Geodrill Ltd

TSX:GEO

Earnings Call Transcript 2022-Q2

[Operator]

Good morning, ladies and gentlemen. Thank you for standing by.

[Operator Instructions]

I'd like to remind everyone that this conference is being recorded on Monday, August 8, at 10:00 a.m. Eastern Standard Time and is being broadcast live via the Internet.

During today's call, management would make statements regarding management's expectations for the company's future financial and operational performance. These statements are considered forward-looking statements. Each forward-looking statement speaks only as of the date of this call, and actual results may differ materially from management expectations for a variety of reasons, including market and general economic conditions and the risks and uncertainties detailed from time to time in the company SEDAR filings.

I would now like to turn the call over to the President and CEO of Geodrill Limited, Mr. Dave Harper.

[David Harper, executive]

Thank you, operator. Good morning, and welcome to Geodrill's Q2 2022 Quarterly Financial Results Call. I'll begin with an overview of our operations and performance for the quarter, our CFO, Greg Borsk, will then give us some more detailed review of our second quarter financial results, after which I will discuss our outlook for the remainder of 2022. During Q2, we achieved new milestones and demonstrated continued strength as demonstrated by our financial performance.

On the financial front, we generated record revenue of USD 39 million, which was up 28% year-over-year. We also achieved record EBITDA being 29% of revenue, which was up 51% year-over-year. On net income, we were just shy of the record. We delivered USD 5.9 million or USD 0.13, which was up 49% year-over-year. And significantly, we continue to strengthen the balance sheet, surpassing a new milestone total equity of USD 100 million. And that's USD 17.7 million or 21% year-over-year.

So aside financial, we also had a number of operational and strategic wins. Operationally, we increased drill rig fleet to 75 rigs and recorded increased rig utilization of 78% on this increased rig fleet. We also exceeded target projections on all recently commenced contracts, especially Egypt. Outlook wise, we continue seeing a strong pipeline of bidding. And finally, strategically, management and insiders demonstrated their confidence in the business by exercising over 1.3 million share options at an average price of CAD 2.13 resulting in CAD 2.9 million in fresh equity.

Geodrill's continued strength is more than the sum of our strong financial measures. Each quarter that we are able to fortify our position further entrenches the company, not only in West Africa, but now extending beyond those borders and into new geographical regions. The bottom line, rig-for-rig, Geodrill continues to outperform generating record profitability and demonstrating that our model works.

Thank you.

[Gregory Borsk, executive]

Thank you, Dave. As a reminder, all figures reported are in U.S. dollars. The company generated record revenue of $39.2 million in Q2 2022, a [ 20% ] increase when compared to $30.6 million in Q2 2021. The increase in revenue is a result of the increase in demand for the company's drilling services. Importantly, the company has invested a significant amount of capital into its drill fleet and has advantages in the form of reputation and experience, accuracy, reliability and safety, all of which are severe -- all of which serves as key factors in the awarding of contracts and in the increase in the company's revenue.

In addition to significantly expanding its rig fleet, the company has also been successful in expanding its client base to include a mix of majors, intermediates and juniors, which all contribute to the increase in the overall drilling activity. The gross profit for Q2 2022 was $12.4 million compared $8.3 million for Q2 2021 being an increase of $4.1 million. The gross profit percentage for Q2 2022 increased to 32% compared to only 27% for Q2 2021.

In terms of EBITDA, the company realized record EBITDA for Q2 2022 of $11.2 million being 29% of revenue compared to $7.4 million for Q2 2021 or 24% of revenue. The company also realized net income for Q2 2022 of $5.9 million or $0.13 per share compared to $4 million or $0.09 per share for Q2 2021. We ended the quarter with our strongest balance sheet ever with total equity of over USD 100 million. We had net cash of $2.9 million and have recently renewed our banking facilities and credit lines to fund any future opportunities.

At this point, I will turn the call back to Dave.

[David Harper, executive]

Thank you, Greg. With a growing drill rig fleet, an outstanding track record, strong balance sheet and exceptional financial metrics, Geodrill is ready to meet the robust demand for exploration drilling services. We believe in the inevitable cycles in commodities. We also believe that we are currently in the early stages of an up cycle. Gold is doing particularly well, relatively -- relative to the markets. And considering the enormous amount of metals needed towards greening the economy, batteries and electric vehicles, it is clear that demand will only grow from here and that new resources will need to be discovered and developed and therefore drilled.

For investors, Geodrill provides a great way to participate in this commodity boom without direct exposure to price fluctuations or country or geographical risk. With Geodrill Prime to continue to deliver outsized performance and growth, investors searching for value and earnings should consider Geodrill. And on that note, some good news for our U.S. investors. Our OTCQX listing is now well advanced and once listed, it should be in the next week or 2. This should increase shareholder visibility and liquidity.

So this concludes our prepared remarks on our financial results. I thank you for participating in today's call. We will now be pleased to answer any questions that you may have. At this point, I'll ask the operator to provide directions for anyone who wishes to ask a question. Thank you.

[Operator]

[Operator Instructions]

First question comes from Ahmad Shaath of Beacon Securities.

[Ahmad Shaath, analyst]

Yes. Sorry about that. I was on mute. Congrats on a solid quarter. I was just wondering if you can give us a little bit more color on the demand environment. I see a lot of commentary on exploration companies. So maybe give us a little color on that either compared to the beginning of the year or compared to last year, any color on that side of the demand environment would be very helpful?

[David Harper, executive]

Demand is as strong as I've ever seen it in my 35 years in the industry that's the simple statement. Gold is doing particularly well at the moment to shy of $1,800, which I think is holding up very well under the circumstances relative to the rest of the market. I think I made that point in my commentary. But what's -- the interesting that I mentioned at the moment is that we're also seeing all this EV activity. And I do not believe ever in my time in the career, as I say, was 35-plus years, we've not been going to say 1 or 2, say, gold and nickel or gold and copper or there's usually 1 or 2 things going at once, right? But to have everything going, it's kind of really -- it seems to be the industry that we're in a different dimension to the rest of the world. And that perhaps is because of the cyclicality of the contrarian nature of gold mining and commodity mining in general. But I got to say, we are completely tapped out for rigs, we cannot get [indiscernible] out to our customers fast enough, even us. And the -- to the extent that we are actually renting drills to keep up with demand. So yes, really busy and getting busier. .

[Ahmad Shaath, analyst]

That's great color. And maybe I have maybe a couple of expansion points on what you mentioned. First, on the other metals, like what is your exposure right now if you're able to mention outside of gold? And specifically, anything related to green energy you've seen some expansion into lithium and other metals into Africa, are you able to capture some of that business or that's out of your geographical scope so far? .

And then secondly, what you just mentioned on the demand environment, and I've seen this is your first time in maybe the last 4 or 5 quarters that we see the EBITDA outpaced revenue. Is it fair to say that this is the beginning of such trend, given where we are in the cycle and the demand commentary you just mentioned?

[David Harper, executive]

I'm going to answer the first half of your question. Maybe I'll just quickly speak to the demand on the commodities, then I'll let Greg answer the back half of your question. So again, on the actual breakdown of the split between, say, gold and other, where it is traditionally single digits, 2%, 3%. That pendulum has swung now to the extent that gold is about 85% of our business to 90% of our business. And other being it in lithium is in [indiscernible] so forth, it's between 10 and 15. And it fluctuates up and down a bit [indiscernible] 1 month it could be 87.5%, 12.5%. But I would say we -- the needle is moving to a larger portion of the battery metals. So yes, kind of moving in the direction of about in 85, 15. And this is on the enlarged numbers on the enlarged meterage big numbers in large revenues. I'm going to hand over to Greg.

[Gregory Borsk, executive]

Yes. Just Ahmad, I think on the demand, it's really a global thing and an industry thing. So not only Geodrill we had tremendous revenue growth last year. So we've also been able to build on that again this year. So you see in the quarter, revenue increased 28%. But again, we -- as Dave mentioned, 90% of our drilling is for gold, and that's just geographically where the majority of our rigs are. But we're able to drill for anything. We drill for lithium, copper, zinc. So it really doesn't -- we can benefit from any base metal or any precious metal. But what you're seeing in terms of demand, as Dave mentioned, we've never seen demand as strong. Dave's never seen demand as strong in 35 years. So our success is being able to keep up with our clients and our clients' demands.

In terms of -- I think you had a question on the EBITDA growth. And yes, what we're realizing -- what we're able to do is as you see the revenue increase, we're able to maintain our margins. So through the first 6 months of 2022, we have a gross margin of 31%. So that's as high as I remember, kind of year-to-date. Q2 that even with all the inflationary costs, our gross margin in Q2 was 32%. And a big factor of that as revenue increases, I think is kind of the point you were getting at, you'll see revenue went from $30.6 million to $39.2 million. We have a lot of fixed costs in there. But as it increases, a lot of that just drops to the bottom line. So you see significant EBITDA number, $11.2 million, which was 29% of revenue. And as I mentioned, Q1 and Q2 were 2 very strong quarters. So if you look at where we are halfway through the year, we have EBITDA of $21.5 million. So very strong start to 2022. And as we mentioned, it's based on demand, and I think everyone has seen in demand. So we're just well positioned to take advantage of it. Okay?

[Ahmad Shaath, analyst]

Got you. That's a great color. Congrats again on the good numbers.

[Operator]

The next question comes from Daryl Young, TD Securities.

[Daryl Young, analyst]

Just the first question around Q3 outlook and the rainy season. Obviously, you're more geographically diverse now. But just curious if you got any early indicators of how we should be thinking about the wet season this year?

[David Harper, executive]

Yes, we're just chatting about that as we're coming on to the call actually. I was wondering whether we might get that question. Traditionally on a year-over-year, our Q4 -- our Q2 is generally our strongest quarter. Relative basis, I think you're going to see a nice price in Q3. We would have normally been sort of parking a few rigs around the end of June into July. And that gives us the opportunity to jump in to a bit of maintenance and seeing some of the [indiscernible] on brake and stuff like that. We're now in the middle of the wet season, what is traditionally in the [indiscernible] and then we haven't seen it. We haven't seen -- we have seen it has fallen away, but not to the extent that it normally does. So I think I think Q3 is going to be under watch.

And this all makes an interesting bigger story, which is, of course, the fiscal 2022. It's -- quarter 4 is looking like the blockbuster as well.

[Gregory Borsk, executive]

Yes, let me just add to that, too. And I think just kind of my earlier comments to Ahmad, if you look at the years over years. If you look at last year, Q3 significantly dropped off from Q2. I think Q3 2021 was about $27 million and Q4 -- even in Q4. We saw a very strong half of 2021 and then Q3 and Q4 were a bit lighter. We're not seeing that this year. So not only are we expecting strong numbers. I think on a year-over-year comparative, we're set up pretty nicely throughout the second half of this year.

[Daryl Young, analyst]

Okay. Great. And then just with respect to labor, I mean it sounds like you've got robust demand just across the board. So just curious if it's really labor that's preventing you from maybe winning even more work at this point?

[David Harper, executive]

We just don't have [indiscernible] we kind of tapped the rigs. You see the number 78% utilization and you think stood at 22% ago, but it haven't worked that way. You never get to 100%. It's -- in reality, 80% to 85% for us is about as high as it [indiscernible]. Given that we are currently in -- towards the tail end of quarter 2, which these numbers related to, you generally would be starting to taper off, particularly considering that we have added to the fleet and that utilization number that we quoted is on the enlarged fleet number.

The thing is that you just need to get to 100%. So all intents and purposes, we're currently tapped out. And we are -- our plans are well and truly put to ensure that [indiscernible] rigs do come out of the workshop. They will be heavily manned with able trained technicians and so on and so forth. It's all part of the machine. Is labor holding us back, good question, no. I mean it's tightened labor market that we're working in. But we kind of -- we were working on this stuff a year ago. So I don't think we're in pretty good shape.

[Daryl Young, analyst]

Okay. Great. And then just one final one. Have you seen any changes -- significant changes in the drilling mix? Just any kind of color or commentary there more directional or deep pool or what you can give us there? .

[David Harper, executive]

Good question. A lot more time in drilling in this current quarter, a lot more. Historically, we do between 15% and 20% of our total meters drilled in the quarter will be down in one and this particular quarter, it was 27%. That's emblematic of mining companies doing more definition type drilling. In other words, bringing resources on to the [indiscernible] so they can be [ cautious ] to produce gold. So it's kind of the transition you see when a mining goes from resource to reserve definition, a lot more [indiscernible], which tends to actually lower the total meters drilled for the same amount of ships drill. And that's the quite simple reason for that is diamond and drilling lower product could be higher price. But yes definitely a lot more [indiscernible].

[Operator]

[Operator Instructions]

The next question comes from Gordon Lawson of Paradigm Capital.

[Gordon Lawson, analyst]

Congratulation again on the excellent quarter. For your newer contracts and ongoing negotiations, are you able to comment on the structure you're targeting in terms of labor and energy inflation?

[Gregory Borsk, executive]

Sorry, I am not sure -- I didn't understand the question. For newer contracts, comment on labor, what, sorry?

[Gordon Lawson, analyst]

Well, in terms of labor and energy inflation, is there any cost sharing, is -- are the clients paying for the energy? How exactly are these newer contracts getting structured? .

[Gregory Borsk, executive]

Yes. No, we -- on a large contract, there's always rise in fall causes that capture that. Like, so if we have a long-term 2, 3, 5-year contracts, so that's reviewed annually. And then on the new contracts, what we do is we build it in. So if we're doing a wet rate -- if we're building at wet rate, we'll build in the fuel. And then again, that's reviewed with the client, so not really any concerns there. There's also a lot of -- we do a lot of underground drilling now with the LM electric rigs. So there's no exposure. We do have some contracts where the client supply fuel.

So I guess to your question, we're on top of it. We do see fuel rising, but it's not something that we're exposed 100% to. We work with the client on that and build it into the rates. And same in terms of labor. Labor increases annually so do our rates, and we make sure we balance that. We have a pretty good handle on -- and I think if you understand the industry and our clients and the drillers, there's always been a history of kind of working together. It's part of the chain. And so if we need to increase rates and we're able to back up why we have to increase rates because of the spike in fuel or the spike in labor, usually we're able to share that with our accounts.

[Gordon Lawson, analyst]

And partially reflecting the fixed rigs that are currently being granted if I were to parlay that back over to labor, how is the hiring process going on that front? I mean there's been a lot of previous commentary on shortage of skilled labor. So has there been much progress there? .

[Gregory Borsk, executive]

We're not -- I think a lot of our competitors struggle with labor and from what I understand, it's predominantly in North America. We're not seeing that. I think Geodrill, our history of investing in our labor force and training them. And we've constantly given staff raises every year, even in bad times for us. So we have -- we're not really seeing significant labor challenges, like I think, some of our competitors. It's -- Dave mentioned earlier, it's more rigs and making sure we have rigs available to suit our clients. But in terms of labor, I think if you continue to invest in your labor force and treat them well, in good times, they're there to support the company.

[David Harper, executive]

Yes. We're training today's workforce -- tomorrow's workforce today. So we're not going to stop whatever it is 75 rigs, Gordon. We envisage that imminently, we're going to get 100 rigs. I don't know whether it's going to be next year or the year after, but we're already trading that next pool of talent in our academy of its own. This is something that we've done since the [indiscernible] up 25 years in business next year. And we started with a bunch of expats many years ago -- hired a bunch of young fellows out here in Africa to do the heavy lifting. And over the years, those young fellows went through the hoops and through our various approach to training, which we think is second to none.

And as a result, we developed an African [indiscernible] Workforce, fully trained technicians as good as what would be -- what you would expect in the Western world. People are very, very tradable. They're hard-working. They pass people, very loyal and honest. And so it's -- Africa actually is part of the, if not the youngest population in the world. and a lot of unemployment. So I see it's really a great place to be looking when you look at upside, what are the things that we struggle from, can't get rigs, can't get people.

So the people side of it, I think we've got it fairly well covered. I think it's worth mentioning that those people who joined the company 25 years ago are still with us today. I mean they're not lifting everything. They're actually all managers in their own right. This is a great story in terms of local content, putting something back into the community. I mean in terms of ESG boxes, I just don't know how many we tick. So yes, I hope that answers your question.

[Gordon Lawson, analyst]

Yes, that does is excellent to hear. And just one more for me on a generic. But I mean your financials continue to outperform, your beating consensus every quarter. What do you feel it will take for your company to trade more in line with peers?

[David Harper, executive]

That's a great question. I'm not sure if Greg wants to jump in, but I'm going to give it my to a sense were here at the moment. We're a small story, we're a great story, but we're a small story. Relative on a pound for pound basis, Geodrill probably punches hard of a driller out there. And this story continues to grow. I think people are becoming more used to the story, but we're still a small [indiscernible] story. Our plans are [ afoot ] at the moment to expand our investor base into the U.S. We think we're getting better eyeballs with better audience in the U.S. at the moment. So we've been marketing down there in the last year but found that it was still difficult for those people that wanted to buy the story and own it. They buy it on the [indiscernible] Exchange. So we're effectively been training with an OTC listing, but it was more like a [indiscernible] sheet listing. So it's sort of in the small pools that it trades is quite a liquid, very difficult to buy even harder to sell.

That will change in a couple of weeks' time. We've actually been working hard on OTCQX listing, and that is now finalized. We have a code, and we've been given an official listing date, which I can't recall exactly, but I think it's in the next week to 10 days. Once that is up and running, I think that's a starting whole new market for us in terms of the investors. The actual story itself, the Geodrill story, I think you go a long way to find the company that has USD 100 million of net equity, consistently grows year in, year out even through difficult times like COVID is still managed to be cash flow positive and reinvest in our business.

I think you'll go a long way to find a company where management and insight is continued to demonstrate their belief in the business. I, myself and Greg and a couple of other of managers just pull out our cheque books literally convert their auctions, put in $2.7 million back into the business. We believe in this business. We just got to get other folks to believe in it as well. I do believe that this is actually one if not the best growing company in the world. We're not the biggest, but we're certainly, if we're not the best we are in the top quartile.

[Gregory Borsk, executive]

And let me just add. I think, Gordon, like we managed the business on the balance sheet. So if you look at our balance sheet, and Dave, we thought it was important to highlight surpassing the $100 million in total equity. But we've continually invested in the business in the balance sheet. And you see that in the PPE, we're constantly adding rigs and we're upgrading rigs, and we're reacting to what the clients want -- whatever the clients want, we're able to deliver, same with inventory. I mean we ended Q2 with almost $30 million in inventory. And for us, that's inventory spread throughout the countries we operate in. It's in CI, it's in Egypt. It's in Ghana. It's throughout our group network. So when large jobs and jobs we're working on continue, we're able to continue to service those clients because we've invested and we have that inventory in place.

And I think just 2 more quick points. you mentioned us versus our competitors. Again, it's a strong balance sheet. We have -- we effectively have no debt. And by that, I mean, we have net cash. So if you look at we -- Q2, I think we had net cash of about $2.9 million. So we have more cash than debt. And the other kind of delta I look at is our receivables versus our payables. And you'll see in Q2 that delta builds up because we're so busy in Q1 and Q2, we kind of bank a lot of trade receivables.

Trade receivables at the end of Q2 were $40 million. I think it was about $40.4 million. And through Q3 and Q4, that makes its way into cash. So we just have a very healthy balance sheet. And you -- I think as over time, as we're consistent with revenue and earnings and keep increasing our total equity it should get recognized. And I guess lastly -- just quickly, lastly, we pay dividend and I'm not just top of my head, I think only one other driller pays a dividend, but we initiated a dividend in 2021. We paid semiannual, and then we've increased that in 2022. So I think if you -- for shareholders and stock value, if you're consistent -- you're consistently growing, you're strengthening your balance sheet and you're returning cash to shareholders. I think that's what we're continuing to do, and hopefully, it will get recognized.

[David Harper, executive]

Just one final point on that. If you don't mind, Gordon, I'm sorry to take so much time, but it's an important point I missed it before. We're obviously an African-focused driller's, this is where we started, this is where our DNA is. There's actually a reason for that. It wasn't a mistake. I recognize this region. 25 years ago this is a region that was very, very under-drilled. I thought that if this place is going to grow up to become the mining region that I believe it will, it's going to [indiscernible] a lot of drilling. So this is a great place for anyone starting a drilling company 25 years ago, never than [indiscernible].

Today, we drill 1.8 million meters a year of drilling that makes us somewhere in the top 5 or 6 fellows in the world by leverage. And as a result of all that drilling and that [indiscernible] conditions that I predicted 25 years ago. Today, the countries that we operate in, Ghana, Burkina Faso, Ivory Coast and Mali. That's just the West African country to speak for 7 of the major producing nations in West Africa.

Now if you look at the production that comes out of West Africa, you think China and Australia and North America is the largest producers in the world from the sums. Majority of the world gold is currently coming from West Africa. Actually, I think if you add the 7 countries up to be the seventh largest producer in the world, and we will soon another couple of years, things keep going the way they're going, West Africa as a region will become the largest producing gold region in the world.

Anyway, I keep trying to sell the African gold story, and some folks don't like it. Some investors are just not like Africa. So that's cool. So now we're expanding the business model into South America. Now that's some of its challenges. But it's actually going well. But despite challenges, and I believe as we become more of a global story, which is the intention, I think will be more acceptable to investors. But by that stage, we will be trading at much higher multiples. The fact remains that today, we traded at what, 2.5x EBITDA multiple. And the investor is looking for big value now on the back of a strong earning story that want to get set at the beginning of the burn, I got to tell Geodrill is the [indiscernible].

[Operator]

The next question comes from Ray Gibbons, a Private Investor.

[Unknown Attendee]

Congratulations, an incredible quarter. I think I might have a long career and not be in a business as good as yours, buying a lot of stocks, I might not ultimately find an entity that combines capital and labor in a way that leaves such an impact. But anyways, following a lot of miners, not necessarily in Africa, but around the world the past 18 months, I often hear about how you're adding rigs. We added another rig. There's a rig coming to drill juniors, intermediates. And then I look at some of your competitors and like their utilization just doesn't seem to change. And so I guess I wonder, big picture, where are these rigs coming from? Are miners choosing to buy rigs now themselves? Is there any of that going on? Like are they getting into your business to any degree. Can you give any color on that?

[David Harper, executive]

I'm not seeing -- most certainly not in my space out here. I really don't -- I don't get too involved in what's going on around outside where we're operating. I just try to focus on what we're doing here. But high level, I'm [indiscernible] -- no, I don't think so. I think people possibly increasing their fleet sizes, and therefore, the utilization possibly not changing as quick as you might expect it to see. Like if you look at our utilization for instance, it moves, but what also moves is the rig count. And as long as the 2 are working in lockstep, we're fine. I mean, 70-plus percent utilization is probably as busy as anyone else in the world would be at the moment. And that's just fine with us.

[indiscernible] on your comment or thinking about it. Internationally, what I actually have noticed and this is important from a pricing perspective. Let's say, in the last sort of 2 years, we've seen international utilization move from about 30% up to about 40%, 45%. 50% is actually where we see an inflection point that the pendulum changes on pricing, and that's where we start to see leverage. We're actually at that point now. So I would -- I don't find the other guys that closely, but I look [indiscernible], I think utilization globally must be approaching 50%.

[Gregory Borsk, executive]

Let me add on that, Ray, too. Yes, I believe like if you look at our competitors, their utilization is increasing also. So when you see from the mining side, adding a rig or adding 2 or it benefits the drilling industry. So...

[Unknown Attendee]

Yes. I guess the lag is kind of what has me a little baffled. One thing that sticks in my mind about kind of through the when -- Dave, when you used to talk about the industry, you'd say things like, I'd hate to be managing like a motley group of rigs through this downturn. I just -- that motley kind of sticks in my mind. How is it that you guys have been able to find 6 rigs for lease that were kind of within your framework of the type of rigs that you guys work with?

[David Harper, executive]

It's more out of necessity than our careful planning. We took on a big job in a new country and the customer's requirement was to start drilling yesterday. And the only way we were going to be able to do that was to take over. We essentially took over the existing contract from another contractor. And that meant that there was a fleet of equipment that was sitting there idle and a fully trained workforce. I mean it was a perfect [indiscernible]. We just asked the client whether they could rent us the rigs. The rigs were actually owned by the mine and the contractor was essentially managing them. So the contractor that we've signed is to supply the equipment. That equipment only 2 of 8 rigs -- 6 rigs, sorry, required were immediately available. So whilst we were shipping them, I guess the question was asked, what are we going to do for production in the meantime? And the answer was [indiscernible] rigs will take its workforce we will put them through our training and start there. I got to tell you, it was the quickest start-up of a new contract I've ever seen. I've never seen such a soft start in all my years of drilling. It's -- it was great. I looked at well from the client [indiscernible] well for us. We work out well for the employees because they managed to maintain their jobs. .

[Operator]

The next question comes from Daryl Young, TD Securities.

[Daryl Young, analyst]

Sorry, just one bit nitty-gritty question, but you had a $600,000 odd nonoperating loss in the income statement this quarter, and it doesn't look like you backed it out of EBITDA would be stronger the way I'd look at it, and just curious what that $600,000 hit was?

[Gregory Borsk, executive]

Yes, you're absolutely correct, Daryl. So that's our -- what we call the drill equity investments. So those are equity that we hold in certain clients. And if you look at that year-to-date, we have a gain of $444,000. And in the quarter, there is a loss of $620 million. So what that's telling you is some of the investments that we had on our balance sheet, we've crystallized a lot of that. But in the quarter, they like a lot of the other mining companies, they decreased in value. So that's the $620 million. So we don't report an adjusted EBITDA, but I know some of the -- some of our analysts do. So in Q1, they adjusted that one way. So they'll probably adjust it again by the $620 million in Q2.

[Daryl Young, analyst]

Okay. That's great color. I don't know if you guys would consider reporting an adjusted EBITDA or not, but FX was a big hit this quarter as well. So a great quarter, guys, congrats.

[Operator]

Thank you. There are no further questions at this time. Please continue.

[David Harper, executive]

Okay. It was a great call and a lot of questions. Thank you very much for everybody who participated in today's call. And yes, thank you very much. Have a great day.

[Gregory Borsk, executive]

Thank you, everyone.

[Operator]

Ladies and gentlemen, this does conclude your conference call for today. We thank you for your participation and ask that you please disconnect your lines.