EDMONTON, AB, Nov. 6, 2020 /CNW/ - McCoy Global
Inc. ("McCoy", "McCoy Global" or "the Corporation") (TSX:
MCB) today announced its operational and financial results for the
three months ended September 30,
2020.
Quarterly Highlights
For the three months ended September 30,
2020, McCoy Global reported:
- Adjusted EBITDA of $0.3 million
generated by exceeding cost reduction targets, achieving
$8.5 million of annualized cost
savings in comparison to Q3 2019
- $10.1 million of orders, with
order intake being led by several large international orders from
new market entrants, which resulted in a book-to-bill ratio of 1.3
on lower revenues
- Refinancing its US$2.4 million
promissory note with a US$3.4 million
term facility to extend maturity and support technology development
plans and securing a new US$2.5
million demand facility to support liquidity
- Achieving key development milestones on McCoy's integrated
tubular running system
"I want to begin by thanking our team for their extraordinary
efforts to not only persevere, but to also succeed in the face of
the COVID-19 pandemic. Despite the 50% decline in revenue we
experienced during the third quarter of 2020, our team's solid
execution on cost reduction and working capital initiatives
continues to exceed expectations, resulting in $0.3 million of Adjusted EBITDA and $0.7 million of cash flow generated from
operating activities," commented Jim
Rakievich, President, and CEO.
"It appears that both quoting activity and order intake have
begun to normalize at modest levels, and we are encouraged by our
third quarter bookings of $10.1
million. Regionally, the decline in active drilling rigs in
the North American land market appears to have flattened, however
our expectations are for little improvement in this region
throughout the remainder of 2020 and well into 2021.
Internationally, we expect drilling activity to continue to remain
flat, with modest improvement as 2021 progresses. Our current order
backlog will provide some visibility for the remainder of 2020 and
early 2021, however the uncertainty caused by the COVID-19 pandemic
could pose a significant risk to our 2021 outlook and we continue
to expect several challenging quarters ahead, from both a revenue
and earnings standpoint. While our third quarter results now
reflect the full impact of cost reduction measures announced in
April of 2020, our earnings were also positively impacted by
$0.2 million of trade receivable
impairment reversals and $0.3 million
of other non-recurring items which we do not expect to benefit from
in future quarters."
"Now more than ever, the increased emphasis on capital
discipline from our customers is driving the need for increased
efficiency through innovative technologies. As we further
illustrate in our November Investor Presentation (accessible at
https://www.mccoyglobal.com/investors/), McCoy continues to
progress the journey to advance tubular running operations toward a
digital and automated future by introducing safer, more efficient
smart technologies that result in not only cost savings but also
improved wellbore integrity. During the quarter, we achieved key
development milestones on McCoy's integrated tubular running
system. With additional financing secured to support this
initiative, we have reinstated US$1.0
million of external capital spend to support the procurement
of prototype materials for McCoy's Smart Casing Running Tool (CRT)
and McCoy's Smart Flush Mount Spider in Q4 2020. Field trials for
these two technologies are scheduled to begin early 2021."
Operational Summary
For the three months ended September 30,
2020, McCoy Global reported:
- Revenue of $7.6 million, compared
to revenue of $15.2 million in the
third quarter of 2019; revenue was impacted by the sharp decline in
order intake experienced in the second quarter of 2020 as a result
of the COVID-19 pandemic
- Cash generated from operating activities for the period ending
September 30, 2020 was $0.7 million compared to $0.3 million in 2019
- Net loss of $0.7 million,
compared to net earnings of $1.2
million in the third quarter of 2019
- Adjusted EBITDA1 of $0.4
million, compared to Adjusted EBITDA of $2.2 million in the third quarter of 2019
- Customer orders of $10.1 million,
compared to $4.1 million for the
three months ended June 30, 2020
- Backlog2 of $10.6
million, an increase of 28% compared to $8.3 million from June 30,
2020
- Book-to-bill ratio3 of 1.32, compared to 0.39 for
the three months ended June 30,
2020
Financial Summary
Revenue for the three months ended September 30, 2020 was $7.6 million, a 50% decrease from the third
quarter of 2019. Revenue was impacted by the sharp decline in order
intake experienced in the second quarter of 2020 as a result of the
COVID-19 pandemic, impacting both capital equipment and aftermarket
revenues, particularly in the US land market.
Gross profit for the three months ended September 30, 2020 was $1.1 million, a decrease of $3.9 million, from the third quarter of 2019.
Gross profit percentage for the three months ended September 30, 2020 fell by 19 percentage points
to 14%, largely as a result of the significant decline in revenue
and production throughput. The cost reductions initiatives that
occurred in both April of 2020 and the fourth quarter of 2019
mitigated the impact of the sharp decline in revenue.
General and administration (G&A) expense for the three
months ended September 30, 2020 was
$1.1 million which represents a
decrease of $0.9 million or 43% from
the third quarter of 2019. Sequentially, G&A declined
$0.3 million or 23% from the second
quarter of 2020 and now reflects the full impact of the cost
reduction initiatives that took place in April 2020. The decrease in G&A is in direct
response to the declined activity levels in the oil & gas
industry, as well as our initiative to become more efficient and
productive for the long term.
Sales & Marketing expense for the three months ended
September 30, 2020 decreased by
$0.2 million or 40% for the third
quarter of 2019 primarily due cost containment initiatives and
travel restrictions placed on our technical sales team.
Research and development expenditures ("R&D") for the three
months ended September 30, 2020 were
$0.7 million, compared to
$1.3 million in the third quarter of
2019. The decline in spend is a result of deferring certain
external project expenditures as part of the cash preservation
measures announced in April, while advancing the development of
McCoy's digital platform of technologies that will drive the
technology success in the future using internal resources.
Net loss for the three months ended September 30, 2020 was $0.7 million or $0.03 loss per basic share, compared to net
earnings of $1.2 million or
$0.04 earnings per basic share in the
third quarter of 2019.
Adjusted EBITDA1 for the three months ended
September 30, 2020 was $0.4 million, compared to $2.1 million for the third quarter of 2019.
As at September 30, 2020, the
Corporation had $9.7 million in cash
and cash equivalents, of which $0.9
million was restricted per the conditions of its credit
facility.
Selected Quarterly Information
|
($000 except per
share amounts and percentages)
|
Q3 2020
|
Q3 2019
|
% Change
|
|
Total
revenue
|
7,621
|
15,222
|
(50)
|
|
Gross
profit
|
1,055
|
4,964
|
(79)
|
|
as a percentage of
revenue
|
14
|
33
|
(19)
|
|
Net (loss)
earnings
|
(720)
|
1,238
|
(158)
|
|
per common share –
basic
|
(0.03)
|
0.04
|
(175)
|
|
per common share –
diluted
|
(0.03)
|
0.04
|
(175)
|
|
Adjusted
EBITDA1
|
365
|
2,213
|
(84)
|
|
per common share –
basic
|
0.01
|
0.08
|
(88)
|
|
per common share –
diluted
|
0.01
|
0.08
|
(88)
|
|
Total
assets
|
58,380
|
61,139
|
(5)
|
|
Total
liabilities
|
19,554
|
21,894
|
(11)
|
|
Total non-current
liabilities
|
10,702
|
7,999
|
34
|
Summary of Quarterly Results
McCoy reported its fourth consecutive quarter of positive
Adjusted EBITDA:
|
($000 except per
share amounts)
|
Q3 2020
|
Q2 2020
|
Q1 2020
|
Q4 2019
|
Q3 2019
|
Q2 2019
|
Q1 2019
|
Q4 2018
|
|
Revenue
|
7,621
|
10,361
|
11,323
|
11,875
|
15,222
|
11,455
|
14,840
|
13,543
|
|
Impairment
&
restructuring
charges
|
-
|
136
|
-
|
-
|
-
|
-
|
-
|
65
|
|
Net (loss)
earnings
|
(720)
|
782
|
(87)
|
61
|
1,238
|
(1,590)
|
524
|
931
|
|
Basic & diluted
(loss) earnings per share
|
(0.03)
|
0.03
|
-
|
-
|
0.04
|
(0.06)
|
0.02
|
0.03
|
|
EBITDA
|
312
|
1,886
|
1,078
|
1,176
|
2,144
|
(828)
|
1,289
|
1,513
|
|
Adjusted
EBITDA
|
365
|
1,327
|
1,919
|
1,487
|
2,213
|
(61)
|
713
|
776
|
|
1 EBITDA
is calculated under IFRS and is reported as an additional subtotal
in the Corporation's consolidated statements of cash flows. EBITDA
is defined as net earnings (loss), before depreciation of property,
plant and equipment; amortization of intangible assets; income tax
expense (recovery); and finance charges, net. Adjusted EBITDA is a
non-GAAP measure defined as net (loss) earnings, before:
depreciation of property, plant and equipment; amortization of
intangible assets; income tax expense (recovery); finance charges,
net; provisions for excess and obsolete inventory; other (gains)
losses, net; restructuring charges; share-based compensation; and
impairment losses. The Corporation reports on EBITDA and adjusted
EBITDA because they are key measures used by management to evaluate
performance. The Corporation believes adjusted EBITDA assists
investors in assessing McCoy Global's current operating performance
on a consistent basis without regard to non-cash, unusual (i.e.
infrequent and not considered part of ongoing operations), or
non-recurring items that can vary significantly depending on
accounting methods or non-operating factors. Adjusted EBITDA is not
considered an alternative to net (loss) earnings in measuring McCoy
Global's performance. Adjusted EBITDA does not have a standardized
meaning and is therefore not likely to be comparable to similar
measures used by other issuers. For comparative purposes, in
previous financial disclosures 'adjusted EBITDA' was defined as
"net earnings (loss) before finance charges, net, income tax
expense (recovery), depreciation, amortization, impairment losses,
restructuring charges, non-cash changes in fair value related to
derivative financial instruments and share-based
compensation."
|
|
|
2 McCoy
Global defines backlog as orders that have a high certainty of
being delivered and is measured on the basis of a firm customer
commitment, such as the receipt of a purchase order. Customers may
default on or cancel such commitments, but may be secured by a
deposit and/or require reimbursement by the customer upon default
or cancellation. Backlog reflects likely future revenues; however,
cancellations or reductions may occur and there can be no assurance
that backlog amounts will ultimately be realized as revenue, or
that the Corporation will earn a profit on backlog once fulfilled.
Expected delivery dates for orders recorded in backlog historically
spanned from one to six months. Under current market conditions,
many customers have shifted their purchasing towards just-in-time
buying.
|
|
|
3 The
book-to-bill ratio is a measure of the amount of net sales orders
received to revenues recognized and billed in a set period of time.
The ratio is an indicator of customer demand and sales order
processing times. The book-to-bill ratio is not a GAAP measure and
therefore the definition and calculation of the ratio will vary
among other issuers reporting the book-to-bill ratio. McCoy Global
calculates the book-to-bill ratio as net sales orders taken in the
reporting period divided by the revenues reported for the same
reporting period.
|
About McCoy Global Inc.
McCoy Global provides technologies designed to support wellbore
integrity and assist with collecting critical data for the global
energy industry. The Corporation operates internationally through
direct sales and distributors with operations in Canada, the United
States of America and the United
Arab Emirates. McCoy's corporate headquarters are located in
Edmonton, Alberta, Canada. The
Corporation's shares are listed on the Toronto Stock Exchange and
trade under the symbol "MCB".
Forward-Looking Information
This News Release contains forward looking statements and
forward looking information (collectively referred to herein as
"forward looking statements") within the meaning of applicable
Canadian securities laws. All statements other than statements of
present or historical fact are forward looking statements. Forward
looking information is often, but not always, identified by the use
of words such as "could", "should", "can", "anticipate", "expect",
"objective", "ongoing", "believe", "will", "may", "projected",
"plan", "sustain", "continues", "strategy", "potential",
"projects", "grow", "take advantage", "estimate", "well positioned"
or similar words suggesting future outcomes. This New Release
contains forward looking statements respecting the business
opportunities for the Corporation that are based on the views of
management of the Corporation and current and anticipated market
conditions; and the perceived benefits of the growth strategy and
operating strategy of the Corporation are based upon the financial
and operating attributes of the Corporation as at the date hereof,
as well as the anticipated operating and financial results. Forward
looking statements regarding the Corporation are based on certain
key expectations and assumptions of the Corporation concerning
anticipated financial performance, business prospects, strategies,
the sufficiency of budgeted capital expenditures in carrying out
planned activities, the availability and cost of labour and
services and the ability to obtain financing on acceptable terms,
which are subject to change based on market conditions and
potential timing delays. Although management of the Corporation
consider these assumptions to be reasonable based on information
currently available to them, they may prove to be incorrect. By
their very nature, forward looking statements involve inherent
risks and uncertainties (both general and specific) and risks that
forward looking statements will not be achieved. Undue reliance
should not be placed on forward looking statements, as a number of
important factors could cause the actual results to differ
materially from the beliefs, plans, objectives, expectations,
anticipations, estimates and intentions expressed in the forward
looking statements, including inability to meet current and future
obligations; inability to complete or effectively integrate
strategic acquisitions; inability to implement the Corporation's
business strategy effectively; access to capital markets;
fluctuations in oil and gas prices; fluctuations in capital
expenditures of the Corporation's target market; competition for,
among other things, labour, capital, materials and customers;
interest and currency exchange rates; technological developments;
global political and economic conditions; global natural disasters
or disease; and inability to attract and retain key personnel.
Readers are cautioned that the foregoing list is not exhaustive.
The reader is further cautioned that the preparation of financial
statements in accordance with IFRS requires management to make
certain judgments and estimates that affect the reported amounts of
assets, liabilities, revenues and expenses. These judgments and
estimates may change, having either a negative or positive effect
on net earnings as further information becomes available, and as
the economic environment changes. The information contained in this
News Release identifies additional factors that could affect the
operating results and performance of the Corporation. We urge you
to carefully consider those factors. The forward looking statements
contained herein are expressly qualified in their entirety by this
cautionary statement. The forward looking statements included in
this News Release are made as of the date of this New Release and
the Corporation does not undertake and is not obligated to publicly
update such forward looking statements to reflect new information,
subsequent events or otherwise unless so required by applicable
securities laws.
SOURCE McCoy Global Inc.