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• DNG continued to take advantage of the high gold price in Q2, beating revenue and profitability estimates, boosting its cash balance and reducing development risk as it enters its next phase of growth.
• Dynacor posted record cash gross operating margin of $346/oz AuEq sold, compared to $234/oz in Q2/23 and our estimate of $233/oz.
• DNG added to its strong balance sheet with $35M in cash (up from $28M in December 2023), $55M in working capital, and negligible debt.
Dynacor Group (DNG:TSX) reported Q2 financial results that came in ahead of our expectations, with significant beats on revenue and cash flow. The beat was primarily due to the elevated gold price and this was compounded by another strong quarter operationally. We continue to believe DNG can sustain its historical production growth rates (~10%) as it begins its next phase of growth and the gold price remains supportive. We are maintaining our BUY rating and target price on Dynacor at C$7.50/share.
Key Highlights
• Tonnes processed came in at 42.9Kt (+5% YoY) translating to 28.4Koz AuEq produced (-13% YoY) which was slightly below our estimates of 44.8Kt (+2% YoY) and 33.2Koz AuEq.
• Given the increased gold price ($2,333/oz selling price), sales came in at $67.4M (+5% YoY), beating our $66.4M estimate.
• Cash gross margin for the quarter was 16% compared to our estimate of 13% and 13% in Q2/23.
• Gross operating margin was $10.0M or $346/oz compared to our model that assumed $7.7M or $233/oz.
• Operating cash flow (before working capital) was $5.8M (9% of revenue) significantly beating our estimate of $4.4M (7% of revenue) while EBITDA also beat our estimate, hitting a quarterly record of $8.3M vs. our $6.4M. After working capital, OCF came in at $9.7M.
• Net income came in at $4.5M or $0.12/share vs. our estimates of $3.5M or $0.10/share.
• The Company ended the quarter with $34.7M in cash compared to $27.7M at the end of Q1/24.
Outlook
Today’s results put DNG ahead of pace for its 2024 guidance on most metrics. We remind readers that DNG guided for $265-280M in sales, $15-18M in OCF, and $12-15M in net income. Annualizing the H1 results, DNG is on track for $270M in sales (within guidance), $23M in operating cashflow and $19M in net income (both well above guidance). Below we remind readers of the many growth initiatives DNG has planned over the next several years with a target of $1B in revenue (~4x 2023 revenue) within the next 5-6 years.
DNG: Q2 Financials - Margins Improve Further
What you need to know:• DNG continued to take advantage of the high gold price in Q2, beating revenue and profitability estimates, boosting its cash balance and reducing development risk as it enters its next phase of growth.
• Dynacor posted record cash gross operating margin of $346/oz AuEq sold, compared to $234/oz in Q2/23 and our estimate of $233/oz.
• DNG added to its strong balance sheet with $35M in cash (up from $28M in December 2023), $55M in working capital, and negligible debt.
Dynacor Group (DNG:TSX) reported Q2 financial results that came in ahead of our expectations, with significant beats on revenue and cash flow. The beat was primarily due to the elevated gold price and this was compounded by another strong quarter operationally. We continue to believe DNG can sustain its historical production growth rates (~10%) as it begins its next phase of growth and the gold price remains supportive. We are maintaining our BUY rating and target price on Dynacor at C$7.50/share.
Key Highlights
• Tonnes processed came in at 42.9Kt (+5% YoY) translating to 28.4Koz AuEq produced (-13% YoY) which was slightly below our estimates of 44.8Kt (+2% YoY) and 33.2Koz AuEq.
• Given the increased gold price ($2,333/oz selling price), sales came in at $67.4M (+5% YoY), beating our $66.4M estimate.
• Cash gross margin for the quarter was 16% compared to our estimate of 13% and 13% in Q2/23.
• Gross operating margin was $10.0M or $346/oz compared to our model that assumed $7.7M or $233/oz.
• Operating cash flow (before working capital) was $5.8M (9% of revenue) significantly beating our estimate of $4.4M (7% of revenue) while EBITDA also beat our estimate, hitting a quarterly record of $8.3M vs. our $6.4M. After working capital, OCF came in at $9.7M.
• Net income came in at $4.5M or $0.12/share vs. our estimates of $3.5M or $0.10/share.
• The Company ended the quarter with $34.7M in cash compared to $27.7M at the end of Q1/24.
Outlook
Today’s results put DNG ahead of pace for its 2024 guidance on most metrics. We remind readers that DNG guided for $265-280M in sales, $15-18M in OCF, and $12-15M in net income. Annualizing the H1 results, DNG is on track for $270M in sales (within guidance), $23M in operating cashflow and $19M in net income (both well above guidance). Below we remind readers of the many growth initiatives DNG has planned over the next several years with a target of $1B in revenue (~4x 2023 revenue) within the next 5-6 years.
Underlying
DYNACOR GROUP INC.
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Ben Pirie
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