Dorchester Minerals LP :DMLP-US: Earnings Analysis: Q3, 2017 By the Numbers : November 8, 2017

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

Highlights

  • Summary numbers: Revenues of USD 12.48 million, Net Earnings of USD 6.95 million.
  • Gross margins narrowed from 72.08% to 67.03% compared to the same period last year, operating (EBITDA) margins now 80.28% from 81.72%.
  • Earnings rose compared to same period last year, despite decline in operating and pretax margins.

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

2017-09-30 2017-06-30 2017-03-31 2016-12-31 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 12.48 12.55 12.73 10.74 10.68
Revenue Growth (%YOY) 16.86 25.42 107.75 45.33 44.56
Earnings (mil) 6.95 8.12 8.22 6.63 6.42
Earnings Growth (%YOY) 8.32 41.2 471.77 153.38 148.72
Net Margin (%) 55.7 64.68 64.6 61.72 60.09
EPS 0.22 0.26 0.27 0.22 0.21
Return on Equity (%) 7.91 10.32 12.21 9.82 9.32
Return on Assets (%) 30.95 40.63 48.46 38.86 36.66

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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 -0.58% and earnings by -14.39% compared to the previous period.

Earnings Growth Analysis

The company’s earnings rose year-on-year. But this growth has not come as a result of improvement in gross margins or any cost control activities in its operations. Gross margins went from 67.03% to 72.08% for the same period last year, while operating margins (EBITDA margins) went from 80.28% to 81.72% over the same time frame.

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 decline in gross margins has not produced any significant offsetting improvement in its working capital . This leads Capital Cube to conclude that the decline in gross margins are likely from operating issues and not trade-offs with the balance sheet. Working capital days are currently 129.28 days, compared to last year’s level of 114.07 days.

Margins

Despite a decline in operating (EBIT) margins as well as a decline in pretax margins, the company’s earnings rose.

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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