EDMONTON, AB, May 14, 2021 /CNW/ - McCoy Global
Inc. ("McCoy," "McCoy Global" or "the Corporation") (TSX:
MCB) today announced its operational and financial results for the
three months ended March 31,
2021.
First Quarter Highlights:
- Completed prototyping and internal design validation, while
engaging target Tier 1 customers in preparation for the commercial
launch of McCoy's SmartCRTTM;
- Commenced development of McCoy's Virtual ThreadRepTM
3.0 technology, which will allow the torque turn software to
autonomously evaluate and confirm premium connection make-up;
- New product and technology offerings contributed 20% of total
revenue compared with 18% in Q1 2020; and
- Reported sequential improvement in Adjusted EBITDA of
$0.7 million or 10% of revenue,
compared to $0.2 million (2% of
revenue) in Q4 2020.
"The second and third waves of the pandemic have led to a slow
and choppy recovery, particularly in the Eastern Hemisphere where
National Oil Company projects approvals have been delayed," said
Jim Rakievich, President & CEO
of McCoy. "Despite these challenges, we are experiencing increasing
quoting activity in the Middle
East and North Africa
(MENA) and the Former Soviet Union markets and we expect that
activity will continue to improve as the year progresses. In
parallel, in the Eastern Hemisphere we are running active field
trails of our Virtual ThreadRepTM software with Tier 1
clients who operate in the region and we expect this to convert to
commercial contracts upon successful completion of testing."
"Our first quarter performance was limited by several COVID
related lockdowns in active jurisdictions in the Eastern Hemisphere
which led to a $0.8 million reduction
in cash flow from operating activities compared to 2020," said
Lindsay McGill, Vice President &
CFO of McCoy. "We continue to invest in our 2021 product
development program for the Digital Technology Roadmap and deployed
$0.4 million in the quarter to
advance our digital products, currently in field trials, towards
commercialization."
Financial and Operational Highlights:
- Total revenue decreased by 35% to $7.4
million, compared to $11.3
million in 2020;
- Cash flows used in operating activities was $0.4 million, compared with $1.2 million of cash flows generated from
operating activities in 2020;
- Adjusted EBITDA1 decreased to $0.7 million, or 10% of revenue, compared to
$1.9 million, or 17% of revenue, in
2020;
- Achieved backlog2 of $9.0
million at March 31, 2021,
compared to $9.7 million as at
December 31, 2020;
- Book-to-bill ratio3 was 0.93 for the three months
ended March 31, 2021, compared to
0.95 in Q4 2020;
- Received $1.9 million of funding
under the US Paycheck Protection Program Loan;
- Anticipated capital spending for the remainder of 2021 includes
up to US$1.9 million of investment in
the Corporation's Digital Technology Roadmap to accelerate the
Corporation's strategy toward a cloud based, Tubular Running
Service solutions; and
- Subsequent to quarter-end, the Corporation announced that Mr.
Alex Ryzhikov will stand for
election as a director nominee at the Annual General Meeting
scheduled for June 1, 2021.
Revenue for the three months ended March
31, 2021 was $7.4 million, a
decrease of $4.0 million from the
first quarter of 2020. Second and third rounds of lockdowns,
particularly in the Eastern Hemisphere, have delayed national oil
companies' project approvals which has in turn deferred our
customers' capital spend. Despite the decline in revenue and
significant degradation of market conditions, McCoy grew revenues
from its new product and technology offerings to $1.2 million or 20% of revenue (Q1 2020 -
$1.5 million or 18% of revenue).
Revenue for the first quarter of 2020 was not materially impacted
by COVID-19.
Gross profit as a percentage of revenue for the three months
ended March 31, 2021 was 30%, an
increase of one percentage point from the first quarter of 2020.
The increase was a result of continued focus on productivity
improvement, favourable product mix and supply chain efficiencies.
Gross profit from the comparative period was negatively impacted by
an additional $0.7 million charge in
2020 recorded for excess and obsolete inventory in anticipation of
challenging market conditions.
General and administration (G&A) expense for the three
months ended March 31, 2021 was
$1.6 million, a decrease of
$0.1 million compared with the first
quarter of 2020. The decrease is a result of cost reduction
initiatives taken throughout 2020.
Sales & Marketing expense for the three months ended
March 31, 2021 decreased by
$0.1 million or 21% from the first
quarter of 2020 due to restructuring initiatives that took place in
April of 2020.
Research and Development (R&D) expenditures for the three
months ended March 31, 2021 were
$0.8 million, an overall decrease of
$0.2 million from the first quarter
of 2020. During the quarter, McCoy further advanced its 'Digital
Technology Roadmap' initiative through the continued development of
'Smart' product offerings that will be digitally integrated into
its automated tubular running system ("SmartTRTM").
Capitalized development expenditures include internal product
design and development hours, in addition to $0.1 million of prototype materials for McCoy's
SmartCRTTM.
Net loss for the three months ended March
31, 2021 was $0.2 million
($0.01 loss per basic share),
compared with a net loss of $0.1
million ($nil loss per basic share) in the first quarter of
2020.
Adjusted EBITDA1 for the three months ended
March 31, 2021 was $0.7 million compared with $1.9 million for the first quarter of 2020.
Though decremental from pre-COVID earnings, Q1 2021 Adjusted EBITDA
performance represents a sequential improvement from both the third
and fourth quarters of 2020.
As at March 31, 2021 the
Corporation had $15.1 million in cash
and cash equivalents, of which $0.5
million was restricted per the conditions of the
Corporation's credit facility.
Selected Quarterly Information
($000 except per
share amounts and percentages)
|
Q1 2021
|
Q1 2020
|
% Change
|
Total
revenue
|
7,374
|
11,323
|
(35)
|
Gross
profit
|
2,212
|
3,297
|
(35)
|
as a percentage of
revenue
|
30%
|
29%
|
1
|
Net loss
|
(158)
|
(87)
|
(82)
|
per common share –
basic
|
(0.01)
|
-
|
-
|
per common share –
diluted
|
(0.01)
|
-
|
-
|
Adjusted
EBITDA1
|
749
|
1,920
|
(31)
|
per common share –
basic
|
0.02
|
0.07
|
(65)
|
per common share –
diluted
|
0.02
|
0.07
|
(65)
|
Total
assets
|
54,984
|
65,202
|
(16)
|
Total
liabilities
|
19,981
|
23,953
|
(17)
|
Total non-current
liabilities
|
12,924
|
7,547
|
71
|
Summary of Quarterly Results
($000 except per
share amounts)
|
Q1 2021
|
Q4 2020
|
Q3 2020
|
Q2 2020
|
Q1 2020
|
Q4 2019
|
Q3 2019
|
Q2 2019
|
Revenue
|
7,374
|
9,369
|
7,621
|
10,361
|
11,323
|
11,875
|
15,222
|
11,455
|
Net (loss)
earnings
|
(158)
|
(2,150)
|
(720)
|
782
|
(87)
|
61
|
1,238
|
(1,590)
|
Basic & diluted
(loss)
earnings
per share
|
(0.01)
|
(0.08)
|
(0.03)
|
0.03
|
-
|
-
|
0.04
|
(0.06)
|
EBITDA1
|
749
|
(1,116)
|
312
|
1,886
|
1,078
|
1,176
|
2,144
|
(828)
|
Adjusted
EBITDA1
|
673
|
153
|
365
|
1,327
|
1,919
|
1,487
|
2,213
|
(61)
|
Outlook and Forward-Looking Information
Since mid-2008, the oil & gas extraction complex has
experienced an increasingly volatile pricing environment and
growing public and investor pressure to reduce its impact on the
environment and improve safety. In turn, producers have been
acutely focused on managing their costs and adapting their business
strategy to demonstrate compliance with broader sustainability
efforts.
McCoy has a reputation of innovation within tubular running
services (TRS) operations globally. The Corporation has extensive
experience launching new products into the markets it serves,
offering the highest quality and safety standards available, and
has done so for more than three decades.
McCoy believes the TRS space is primed for transformation
employing automation and machine learning. Tools and processes used
in TRS today are mechanical, highly repetitive, require significant
labour inputs, have a high rate of personnel safety exposure, and
maintain minimal well integrity data. Recognizing this opportunity,
McCoy has conceptualized a 'Smart' TRS system that will operate
autonomously using the Corporation's cloud-based data repository
and machine learning to improve effectiveness. Our cloud-based
platform and digital infrastructure that was developed in 2019,
will enable future digital product offerings and enhancements. This
cloud based, real time, remote data transmission infrastructure
will support our ability to integrate, digitize, and automate the
historically manual processes of tubular make up through our
SmartTRTM autonomous casing running system. The product
suite includes five 'Smart' products: Virtual
ThreadRepTM, SmartCRTTM,
SmartFMSTM, McCoy's Smart Tong, and McCoy's Smart
Tailing Stabbing Arm.
McCoy is engaged with three key customer groups:
Producers – McCoy's Virtual ThreadRepTM consolidates
data on every connection made in a Producer's completion program.
This repository of data supports verifiable and reliable well
integrity that validates Environmental Social Governance (ESG)
initiatives under the SASB standard. In addition to providing
enhanced data, remote operation can reduce up to 85% of the labour
costs associated with TRS for our Producer group.
Tubular Manufacturers – Threaded connection integrity is the
standard that all manufacturers are measured by. Tubular
connections at wellsite, which are currently made up by humans,
will be controlled, and torqued to factory specifications by
McCoy's 'Smart' tools, leveraging autonomous machine learning.
OEM's and manufacturers will benefit from reduced operational risk
with systems in place to ensure connections are made correctly and
in accordance with specifications related to project parameters,
reducing the environmental impact of faulty connections and leaking
wells.
Service Companies and Drilling Contractors - Producers are
challenging contractors, across the board, to reduce costs. In most
cases, their largest cost is people. With five years of decreasing
oil and gas activity, personnel have left the industry to the point
where there is now a critical shortage of skilled and experienced
labour. This lack of labour and the reality that 65% of TRS cost is
directly attributed to labour is a driving force behind the
transition to an increasingly automated system.
McCoy's digital strategy will meet this demand. Our cloud
platform is the nucleus of the Corporation's digital strategy and
serves as a repository for real-time, complete well integrity data.
Taking advantage of its first mover status, McCoy expects to launch
its next two 'Smart' products in 2021 with the goal of having a
fully automated TRS by the end of 2022.
Looking ahead, the COVID-19 crisis continues to impact the oil
and gas industry globally. Second and third waves of the pandemic
and the consequential global lockdowns have led to a slow and
choppy recovery, particularly in the Eastern Hemisphere where
project approvals by national oil companies (NOC's) have been
delayed. Despite these challenges, we are experiencing increasing
quoting activity in the Middle
East and North Africa
(MENA) region and Former Soviet Union countries. We expect drilling
activity will continue to improve modestly through the second
quarter of 2021, with momentum building as the year progresses.
McCoy has been able to leverage its engineering capabilities,
technology offerings and strong market position for revenue
sustainability, particularly in these international and offshore
regions. Turning to the North American land market, the number of
active drilling rigs are also beginning to trend upwards, though
our expectations are for modest improvement throughout 2021.
Although order intake declined slightly during the quarter to
$6.9 million, we are encouraged by
strong recent quoting activity. McCoy closed out the quarter with a
backlog of $9.0 million, which will
provide visibility for the second and third quarter of 2021. We
expect order intake and revenue momentum to build as we progress
through 2021.
In summary, we will continue to focus on our key strategic
initiatives to navigate to success despite the challenges
ahead:
- Growing market penetration of new and recently developed
'Smart' portfolio products;
- Prudently investing in technology development initiatives and
certain key rental opportunities;
- Generating cashflow from operations through fiscal discipline
and continued working capital efficiency, despite uncertain market
conditions ahead; and
- Ensuring the health and safety of our employees, their families
and our partners throughout the COVID19 pandemic.
We believe this strategy, together with our committed and agile
team, intimate customer knowledge and global footprint will further
advance the McCoy's competitive position, regardless of the market
environment.
About McCoy Global Inc.
McCoy Global is transforming well construction using automation
and machine learning to maximize wellbore integrity and collect
precise connection data critical to the global energy industry. The
Corporation has offices in Canada,
the United States of America, and
the United Arab Emirates and
operates internationally in more than 50 countries through a
combination of direct sales and key distributors.
Throughout McCoy's 100-year history, it has proudly called
Edmonton, Alberta, Canada its
corporate headquarters. The Corporation's shares are listed on the
Toronto Stock Exchange and trade under the symbol "MCB".
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.
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.