Africa, it tends to be there is slower payment cycles than what we would like. And obviously, we keep pushing that and we'd like to see the catch-up, and there will be some catch-up whether we get to that full-blown catch-up in the long run, it would be great. But I -- we have to allow that Africa at times and other regions do take longer to collecting.

[Operator]

Your next question comes from Liam Hegarty-Cremer with Morgans Financial.

[Liam Hegarty-Cremer, analyst]

Just a quick one around the redeployment costs you mentioned for SGS in the quarterly. Could you just give us a little bit more color around that cost maybe if we look more broadly, if it was in West Africa, what that would look like versus Perth and Kalgoorlie and also, whether we should expect costs for redeployment per year, whether it's the one-off and how to look at that moving forward?

[Dirk Treasure, executive]

Happy to talk about that one. So, we've typically talked about sort of 10% to 20% of CapEx for moving one of these units. I think that the more often that we do it, and it's certainly part of the underlying model is our ability because you've got a very long life asset. Our ability to pick those up, move them to a different site is actually an integral part of the model and we are getting better at it, even having only done 2 of them. So ideally, we're not going to see a large proportion of these units moving. However, when a customer does want to pick it up and move it, we're willing to do that with them. So, going forward from here, there aren't any planned redeployments at the moment. But as and when they come up for whatever reason, at a customer's behest then we would go ahead and we would undertake that.

[Operator]

We have no further questions at this time. I'll now hand it back to Mr. Treasure for closing remarks.

[Dirk Treasure, executive]

Thank you very much, Rachel, and thank you, shareholders. I appreciate your continued support and look forward to providing our next update corresponding with our full year results. I appreciate your time.

[Operator]

That does conclude our conference for today. Thank you for participating. You may now disconnect.