EDMONTON, AB, May 9, 2022
/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, 2022.
First Quarter
Highlights:
- Order intake increased 91% to $13.2
million compared to $6.9
million for the first quarter 2021, alongside a 74% increase
in order backlog to $15.7 million
compared to $9.0 million for the
first quarter 2021, and a level not seen since the third quarter of
2018;
- Adjusted EBITDA1 more than doubled to $1.4 million, or 16% of revenue, compared with
$0.7 million, or 9% of revenue, in
2021;
- Advanced its Digital Technology Roadmap:
-
- Reported the first commercial order for McCoy's FMS, the
hydraulic rotary flush mounted spider that when fully connected
(smartFMSTM), 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 the
smartCRT™.
- Continued customer field trials for McCoy's
smartCRTTM, an intelligent, connected enhancement of our
conventional casing running tool that offers superior safety,
efficiency and simplified operating procedures. Further field
trials with a Middle East based
Tier 1 National Oil Company are planned to commence in the second
quarter; and
- Completed further software enhancements for our Virtual
Thread-RepTM technology (VTR) for conventional casing
running applications using hydraulic power tongs. These
enhancements enable the torque turn software to autonomously
evaluate and confirm premium connection make-up.
"McCoy's first quarter performance continued to improve and
demonstrates the strong operating leverage we expect to further
harness as we deliver on our $15.7
million order backlog, a level only seen prior to 2019. The
strategic priorities we executed upon in 2020 and 2021 to first
optimize cost structure and second, to advance our investments in
developing smart technologies, positions us to capitalize on
opportunities as market activity improves" said Jim Rakievich, President & CEO of McCoy.
"Our first quarter performance demonstrated continued strength
in several of our financial metrics. McCoy's continued fiscal
discipline resulted in a more than doubling of Adjusted
EBITDA1 of $1.4 million or
16% of revenue for the first quarter (Q1 2021 – Adjusted EBITDA of
$0.7 million, or 9% of revenue). The
improvement in EBITDA margins was driven by operating leverage and
was largely a result of $0.7 million
of Adjusted EBITDA contributed from $1.5
million of additional revenue. Despite the many supply chain
challenges faced globally, successful supply chain management
allowed us to navigate cost headwinds and largely maintain product
margins," said Lindsay McGill, Vice
President & CFO of McCoy. "As of March
31, 2022, McCoy reported net cash of $6.8 million with an additional US$2.5 million available under an undrawn
operating facility, which will well position McCoy for revenue
growth in the year ahead."
First Quarter Financial
Highlights:
- Total revenue of $8.9 million,
compared with $7.4 million in Q1
2021;
- Adjusted EBITDA1 increased to $1.4 million, or 16% of revenue, compared with
$0.7 million, or 9% of revenue, in Q1
2021;
- Net earnings of $0.2 million,
compared to net loss of $0.2 million
in Q1 2021,
- Booked backlog2 of $15.7
million at March 31, 2022, up
from $9.0 million in the first
quarter of 2021 and the highest levels seen since Q3 2018;
- Book-to-bill ratio3 was 1.48 for the three months
ended March 31, 2022, compared with
0.93 in the first quarter of 2021;
- During the first quarter of 2022, we experienced strong
customer order intake for our McCoy Torque Turn system (MTT) as a
result of the enhanced Virtual ThreadRepTM offering,
which will translate to new product revenues in the coming
quarters.
Financial Summary
Revenue of $8.9 million for three
months ended March 31, 2022,
continued to benefit from improved global drilling activity levels,
particularly with respect to aftermarket, service and rental
product lines. Revenue for the first quarter of 2020 of
$7.4 million was impacted by the
decline in order intake experienced as a result of second and third
waves of the COVID-19 pandemic.
Gross profit, as a percentage of revenue for the three months
March 31, 2022, was 30%, consistent
with the first quarter of 2021. The benefit of additional
production throughput was partially offset by additional freight
and logistics costs. Despite the many supply chain challenges faced
globally, successful supply chain management allowed us to navigate
cost headwinds and maintain product margins.
For the three months and year ended March
31, 2022, general and administrative expenses (G&A) was
consistent with the comparative period as the Corporation continues
to maintain discipline around overhead expenditures, further
demonstrating the solid financial operating leverage we expect to
deliver as our order book builds.
Sales and marketing expenses for the first quarter of 2022
remained consistent with the comparative periods and were focused
on targeted marketing initiatives related to soon-to-be commercial
products under the Corporation's 'Digital Technology Roadmap', as
well as maintaining our market leading customer engagement to
support rebounding order activity with improvements in market
conditions.
During the three months March 31,
2022, McCoy further advanced its Digital Technology Roadmap
initiative through the continued development of 'smart' product
offerings which will be digitally integrated into its automated
tubular running system smartTRTM.
For the three months ended March 31,
2022, other gains, net is comprised primarily of gains on
disposal of property, plant and equipment offset by costs
associated with strategic alternatives assessment and foreign
exchange losses. In the comparative period, other gains, net is
comprised primarily of government assistance payments related to
the Canadian Emergency Wage Subsidy, gains on the disposal of
property, plant and equipment offset by foreign exchange
losses.
Net earnings for the three months ended March 31, 2022 was $0.2
million or $0.01 per basic
share, compared with a net loss of $0.2
million or ($0.01) per basic
share in the first quarter of 2021.
Adjusted EBITDA1 for the three months ended
March 31, 2022 was $1.4 million compared with $0.7 million for the first quarter of 2021.
As at March 31, 2022 the
Corporation had $11.0 million in cash
and cash equivalents, of which $0.8
million was restricted under the conditions of the
Corporation's credit facility.
Selected Quarterly
Information
($000 except per share
amounts and percentages)
|
Q1 2022
|
Q1 2021
|
% Change
|
Total
revenue
|
8,891
|
7,374
|
21%
|
Gross profit
|
2,692
|
2,212
|
22%
|
as
a percentage of revenue
|
30%
|
30%
|
-%
|
Net earnings
(loss)
|
174
|
(158)
|
210%
|
per
common share – basic
|
0.01
|
(0.01)
|
208%
|
per
common share – diluted
|
0.01
|
(0.01)
|
208%
|
Adjusted
EBITDA1
|
1,461
|
673
|
117%
|
per
common share – basic
|
0.05
|
0.02
|
114%
|
per
common share – diluted
|
0.05
|
0.02
|
111%
|
Total assets
|
55,522
|
54,984
|
1%
|
Total
liabilities
|
15,889
|
19,981
|
(20%)
|
Total non-current
liabilities
|
5,953
|
12,924
|
(54%)
|
Summary of Quarterly
Results
($000 except per
share amounts)
|
Q1 2022
|
Q4 2021
|
Q3 2021
|
Q2 2021
|
Q1 2021
|
Q4 2020
|
Q3 2020
|
Q2 2020
|
Revenue
|
8,891
|
9,451
|
9,855
|
6,086
|
7,374
|
9,369
|
7,621
|
10,361
|
Net earnings
(loss)
|
174
|
2,464
|
621
|
1,151
|
(158)
|
(2,150)
|
(720)
|
782
|
per share
- basic
|
0.01
|
0.09
|
0.02
|
0.04
|
(0.01)
|
(0.08)
|
(0.03)
|
0.03
|
per share
- diluted
|
0.01
|
0.08
|
0.02
|
0.04
|
(0.01)
|
(0.08)
|
(0.03)
|
0.03
|
EBITDA1
|
1,146
|
3,504
|
1,550
|
2,077
|
749
|
(1,116)
|
312
|
1,886
|
Adjusted
EBITDA1
|
1,461
|
1,213
|
1,376
|
174
|
673
|
153
|
365
|
1,327
|
Update on Strategic
Alternatives
In November 2021, McCoy announced
the engagement of a financial advisor in connection with the
Special Committee's review and analysis of strategic alternatives
to bridge what the Corporation's Board of Directors saw as a gap
between the Corporation's fair value and its market price. One such
alternative considered was a potential sale of the business. The
evaluation of this alternative did not result in an acceptable
proposal, particularly in light of McCoy's strong balance sheet and
improving fundamentals as evidenced by the financial and operating
results outlined above. In its continuing evaluation of available
strategic alternatives, the Corporation intends to pursue
additional alternatives to unlock shareholder value, including the
implementation of a normal course issuer bid (NCIB), subject to
Toronto Stock Exchange approval.
Outlook and Forward-Looking
Information
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 expertise and 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, unparalleled customer support, 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 automated casing running system. The product
suite includes five 'Smart' products: Virtual
Thread-RepTM, smartCRTTM,
smartFMSTM, McCoy's smartTong, and McCoy's smart tailing
stabbing arm (smartTSATM).
McCoy is engaged with three key customer groups:
Service Companies and Drilling Contractors - Producers are
challenging contractors, across the board, to reduce costs. In many
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. Personnel safety, the shortage of experienced people, and
the reality that 65% of TRS cost is directly attributable to
labour, is a driving force behind the transition to an increasingly
automated system.
Producers – McCoy's Virtual Thread RepTM 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. 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 people,
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.
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.
McCoy reported a 91% increase in order intake to $13.2 million for the first quarter of 2022 (Q1
2021 - $6.9 million). Customer
inquiries, quoting activity and order intake continued to improve
in Q1 2022, particularly in the Eastern Hemisphere, resulting in a
74% increase in order backlog or $15.7
million (Q1 2021 $9.0
million). We expect this level of order backlog, coupled
with continued growth in customer demand, to support strong
sequential revenue and earnings growth in coming quarters.
With order backlog rebounding to levels only seen in
pre-pandemic periods and a strong balance sheet, McCoy is well
positioned for strong earnings growth for 2022. Increased drilling
activity levels paired with new market entrants in international
markets will serve to further enhance commercial opportunities for
our smartCRTTM. We also expect that the tightening
labour market faced by our customers will serve to accelerate
adoption of many of our new smart technology offerings,
particularly in the US land region in both the near and long
term.
As we proceed through 2022, we continue to focus on our key
strategic initiatives to deliver value to all of our
stakeholders:
- Growing market adoption of new and recently developed 'Smart'
portfolio products;
- Prudently investing in technology development initiatives;
- Taking advantage of the current market trajectory by focussing
on revenue generation while continuing to successfully mitigate
supply chain and logistic challenges;
- Continuing to build our equipment rental fleet to offer
flexible solutions to customers where meaningful returns are
expected; and
- Generating cashflow from operations through fiscal discipline
and continued working capital efficiency.
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, 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."
($000 except per share
amounts and percentages)
|
Q1 2022
|
Q1 2021
|
Net earnings
(loss)
|
174
|
(158)
|
Depreciation of property, plant and equipment
|
596
|
502
|
Amortization of intangible assets
|
200
|
200
|
Finance charges, net
|
176
|
205
|
EBITDA
|
1,146
|
749
|
Provisions for (recovery of) excess and obsolete
inventory
|
262
|
(85)
|
Other (gains) losses, net
|
(201)
|
(176)
|
Share-based compensation
|
254
|
185
|
Adjusted
EBITDA
|
1,461
|
673
|
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.
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.