Dorchester Minerals LP :DMLP-US: Earnings Analysis: Q1, 2017 By the Numbers : May 30, 2017

Dorchester Minerals LP reports financial results for the quarter ended March 31, 2017.

We analyze the earnings along side the following peers of Dorchester Minerals LP – North European Oil Royalty Trust, Enduro Royalty Trust, Panhandle Oil and Gas Inc. Class A and San Juan Basin Royalty Trust (NRT-US, NDRO-US, PHX-US and SJT-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 12.73 million, Net Earnings of USD 8.22 million.
  • Gross margins widened from 55.22% to 78.46% compared to the same period last year, operating (EBITDA) margins now 80.75% from 60.95%.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-03-31 2016-12-31 2016-09-30 2016-06-30 2016-03-31
Relevant Numbers (Quarterly)
Revenues (mil) 12.73 10.74 10.68 10.01 6.13
Revenue Growth (%YOY) 107.75 45.33 44.56 20.88 -30.42
Earnings (mil) 8.22 6.63 6.42 5.75 1.44
Earnings Growth (%YOY) 471.77 153.38 148.72 56.8 -62.92
Net Margin (%) 64.6 61.72 60.09 57.45 23.47
EPS 0.27 0.22 0.21 0.19 0.05
Return on Equity (%) 48.83 39.29 37.29 33.35 8.13
Return on Assets (%) 48.46 38.86 36.66 32.93 8.06

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Market Share Versus Profits

Revenues History
Earnings History

DMLP-US‘s change in revenue this period compared to the same period last year of 107.75% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that DMLP-US is holding onto its market share. Also, for comparison purposes, revenues changed by 18.47% and earnings by 23.99% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 55.22% to 78.46% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 60.95% to 80.75% compared to the same period last year. For comparison, gross margins were 73.48% and EBITDA margins were 81.98% in the last reporting period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

DMLP-US‘s improvement in gross margin has been accompanied by an improvement in its balance sheet as well. This suggests that gross margin improvements are likely from operating decisions and not accounting gimmicks. Its working capital days have declined to 112.75 days from 162.22 days for the same period last year.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 24.45% to 66.96% and (2) one-time items. The company’s pretax margins are now 66.96% compared to 24.45% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Dorchester Minerals LP engages in the acquisition, ownership, and administration of Royalty Properties, which is a producing and non-producing oil and natural gas mineral, royalty, overriding royalty, net profits, and leasehold interests. The company was founded in December 2001 and is headquartered in Dallas, TX.

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