EDMONTON, AB, May 10, 2024
/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, 2024. The Corporation also announced
that its Board of Directors has declared a quarterly cash dividend
of $0.02 per common share payable on
July 15, 2024, to shareholders of
record as of close of business on June 30,
2024. The dividend per common share is a regular dividend
and is an "eligible" dividend for purposes of the Income Tax Act
(Canada) and any similar
provincial/territorial legislation.
First Quarter Highlights:
- As anticipated, revenue for the quarter declined by 2.4% from
the comparative period to $16.5
million, due to timing of certain customer purchase
commitments;
- Net earnings increased 85% to $1.0
million compared to the first quarter of 2023 of
$0.5 million on revenues of
$16.5 million and $16.9 million, respectively;
- Adjusted EBITDA1 of $2.3
million, or 14% of revenue, compared with $2.4 million, or 14% of revenue, in 2023;
- Advanced its Digital Technology Roadmap:
- Delivered fourteen (14) of McCoy's Flush Mount Spider (FMS)
during the first quarter of 2024 (Q1 2023 – 4 tools). With a
growing number of tools operating in-field, operators are
recognizing the benefits of McCoy's FMS, which has in turn led to
more widespread adoption resulting in robust order intake. McCoy's
FMS is a hydraulic rotary flush mounted spider that when fully
connected (smartFMS™), handles casing while providing information
on the state of the tool to the driller's display in real-time as
well as the ability to integrate with McCoy Smart Casing Running
Tool (smartCRT™).
- Progressed in-field trials with our partnering customer in
North America for
the smarTR™, McCoy's integrated casing running
system. Field trials are a critical stage to full commercialization
and the process continues to provide valuable data which has led to
continued refinement our technology. We expect further advancements
toward commercialization and look forward to reporting our progress
on key milestones.
- McCoy completed the design for an
enhanced smartCRT™ that will address the new tool
specifications introduced by National Oil Companies (NOCs) and
major operators in certain key regions. With product prototyping
scheduled for Q2 2024, McCoy's enhanced smartCRT™ will
not only address the new contract requirements, but also provide an
intelligent, connected enhancement to conventional casing running
tool on the market today, offering superior safety, efficiency and
simplified operating procedure, with real-time data collection and
analysis capabilities.
- Declared a quarterly cash dividend of $0.02 per common share payable on July 15, 2024, to shareholders of record as of
close of business on June 30,
2024.
"McCoy's first quarter earnings performance benefitted from the
continued revenue growth of McCoy's recently introduced Flush Mount
Spider (FMS) in the North American land market, in spite of
declining rig count and drilling activity levels in the region,"
said Jim Rakievich, President &
CEO of McCoy. "Looking ahead, oil and gas market fundamentals
remain robust for international markets, especially in the
Middle East and North Africa (MENA) region, and our base TRS
product lines, including hydraulic power tongs, torque-turn
systems, and aftermarket parts and consumables continue to provide
consistent revenue contributions. As we advance through the
commercialization phase of our 'Digital Technology Roadmap'
initiative, as proven by our success with the FMS, we anticipate
future revenues will rely less on the cyclical nature of drilling
activity, and more on technology adoption, demand from emerging
local and regional market players, and market share expansion in
new geographical areas."
"For the first quarter of 2024, McCoy reported net earnings of
$1.0 million, on revenues of
$16.5 million, an increase of 85%
from the comparative period (Q1 2023 - $0.5
million on revenues of $16.9
million). Though revenues were impacted by timing delays on
certain customer purchase commitments, and greater than anticipated
book-and-ship revenues that positively impacted Q4, 2023, earnings
growth was achieved as a result of favourable product margins due
to shifts in product mix towards McCoy's recently introduced Flush
Mount Spider (FMS), as well as material cost improvements. Earnings
also benefited from a reduction in finance charges with repayment
of the Corporation's borrowings in the first quarter of 2023," said
Lindsay McGill, Vice President &
CFO of McCoy. "As at March 31, 2024,
McCoy's backlog totaled $25.2 million
(US$18.6 million), which will support
strong revenue and earnings performance for the remainder of
2024."
First Quarter Financial Highlights:
- Total revenue of $16.5 million,
compared with $16.9 million in Q1
2023;
- Net earnings of $1.0 million,
compared to $0.5 million in Q1
2023;
- Adjusted EBITDA1 of $2.3
million, or 14% of revenue, compared with $2.4 million, or 14% of revenue, in 2023;
- Booked backlog2 of $25.2
million at March 31, 2024,
compared to $26.1 million in the
first quarter of 2023;
- Book-to-bill ratio3 was 1.13 for the three months
ended March 31, 2024, compared with
1.14 in the first quarter of 2023.
Financial Summary
Revenue of $16.5 million for the
three months ended March 31, 2024,
decreased 2% from the comparative period. As anticipated, timing
delays on certain customer purchase commitments, and greater than
anticipated book-and-ship revenues that positively impacted Q4,
2023 resulted in quarter-to-quarter fluctuations in revenue,
negatively impacting Q1, 2024. Revenue in the first quarter of 2024
included sales for fourteen (14) of McCoy's FMS tool, demonstrating
continued strong adoption of the Corporation's new
technologies.
Gross profit, as a percentage of revenue for the three months
March 31, 2024, was 32%, an increase
of 3% compared to the comparative period in 2023. This was due to a
shift in product mix towards new technologies such as the FMS with
favourable product margins and away from traditional capital
equipment which commands higher material cost, as well as supply
chain cost containment efforts.
For the three months ended March 31,
2024, general and administrative expenses (G&A) of
$2.2 million remained consistent from
the comparative period and included bad debts provision of
$0.3 million (2023 – $0.1 million). As a percentage of revenue,
G&A was consistent with the comparative period.
For the three months ended March 31,
2024, sales and marketing expenses increased from the
comparative period by $0.2 million
due to increased headcount for sales and customer support
activities, as well as increased marketing expenses to promote the
Corporation's newly developed products.
During the three months ended March 31,
2024, the Corporation further advanced its 'Digital
Technology Roadmap' initiative through continued focused on
accelerating customer adoption of new technologies as well as the
design and development of additional 'smart' product enhancements
and complementary product accessories. For the remainder of 2024,
the Corporation has committed US$0.7
million of capital toward the development of these
enhancements and additional product offerings, including
enhancements to McCoy's smartCRT™ to address new
contractual operating requirements in certain geographies. In the
current period, Product development and support expenses increased
from the comparative period due to increased headcount to support
customer adoption of new technologies.
For the three months ended March 31,
2024, as well as the comparative period, other losses, net
is comprised of foreign exchange losses.
Net earnings for the three months ended March 31, 2024, was $1.0
million or $0.04 per basic
share, compared with net earnings of $0.5
million or $0.02 per basic
share in the first quarter of 2023. Adjusted EBITDA1 for
the three months ended March 31,
2024, was $2.3 million
compared with $2.4 million for the
first quarter of 2023.
As at March 31, 2024, the
Corporation had $10.6 million in cash
and cash equivalents.
Selected Quarterly Information
|
($000 except per share
amounts and percentages)
|
Q1 2024
|
Q1 2023
|
% Change
|
|
Total
revenue
|
16,542
|
16,864
|
(2 %)
|
|
Gross profit
|
5,251
|
4,828
|
9 %
|
|
as a percentage of
revenue
|
32 %
|
29 %
|
3 %
|
|
Net earnings
|
975
|
528
|
85 %
|
|
as a percentage of
revenue
|
6 %
|
3 %
|
3 %
|
|
per common share –
basic
|
0.04
|
0.02
|
100 %
|
|
per common share –
diluted
|
0.04
|
0.02
|
100 %
|
|
Adjusted
EBITDA1
|
2,273
|
2,419
|
(6 %)
|
|
as a percentage of
revenue
|
14 %
|
14 %
|
- %
|
|
per common share –
basic
|
0.08
|
0.08
|
- %
|
|
per common share –
diluted
|
0.08
|
0.08
|
- %
|
|
Total assets
|
79,997
|
71,742
|
12 %
|
|
Total
liabilities
|
24,257
|
19,425
|
25 %
|
|
Total non-current
liabilities
|
3,012
|
4,113
|
(27 %)
|
Summary of Quarterly Results
|
($000 except per
share amounts)
|
Q1
2024
|
Q4
2023
|
Q3
2023
|
Q2
2023
|
Q1
2023
|
Q4
2022
|
Q3
2022
|
Q2
2022
|
Q1
2022
|
|
Revenue
|
16,542
|
19,699
|
16,878
|
16,248
|
16,864
|
18,264
|
12,410
|
12,863
|
8,891
|
|
Net earnings
|
975
|
2,674
|
1,900
|
1,427
|
528
|
7,264
|
274
|
1,051
|
174
|
|
as a % of
revenue
|
6 %
|
14 %
|
11 %
|
9 %
|
3 %
|
40 %
|
2 %
|
8 %
|
2 %
|
|
per share
– basic
|
0.04
|
0.10
|
0.07
|
0.05
|
0.02
|
0.26
|
0.01
|
0.04
|
0.01
|
|
per share
– diluted
|
0.04
|
0.10
|
0.07
|
0.05
|
0.02
|
0.25
|
0.01
|
0.04
|
0.01
|
|
EBITDA1
|
2,191
|
3,001
|
3,641
|
2,639
|
1,954
|
7,319
|
1,149
|
1,943
|
1,146
|
|
as a % of
revenue
|
13 %
|
15 %
|
22 %
|
16 %
|
12 %
|
40 %
|
9 %
|
15 %
|
13 %
|
|
Adjusted
EBITDA1
|
2,273
|
3,987
|
3,856
|
2,862
|
2,419
|
3,681
|
1,099
|
2,296
|
1,461
|
|
as a % of
revenue
|
14 %
|
20 %
|
23 %
|
18 %
|
14 %
|
20 %
|
9 %
|
18 %
|
16 %
|
Outlook and Forward-Looking Information
Over the near and medium term, the oil and gas market in
international regions, particularly the MENA region, continues to
exhibit robust fundamentals. The growth in drilling activity and
the emergence of new regional players, combined with the NOC's
growing commitment to safety and efficiency improvements, and
technology, will open additional opportunities for our innovative
products. McCoy is strategically positioned to leverage these
trends, offering market leading technologies and product
enhancements that address these customer priorities. Our expert
technical support, coupled with a strong local presence and an
extensive portfolio of Tubular Running Services (TRS) equipment,
further reinforces our competitive advantage in the market.
In the North American land market, despite relatively flat to
declining rig count and drilling activity, McCoy anticipates
continued robust demand for our innovative FMS technology in 2024.
This optimism stems from the inherent performance and safety
benefits of its unique design that offers a solution to the
persistent labor challenges encountered by many of our
customers. Furthermore, with a growing number of tools
operating in-field, operators have begun to recognize the benefits
of McCoy's FMS, and have begun to require the tools use in certain
operations.
As we advance through the commercialization phase of our
'Digital Technology Roadmap' initiative, we anticipate that future
revenues will rely less on the cyclical nature of drilling
activity, and more driven by technology adoption, demand from
emerging local and regional market players, and market share
expansion in new geographical areas. However, the inherent
characteristics of our capital equipment product offerings as well
as the rate of technology adoption, and timing of contract awards,
may lead to fluctuations in order intake and revenues on a
quarter-to-quarter basis. Consequently, these factors also may
impact fluctuations in working capital balances due to the timing
of customer shipments and billings, as observed in the first
quarter of 2024. As at March 31,
2024, McCoy's backlog totaled $25.2
million (US$18.6 million),
which will support strong revenue and earnings performance for the
remainder of 2024.
As we progress through 2024, we continue to focus on our key
strategic initiatives to deliver value to all of our
stakeholders:
- Accelerating market adoption of new and recently developed
'smart' portfolio products;
- Taking advantage of the current market trajectory by focusing
on revenue generation from key strategic customers;
- Focus on capital allocation priorities; a) investment in growth
through both organic and strategic M&A opportunities where
returns are favourable, and b) return excess cash to our
shareholders in the form of share buy-backs and quarterly
dividends.
We believe this strategy, together with our committed and agile
team, McCoy's global brand recognition, intimate customer knowledge
and global footprint will further advance McCoy's competitive
position and generate strong returns on invested capital.
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
earnings (loss), 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 earnings (loss) 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."
|
|
($000 except per share
amounts and percentages)
|
Q1 2024
|
Q1 2023
|
|
Net earnings
|
975
|
528
|
|
Depreciation of
property, plant and equipment
|
578
|
450
|
|
Amortization of
intangible assets
|
466
|
420
|
|
Income tax
expense
|
184
|
201
|
|
Finance (income)
charges, net
|
(11)
|
355
|
|
EBITDA
|
2,192
|
1,954
|
|
Provisions for
(recovery of) excess and obsolete inventory
|
85
|
(6)
|
|
Other losses,
net
|
19
|
44
|
|
Share-based
compensation
|
(23)
|
427
|
|
Adjusted
EBITDA
|
2,273
|
2,419
|
|
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.
|
|
4 New
product and technology offerings as products or technologies
introduced to our portfolio in the past 36 months.
|
|
5 Net
cash is a non-GAAP measure defined as cash and cash equivalents,
plus: restricted cash, less: borrowings.
|
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