Our view: We expect a modest negative reaction from MDI shares to FQ4 financial results that were slightly below estimates partially driven by inclement weather in North America which delayed operational restart after a seasonally weak third quarter and continued softness in junior drilling activity. Looking ahead, we continue to see robust drilling activity in FY2024 as gold and base metals producers have strong balance sheets, although junior financing remains sluggish.
FQ4 financial results slightly below estimates: MDI reported EPS of $0.25, below our estimate of $0.32 and consensus of $0.27. EBITDA came in at $37M, also below our estimate of $47M and consensus of $41M. The weaker than expected financial results were driven by inflationary pressure, seasonal weather-related challenges, and an overall slowdown in junior activity. MDI generated -$9.6M of FCF (inclusive of an expected increase in WC of $29M) vs. our estimate of $23M.
Operating results mixed across all geographies: Revenues were down -2.6% y/y to $185M. In the Canada - US region, revenue decreased -8.5% y/y based on adverse weather in Nevada and Northern Canada early in the quarter. Revenue in South and Central America decreased by -5.5% y/y, due to a slowdown in junior mining activity in Mexico given a financing gap and uncertainty surrounding the impact of new mining legislation. Revenue in Asia, Australia, & Africa outperformed other regions, increasing by +20.8% y/y, driven by new work in Mongolia and specialized services in Australia.
Capex and balance sheet update: Capital expenditures were $17M in FQ4. MDI added 5 rigs and disposed of 7 rigs, bringing the total rig count to 600, down from 602 rigs at FQ3-end. The company ended FQ4 with $94M in cash, down from $98M at the end of FQ3, putting the net cash position at $59.3M. LT debt at the end of the quarter was $20M. MDI anticipates capex spend of ~ $80M in FY2024, to prepare for an uptick in exploration activity along with several ESG initiatives.