Royal Gold(RGLD) - 2022 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Financial Statements (Unaudited) Unaudited statements show total assets of $2.85 billion, Q2 revenue of $146.4 million, and net income of $71.1 million Consolidated Balance Sheets Total assets grew to $2.85 billion as of June 30, 2022, driven by increased cash and stable liabilities Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total current assets | $340,340 | $215,996 | | Total assets | $2,853,046 | $2,757,032 | | Total current liabilities | $64,013 | $61,428 | | Total liabilities | $156,388 | $155,821 | | Total equity | $2,696,658 | $2,601,211 | Consolidated Statements of Operations and Comprehensive Income Q2 2022 revenue was $146.4 million with net income of $71.1 million, a decrease from the prior-year period Q2 2022 vs Q2 2021 Performance (in thousands, except per share data) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | | :--- | :--- | :--- | | Revenue | $146,441 | $168,027 | | Operating Income | $67,905 | $85,967 | | Net Income | $71,140 | $81,677 | | Diluted EPS | $1.08 | $1.24 | H1 2022 vs H1 2021 Performance (in thousands, except per share data) | Metric | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Revenue | $308,796 | $310,616 | | Operating Income | $148,481 | $157,025 | | Net Income | $136,816 | $135,705 | | Diluted EPS | $2.08 | $2.07 | Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity increased to $2.70 billion, primarily driven by net income of $136.8 million Changes in Stockholders' Equity - Six Months Ended June 30, 2022 (in thousands) | Description | Amount | | :--- | :--- | | Balance at December 31, 2021 | $2,601,211 | | Net income and comprehensive income | $137,308 | | Dividends declared | ($45,981) | | Other (Stock-based comp, etc.) | ($1,878) | | Balance at June 30, 2022 | $2,696,658 | Consolidated Statements of Cash Flows Net operating cash flow for H1 2022 was $221.3 million, contributing to a $137.1 million increase in cash Cash Flow Summary - Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $221,329 | $213,086 | | Net cash used in investing activities | ($37,877) | ($128,841) | | Net cash used in financing activities | ($46,386) | ($240,188) | | Net increase (decrease) in cash | $137,066 | ($155,943) | | Cash and equivalents at end of period | $280,617 | $225,916 | Notes to Consolidated Financial Statements Notes detail the stream/royalty business model and significant subsequent events including two major acquisitions - The company's business is acquiring and managing precious metals streams and royalties, not operating mines[15] - Subsequent to the quarter's end, the company acquired a royalty on the Cortez Complex for $525 million in cash[59] - The company announced an agreement to acquire Great Bear Royalties Corp for approximately C$199.5 million in cash[63] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management analyzes financial results, highlighting the impact of metal prices and recent strategic acquisitions Overview of Our Business The business acquires and manages stream and royalty interests, which constituted 72% and 28% of Q2 2022 revenue Revenue Contribution by Segment (Q2 2022) | Segment | Revenue Contribution | | :--- | :--- | | Stream Interests | ~72% | | Royalty Interests | ~28% | Business Trends and Uncertainties Financial results are primarily influenced by metal price volatility, with gold accounting for 71% of Q2 revenue Average Metal Prices and Revenue Contribution | Metal | Q2 2022 Avg. Price | Q2 2022 % of Revenue | Q2 2021 Avg. Price | Q2 2021 % of Revenue | | :--- | :--- | :--- | :--- | :--- | | Gold | $1,871/oz | 71% | $1,816/oz | 76% | | Silver | $22.60/oz | 11% | $26.69/oz | 8% | | Copper | $4.31/lb | 14% | $4.40/lb | 11% | - Announced two major acquisitions post-quarter end: the Cortez Royalty for $525M and Great Bear Royalties Corp for ~C$199.5M[80][81] Property Developments Key property updates include lower deliveries from Andacollo and Cortez, and continued ramp-up at Khoemacau - Khoemacau ramp-up is progressing, with full sustained production expected by Q4 2022[97] - At Pueblo Viejo, an additional 45,000 ounces of silver were deferred, bringing the total deferred amount to 484,000 ounces[102] - Lower production at Cortez in Q2 2022 was due to mine sequencing, with stronger performance expected in Q4 2022[105] Results of Operations Q2 2022 net income decreased to $71.1 million due to lower revenue from key properties like Andacollo and Cortez - The decrease in Q2 2022 revenue was primarily from lower gold sales at Andacollo and Pueblo Viejo, and lower gold production at Cortez and Peñasquito[111] Revenue by Principal Property (in thousands) | Stream/Royalty | Q2 2022 Revenue | Q2 2021 Revenue | | :--- | :--- | :--- | | Mount Milligan | $45,627 | $43,802 | | Pueblo Viejo | $19,812 | $26,585 | | Andacollo | $11,721 | $27,868 | | Peñasquito | $9,664 | $13,399 | | Cortez | $8,138 | $13,739 | Liquidity and Capital Resources The company maintains a strong liquidity position with $276.3 million in working capital and $1 billion in credit - Working capital was $276.3 million at June 30, 2022, with a current ratio of 5 to 1[130] - In July 2022, the company borrowed $500 million under its revolving credit facility for business development, leaving $500 million available[135] Quantitative and Qualitative Disclosures about Market Risk Earnings are significantly exposed to metal price fluctuations, particularly gold, which drives 71% of revenue Revenue Sensitivity to 10% Metal Price Change (H1 2022) | Metal | % of Total Revenue | Revenue Impact (Increase/Decrease) | | :--- | :--- | :--- | | Gold | 71% | $24.9 million | | Copper | 14% | $7.9 million | | Silver | 10% | $1.7 million | Controls and Procedures Management concluded that disclosure controls and procedures were effective as of the end of the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2022[148] - No material changes in internal control over financial reporting occurred during the quarter[149] PART II OTHER INFORMATION Legal Proceedings The company reported no legal proceedings during the period - None[151] Risk Factors There have been no material changes to the risk factors previously disclosed in the Form 10-K Transition Report - There have been no material changes to the risk factors included in the section entitled "Risk Factors" of our Transition Report[152] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no purchases of its own equity securities during the second quarter of 2022 - The company made no purchases of its equity securities in April, May, or June 2022[153] Defaults Upon Senior Securities The company reported no defaults upon its senior securities - None[154] Mine Safety Disclosures This item is not applicable to the company - Not applicable[155] Other Information The company reported no other information for this item - None[156] Exhibits This section lists exhibits filed with the Form 10-Q, including Sarbanes-Oxley certifications and XBRL data - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and Inline XBRL data (101, 104)[160]