EDMONTON, AB, March 14,
2024 /CNW/ - McCoy Global Inc. ("McCoy," "McCoy Global" or "the Corporation")
(TSX: MCB) today announced its operational and financial results
for the year and three months ended December
31, 2023.
Annual Highlights:
- Total revenue of $69.7 million, a
33% increase from the $52.4 million
reported in 2022, driven by strong demand for recently
commercialized new products;
- Adjusted EBITDA1 of $13.1
million, or 19% of revenue, compared with $8.5 million, or 16% of revenue, in 2022,
reaching the highest level since 2014.
Fourth Quarter Highlights:
- Revenue increased 8% to $19.7
million, compared to $18.3
million in 2022, driven by strong demand for the newly
commercialized smart products, particularly McCoy's Flush Mount Spider (FMS);
- Adjusted EBITDA1 increased to $4.0 million, or 20% of revenue, compared to
$3.7 million, or 20% of revenue, in
2022;
- Advanced its Digital Technology Roadmap, and since January 1, 2023:
- Reported thirty-nine (39) commercial sales for McCoy's Flush Mount Spider (FMS) and
twenty-three (23) additional tools scheduled for delivery in early
2024. With a growing number of tools delivered in the fourth
quarter and coming months, we expect the increased exposure with
operators will showcase the benefits of McCoy's FMS, and in turn, further accelerate
adoption in the year ahead. 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™).
- Reported two (2) commercial sale for McCoy's smartCRT™ and
delivered four (4) rental tools in Latin
America to a large multinational customer committed to
utilizing our technology. In addition, purchase order commitments
were received from a new market entrant in Latin America. The
smartCRT™ has successfully executed multiple
commercial casing jobs in the Middle East North Africa ("MENA")
region, proving the in-field application of the tool and display.
We expect to continue to build upon the tool's in-field performance
record in 2024 and further accelerate customer adoption.
McCoy's
smartCRT™ is an intelligent, connected enhancement
of our conventional casing running tool that offers superior
safety, efficiency and simplified operating procedure, with
real-time data collection and analysis capabilities. This
technology effectively mitigates the risk of human error, while
providing actionable insights that optimize future
performance.
- Completed the development of the smarTR™ and
have since began in-field trials with our partnering customer in
North America. We expect further
advancements toward commercialization and look forward to reporting
our progress on key milestones.
- Announced the doubling of its quarterly cash dividend to
$0.02 per common share payable on
April 15, 2024, to shareholders of
record as of close of business on March 31,
2024.
"McCoy's strong fourth quarter
results reflect the successful execution of our growth strategy.
McCoy's revenue and adjusted
EBITDA was driven by robust demand for the newly commercialized
smart products we invested in under our Digital Technology Roadmap
initiative, with particular emphasis on the success of the Flush
Mount Spider (FMS) in the North American land market in Q4," said
Jim Rakievich, President & CEO
of McCoy. "Looking ahead, oil
& gas market fundamentals remain robust for international
markets, especially in the MENA region. Though timing and product
mix of customer purchase commitments may result in
quarter-to-quarter fluctuations in revenues and gross margins, we
anticipate sustained success beyond drilling activity cycles as
adoption of our smart technologies continues to accelerate."
"For the fourth quarter of 2023, McCoy reported net earnings of $2.7 million on $19.7
million of revenues, generating $4.2
million of operating cashflows. Looking ahead, with
continued strong customer demand, alongside a disciplined approach
to our overhead structure, we expect to manifest solid operating
leverage as we deliver on our $22.5
million backlog." said Lindsay
McGill, Vice President & CFO of McCoy. "McCoy
remains confident in the continued strong adoption of its new
technologies in 2024, and with its proven track record of
operational efficiency and cashflow generation, McCoy has since doubled its quarterly dividend
to $0.02 per share."
Fourth Quarter Financial Highlights:
- Total revenue of $19.7 million,
compared with $18.3 million in
2022;
- Net earnings of $2.7 million,
compared to net earnings of $7.3
million in 2022, with the comparative period benefitting
from a $3.9 million gain on sale and
leaseback of McCoy's facility in
Cedar Park, TX, and $1.0 million recovery of income taxes;
- Adjusted EBITDA1 increased to $4.0 million, or 20% of revenue, compared with
$3.7 million, or 20% of revenue, in
2023;
- Booked backlog2 of $22.5
million at December 31, 2023,
a 5% decline from the $24.7 million
in the fourth quarter of 2022; and
- Book-to-bill ratio3 was 0.91 for the three months
ended December 31, 2023, compared
with 0.81 in the fourth quarter of 2022.
Annual Financial Highlights:
- Total revenue of $69.7 million, a
33% increase from the $52.4 million
reported in 2022, driven by strong demand for recently
commercialized new products;
- Net earnings of $6.5 million,
compared to net earnings of $8.8
million in 2022, with the comparative period benefitting
from a $3.9 million gain on sale and
leaseback of McCoy's facility in
Cedar Park, TX, and $1.0 million recovery of income taxes; and
- Adjusted EBITDA1 of $13.1
million, or 19% of revenue, compared with $8.5 million, or 16% of revenue, in 2022,
reaching the highest level since 2014.
Financial Summary
Revenue of $19.7 million for the
three months ended December 31, 2023,
grew 8% in comparison to 2022, driven by strong customer demand for
McCoy's FMS, particularly in the
North America land market. For the
year ended December 31, 2023,
revenues of $69.7 million benefited
from continued market share increase of McCoy's DWCRT™, as well as further
deliveries of McCoy's new
technologies including the FMS and smartCRT™. In the
comparative period, revenues benefited from strengthened industry
fundamentals and key capital equipment orders received from new
market entrants in several regions in the Middle East and North Africa.
Gross profit, as a percentage of revenue for both the three
months and year ended December 31,
2023, was 33%, an increase of one and three percentage
points, respectively, from the comparable periods in 2022. The
improvement was largely a result of increased production throughput
as well as product mix weighed more heavily towards the new
products with favourable product margins compared to legacy capital
equipment. This was partially offset by additional labour costs to
support increased production throughput as increased customer
technical support.
For the three months December 31,
2023, general and administrative expenses (G&A)
increased by $0.5 million to
$2.5 million, from the comparable
periods in 2022, primarily attributable to the appreciation of the
Corporation's stock price on Director Performance Share Units and
Director Share Units. For the year ended December 31, 2023, McCoy reported G&A of $8.6 million or 12% of revenue. On an annual
basis, G&A increased from 2022 due to increased stock-based
compensation of $1.3 million (2022 -
$0.6 million), attributable to the
appreciation of the Corporation's stock price on Director
Performance Share Units and Director Share Units. In addition,
headcount increases to support increased operational activities,
the impact of full-year reversal of wage rollbacks that took place
in June 2022, and inflationary
pressures on service provider pricing also contributed to the
increase in G&A. For the year ended December 31, 2023, as a percentage of revenue,
G&A remained flat at 12% compared to 2022.
During the three months and year ended December 31, 2023, product development and
support expense totaled $1.1 million
and $4.1 million, respectively, with
the further advancement of McCoy's 'Digital Technology Roadmap'
initiative through concentrated efforts on accelerating market
adoption of new and recently commercialized 'smart' portfolio
products, including the smartCRT™ and FMS. Field
trials for the automated smarTR™ system commenced
in Q3 and will continue into 2024. In the comparative periods,
product development and support included internal product
development hours and field trial support, in addition to
$0.6 million of external spend
related to field trials, prototype materials, and certification
costs.
For the three months and year ended December 31, 2023, sales and marketing expenses
increased from the comparative period to $0.7 million and $2.4
million, respectively, as a result of increased sales and
marketing activity to support newly commercialized smart products.
For the year ended December 31, 2023,
as a percentage of revenue, sales and marketing expenses remained
unchanged at 3% compared to 2022.
For the three months and year ended December 31, 2023, other losses, net of
$0.2 million and $0.3 million, respectively is comprised primarily
of foreign exchange losses. For the three months and year ended
December 31, 2022, other gains are
comprised primarily of $4.1 million
of gains on disposal of property, plant and equipment including the
impact of the sale and leaseback transaction the Corporation
completed in December 2022, offset by
foreign exchange losses.
Net earnings for the three months ended December 31, 2023, was $2.7 million or $0.10 per basic share, compared with net earnings
of $7.3 million or $0.26 per basic share in the fourth quarter of
2022. Net earnings for the year ended December 31, 2023, was $6.5 million or $0.23 per basic share, compared with net earnings
of $8.8 million or $0.31 per basic share in 2022. Net earnings for
the three months and year ended December 31,
2022, benefited from benefited from a $3.9 million gain on property, plant and
equipment recognized in conjunction with the sale-leaseback of
McCoy's facility in Cedar Park, Texas, as well as a $1.0 million recovery of income tax expense,
largely from the recovery of previously unrecognized deferred tax
assets.
Adjusted EBITDA1 for the three months ended
December 31, 2023, was $4.0 million compared with $3.7 million for the fourth quarter of 2022. For
the year ended December 31, 2023,
Adjusted EBITDA1 was $13.1
million compared with $8.5
million in 2022. This growth reflects McCoy's robust operating efficiency, fueled by
significant revenue contributions from innovative technologies such
as FMS, DWCRTs, and smartCRT™s, which generally offer
higher margins compared to legacy capital equipment. Adjusted
EBITDA performance for the three months and year ended,
December 31, 2023, was impacted by
increased revenues and production throughput, offset to a lesser
extent by escalated freight costs and adjustments in workforce
compensation to support revenue expansion.
As at December 31, 2023, the
Corporation had $15.7 million in net
cash4, along with an additional $11.1 million available under undrawn credit
facilities that were renewed throughout the year.
Selected Quarterly Information
|
($000 except per share
amounts and percentages)
|
Q4 2023
|
Q4 2022
|
% Change
|
|
Total
revenue
|
19,699
|
18,264
|
8 %
|
|
Gross profit
|
6,423
|
5,845
|
10 %
|
|
as a percentage of
revenue
|
33 %
|
32 %
|
1 %
|
|
Net earnings
|
2,674
|
7,264
|
(63 %)
|
|
as a percentage of
revenue
|
14 %
|
40 %
|
(26 %)
|
|
per common share –
basic
|
0.10
|
0.26
|
(62 %)
|
|
per common share –
diluted
|
0.10
|
0.26
|
(60 %)
|
|
Adjusted
EBITDA1
|
3,987
|
3,682
|
8 %
|
|
as a percentage of
revenue
|
20 %
|
20 %
|
- %
|
|
per common share –
basic
|
0.15
|
0.13
|
15 %
|
|
per common share –
diluted
|
0.14
|
0.13
|
8 %
|
|
Total assets
|
77,241
|
77,793
|
(1 %)
|
|
Total
liabilities
|
23,257
|
26,079
|
(11 %)
|
|
Total non-current
liabilities
|
3,208
|
6,680
|
(52 %)
|
Selected Annual Information
|
($000 except per share
amounts and percentages)
|
2023
|
2022
|
% Change
|
|
Total
revenue
|
69,689
|
52,428
|
33 %
|
|
Gross profit
|
22,830
|
15,763
|
45 %
|
|
as a percentage of
revenue
|
33 %
|
30 %
|
3 %
|
|
Net earnings
|
6,529
|
8,763
|
(25 %)
|
|
as a percentage of
revenue
|
9 %
|
17 %
|
(8 %)
|
|
per common share –
basic
|
0.23
|
0.31
|
(26 %)
|
|
per common share –
diluted
|
0.23
|
0.31
|
(26 %)
|
|
Adjusted
EBITDA1
|
13,125
|
8,537
|
54 %
|
|
as a percentage of
revenue
|
19 %
|
16 %
|
3 %
|
|
per common share –
basic
|
0.47
|
0.30
|
57 %
|
|
per common share –
diluted
|
0.46
|
0.30
|
53 %
|
Summary of Quarterly Results
|
($000 except per
share amounts)
|
Q4 2023
|
Q3 2023
|
Q2 2023
|
Q1 2023
|
Q4 2022
|
Q3 2022
|
Q2 2022
|
Q1 2022
|
|
Revenue
|
19,699
|
16,878
|
12,571
|
16,864
|
18,264
|
12,410
|
12,863
|
8,891
|
|
Net earnings
|
2,674
|
1,900
|
2,996
|
528
|
7,264
|
274
|
1,051
|
174
|
|
as a % of
revenue
|
14 %
|
11 %
|
24 %
|
3 %
|
40 %
|
2 %
|
8 %
|
2 %
|
|
per share
- basic
|
0.10
|
0.07
|
0.10
|
0.02
|
0.26
|
0.01
|
0.04
|
0.01
|
|
per share
- diluted
|
0.10
|
0.07
|
0.10
|
0.02
|
0.25
|
0.01
|
0.04
|
0.01
|
|
EBITDA1
|
3,001
|
3,641
|
3,618
|
1,954
|
7,319
|
1,149
|
1,943
|
1,146
|
|
as a % of
revenue
|
15 %
|
22 %
|
29 %
|
12 %
|
40 %
|
9 %
|
15 %
|
13 %
|
|
Adjusted
EBITDA1
|
3,988
|
3,856
|
3,739
|
2,419
|
3,681
|
1,099
|
2,296
|
1,461
|
|
as a % of
revenue
|
20 %
|
23 %
|
30 %
|
14 %
|
20 %
|
9 %
|
18 %
|
16 %
|
Outlook and Forward-Looking Information
Over the short and medium term, oil & gas market
fundamentals remain robust for international markets, especially in
the Middle East and North Africa (MENA). Increased drilling
activity and the entry of new regional players alongside National
Oil Companies' (NOC) strong focus on increased safety and
efficiency will create further opportunities for our new products.
McCoy is well positioned to
capitalize on these trends with market leading technologies and
product enhancements that provide superior safety, efficiency and
simplified operating procedures, as well as expert technical
support with local presence and the broadest portfolio of TRS
equipment on the market.
Turning to the North America
land market, despite flat rig count and drilling activity,
McCoy anticipates continued robust
order intake for our new FMS technology in 2024 due to the
performance and safety advantages inherent in its unique design,
along with the ongoing labour challenges faced by many of our
customers.
As we progress through the commercialization stage of our
'Digital Technology Roadmap' initiative, we expect future revenues
to become less dependent on the cyclicality of drilling activity,
and more driven by technology adoption, demand from new local and
regional market entrants, and market share gains in new
geographies.
From January 1 to March 13, 2024,
order intake amounted to $15.6
million, on pace with Q4 2023 order intake. With
$22.5 million (US$17.0 million) of backlog reported at
December 31, 2023, we are confident
in delivering strong revenue and earnings performance for 2024.
However, timing delays experienced on certain customer purchase
commitments, shifts in product mix, and greater than anticipated
book-and-ship revenues that positively impacted Q4, 2023, may
result in quarter-to-quarter fluctuations in revenues and gross
margins, particularity in the first quarter, with revenues and
earnings more heavily weighted toward the second half of 2024.
McCoy remains confident in the
continued strong adoption of its new technologies in 2024, and with
its proven track record of operational efficiency and cashflow
generation, McCoy has since
doubled its quarterly dividend to $0.02 per share. For 2024 and beyond, we continue
to focus on our key strategic initiatives to deliver value to all
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 new and existing customers;
- Focusing 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 buybacks and quarterly
dividends.
We believe this strategy, together with our committed and agile
team, McCoy's global brand
recognition, application expertise, strong balance sheet, 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
(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)
|
Q4 2023
|
Q4 2022
|
|
Net earnings
|
2,674
|
7,264
|
|
Depreciation of
property, plant, and equipment
|
571
|
407
|
|
Amortization of
intangible assets
|
472
|
407
|
|
Income tax
recovery
|
(708)
|
(974)
|
|
Finance charges,
net
|
(8)
|
215
|
|
EBITDA
|
3,001
|
7,319
|
|
Provisions (recovery
of) for excess and obsolete inventory
|
280
|
(4)
|
|
Other losses (gains),
net
|
176
|
(3,810)
|
|
Share-based
compensation
|
530
|
177
|
|
Adjusted
EBITDA
|
3,987
|
3,682
|
|
($000 except per share
amounts and percentages)
|
2023
|
2022
|
|
Net earnings
|
6,529
|
8,763
|
|
Depreciation of
property, plant, and equipment
|
1,985
|
1,846
|
|
Amortization of
intangible assets
|
1,823
|
1,151
|
|
Income tax expense
(recovery)
|
558
|
(974)
|
|
Finance charges,
net
|
340
|
771
|
|
EBITDA
|
11,235
|
11,557
|
|
Provisions for
(recovery of) excess and obsolete inventory
|
279
|
486
|
|
Other losses (gains),
net
|
304
|
(4,072)
|
|
Share-based
compensation
|
1,307
|
566
|
|
Adjusted
EBITDA1
|
13,125
|
8,537
|
|
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 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