Dorchester Minerals LP :DMLP-US: Earnings Analysis: Q2, 2017 By the Numbers : August 7, 2017

Dorchester Minerals LP reports financial results for the quarter ended June 30, 2017.

Highlights

  • Summary numbers: Revenues of USD 12.55 million, Net Earnings of USD 8.12 million.
  • Gross margins widened from 69.77% to 76.55% compared to the same period last year, operating (EBITDA) margins now 82.39% from 81.99%.
  • 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:

2017-06-30 2017-03-31 2016-12-31 2016-09-30 2016-06-30
Relevant Numbers (Quarterly)
Revenues (mil) 12.55 12.73 10.74 10.68 10.01
Revenue Growth (%YOY) 25.42 107.75 45.33 44.56 20.88
Earnings (mil) 8.12 8.22 6.63 6.42 5.75
Earnings Growth (%YOY) 41.2 471.77 153.38 148.72 56.8
Net Margin (%) 64.68 64.6 61.72 60.09 57.45
EPS 0.26 0.27 0.22 0.21 0.19
Return on Equity (%) 10.32 12.21 9.82 9.32 8.34
Return on Assets (%) 40.63 48.46 38.86 36.66 32.93

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, DMLP-US‘s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if DMLP-US‘s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by -1.37% and earnings by -1.25% compared to the previous period.

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 69.77% to 76.55% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 81.99% to 82.39% compared to the same period last year. For comparison, gross margins were 78.46% and EBITDA margins were 80.75% in the last reporting period.

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 gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 127.61, compared to last year’s level of 103.17 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 59.46% to 67.31% and (2) one-time items. The company’s pretax margins are now 67.31% compared to 59.46% for the same period last year.

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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