Vox Royalty Delivers Strong Quarterly Results, Makes Clear Case for Royalty Investing in Tough Markets

• Vox Royalty reported 50% year-over-year revenue growth and record profit margins in Q3 results.
• CEO highlights Vox's returns-focused model and execution delivering value for shareholders.
• Disciplined capital deployment focused on assets with high returns on invested capital.
• Royalty companies offer leverage to rising commodity prices with insulation from producer cost inflation.
• Vox sees tailwinds for commodities, focused on accretive acquisitions and portfolio growth.

Vox Royalty recently announced impressive third-quarter results, including 50% year-over-year revenue growth and record gross profit margins. In an interview, Vox CEO Kyle Floyd touted these metrics as validation of the company's returns-focused business model. He also discussed the benefits of royalty investing, arguing the asset class can provide leverage to rising commodity prices while insulating investors from inflationary pressures impacting producers.

Quarterly Results Demonstrate Vox's Execution

Vox's Q3 revenue of $9 million represented a 50% increase versus the prior year's $6 million. Gross profit margins hit a record high, which Floyd called "a really significant metric in the mining royalty space." The company also generated positive earnings during the quarter.

Floyd cited these results as evidence that Vox is delivering on its promise to shareholders: "It's a great time for Vox. The markets are what they are, but we continue to produce the results that we told shareholders we would."

Creative Growth Strategy Based on Capital Discipline

With capital markets currently constrained, Floyd emphasized Vox's discipline in deploying its capital. The company focuses on assets likely to generate returns exceeding its cost of capital over the short, medium and long term.

Vox has invested around $15 million in acquiring royalties over the past year, already yielding around $10 million in top-line revenue - approximately a 20% cash return on invested capital. For 2022, Vox expects $11-13 million in revenue on its royalty portfolio, representing a 25% cash return.

Beyond its operating cash flows, Vox is focused on extracting more value from non-core assets. Floyd highlighted the company's recent sale of its coal royalty database as an example of this creative approach. Although Vox holds no coal royalties, the database sale provided an immediate return while retaining upside through a revenue share as the new owner acquires coal royalties.

Royalties Offer Leverage and Inflation Protection

Floyd made a strong case for royalty companies benefiting from inflationary conditions as commodity prices rise. With producers facing persistently high input costs, royalties avoid much of this risk while providing leveraged exposure to underlying metals and minerals.

Vox's existing portfolio contains embedded growth as assets hit key development milestones. Once acquired, royalty interests require no additional capital. This built-in growth is "pure benefit to the business," Floyd noted.

He expects tailwinds for commodity prices to continue over the medium to long term. Royalty companies with high-quality assets like Vox are best positioned to capitalize on this trend. Floyd also highlighted Vox's industry-leading dividend yield as providing investors with near-term returns while they "get paid to wait."

With its revenue growth, Vox has operating leverage and cash flows to keep acquiring royalties without accessing capital markets. Floyd indicated the company is well-positioned to add value for shareholders through acquisitions. Vox also has over $8 million in cash to fund further deals.

Takeaway for Investors

Vox Royalty has a portfolio of producing assets generating impressive returns on invested capital. Its business model is validated by strong execution, including Q3 results showing robust revenue growth and record profit margins.

With disciplined capital allocation and creative moves to extract value, Vox is positioned to continue benefiting from commodity tailwinds. The company's royalty focus offers inherent leverage to rising prices along with insulation from producer cost inflation.

For investors seeking commodity exposure with downside protection, Vox warrants consideration. Its attractive dividend provides income alongside anticipated growth from both portfolio expansion and organic royalty interest development.