EDMONTON, AB, March 17, 2021 /CNW/ - McCoy Global
Inc. ("McCoy," "McCoy Global" or "the Corporation") (TSX:
MCB) today announced its operational and financial results for the
three months and year ended December 31,
2020. All amounts are stated in Canadian dollars unless
otherwise noted.
2020 FINANCIAL AND OPERATIONAL HIGHLIGHTS:
- Launched McCoy's first digital product offering Virtual Thread
RepTM;
- Completed detail design for McCoy's Smart Casing Running Tool
(SmartCRTTM) and Flush Mount Spider
(SmartFMSTM);
- New product and technology offerings contributed 25% of total
revenue compared to 17% in 2019;
- Total revenue decreased by 28% to $38.7
million, compared to $53.4
million in 2019;
- Reported Adjusted EBITDA1 of $3.8 million, or 10% of revenue, compared to
$4.4 million, or 8% of revenue, in
2019;
- Cash flows from operating activities increased 27% to
$8.8 million, compared to
$6.9 million in 2019;
- Achieved backlog of $9.7 million
at December 31, 2020, compared to
$12.2 million in 2019;
- Reported cash, net of borrowings of $5.3
million at December 31, 2020,
compared to $0.7 million at
December 31, 2019;
- Depending on operational cash flows, the Board of Directors
approved up to US$2.1 million of
growth capital for 2021 to accelerate the Corporation's strategy
towards a cloud based, fully automated Tubular Running Technology,
McCoy's SmartTRTM;
- Subsequent to the year end, McCoy announced the appointment of
Data Science executive Mr. Cory
Janssen to the Board of Directors.
"In spite of the uncertainty and challenges presented by the
COVID-19 pandemic, McCoy successfully launched its first digital
product, Virtual Thread Rep™, and advanced two products from design
to prototype, with customer field testing expected shortly," said
Jim Rakievich, President & CEO
of McCoy Global. "Tubular Running Services (TRS) are prime for
transformation using automation and machine learning. At the centre
of McCoy's digital strategy sits a cloud-based platform that will
serve as a remote support service for real-time well integrity
data. McCoy expects to launch its next two 'Smart' products in 2021
with the goal of having a fully automated TRS solution,
SmartTRTM, by the end of 2022. We expect to enter into
at least two major commercial contracts with Tier 1 customers for
our 'Smart' technologies in 2021."
"Our fourth quarter performance benefited from our commitment in
April 2020, immediately following the
material decline in oil prices, to focus on cash flow generation
and restructure our debt while continuing to invest in our 'Digital
Technology Roadmap'. We delivered on these objectives which
increased cash flow from operations by 55% to $6.2 million compared with 2019. In parallel, we
invested $1.4 million to advance our
first three 'Smart' products towards commercialization," said
Lindsay McGill, Vice President &
CFO of McCoy Global.
Since mid-2008, the oil & gas extraction complex has
experienced an increasingly volatile pricing environment and
growing public and investor pressure to reduce their 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 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.
Mr. Bing Deng, McCoy's Vice President, Marketing &
Technology stated," We believe the TRS space is primed for
transformation using automation and machine learning. The tools and
processes used in TRS today are mostly 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, SmarTRTM, that will operate
autonomously using our cloud-based data repository and machine
learning to improve effectiveness. The cloud-based platform and
digital infrastructure that we developed in 2019 will enable future
digital product offerings and enhancements. This cloud based, real
time, remote data transmission infrastructure will integrate,
digitize, and automate the historically manual processes of tubular
make up through our SmartTRTM. The product suite
includes five 'Smart' products: Virtual Thread RepTM,
McCoy's SmartCRTTM, SmartFMSTM, McCoy's Smart
Tong, and McCoy's Smart Tailing Stabbing Arm."
"Though COVID-19 continues to make for a fragile near-term
recovery, we expect drilling activity to improve modestly in the
first half of 2021, with momentum building as the year progresses,
particularly in the Middle East,
Former Soviet Union and Offshore markets," said Jim Rakievich. "McCoy has been able to leverage
its engineering capabilities, technology offerings and strong
market position for revenue sustainability particularly in
international and offshore regions. We are encouraged by these
opportunities and through 2021 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" products in our portfolio;
- Prudently investing in our technology development initiatives
and 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 all our partners throughout this COVID19 pandemic."
FOURTH QUARTER FINANCIAL HIGHLIGHTS:
- Total revenue decreased by 21% to $9.4
million, compared to $11.9
million in 2019;
- Adjusted EBITDA decreased to $0.1
million, compared to $1.5
million in 2019;
- Cash flows from operating activities increased 55% to
$6.6 million, compared to
$4.2 million in 2019;
- Book-to-bill ratio was 0.95 for the three months ended
December 31, 2020, compared to 1.22
in Q4 2019.
Quarterly Financial Summary
Revenue for the three months ended December 31, 2020 declined by 21% from the
comparative period to $9.4 million.
Order intake through to the fourth quarter of 2020 was impacted by
the COVID-19 pandemic, which led to decreased demand for both
capital equipment and aftermarket products, particularly in the US
land market. Drilling activity levels have stabilized, and we
expect drilling activity to improve modestly in the first half of
2021, with momentum building as the year progresses.
Gross profit as a percentage of revenue for the three months
ended December 31, 2020 was 10%, a
decrease of 23 percentage points from the fourth quarter of 2019.
This was a result of unfavourable product mix, particularly due to
the shipment of a large capital equipment order from aged
inventory. Gross profit for three months ended December 31, 2020 was also impacted by a
$0.8 million expense for excess and
obsolete inventory provisions (2019 – $0.3
million). These items were offset by the favourable impact
of cost reduction initiatives.
General and administration (G&A) expense for the three
months ended December 31, 2020 was
$1.6 million, a 26% decrease of
$0.6 million compared to the fourth
quarter of 2019. This was largely attributable to cost reduction
initiatives enacted in April 2020,
offset by certain one-time project expenses. The Corporation
continues to focus on driving incremental efficiencies into this
area of the business.
Sales & Marketing expense for the three months ended
December 31, 2019 decreased by
$0.2 million or 35% from the fourth
quarter of 2019 as a result of cost reduction initiatives.
Research and Development (R&D) expenditures for the three
months ended December 31, 2020 were
$1.9 million, an increase of
$0.6 million from the fourth quarter
of 2019. During the quarter, McCoy further advanced its 'Digital
Technology Roadmap' initiative through the development of three
'Smart" product offerings that will be digitally integrated into an
automated tubular running system. Capitalized development
expenditures include $0.9 million of
external costs for product prototypes for McCoy's
SmartCRTTM and SmartFMSTM. McCoy completed
the product prototype for its SmartFMSTM and have since
begun internal prototype testing with field trials scheduled to
begin in early Q2. McCoy is in the final stages of the product
prototype for its SmartCRTTM with internal testing
scheduled to begin in early Q2. During the quarter, McCoy completed
the development of its "Virtual Thread RepTM 2.0"
technology, which now allows customers to not only remotely
monitor, but also remotely control premium connection
make-up.
Net loss for the three months ended December 31, 2020 was $2.2
million ($0.08 loss per basic
share), compared to net earnings of $0.1
million ($nil earnings per basic share) in the fourth
quarter of 2019.
Adjusted EBITDA1 for the three months ended
December 31, 2020 was $0.2 million compared to $1.5 million for the fourth quarter of 2019.
As at December 31, 2020 the
Corporation had $12.1 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)
|
Q4 2020
|
Q4 2019
|
% Change
|
|
Total
revenue
|
9,369
|
11,875
|
(21)
|
|
Gross
profit
|
968
|
3,943
|
(75)
|
|
as a percentage of
revenue
|
10%
|
33%
|
(70)
|
|
Net (loss)
earnings
|
(2,150)
|
61
|
(3,625)
|
|
per common share –
basic
|
(0.08)
|
-
|
n/a
|
|
per common share –
diluted
|
(0.08)
|
-
|
n/a
|
|
Adjusted
EBITDA1
|
153
|
1,487
|
(90)
|
|
per common share –
basic
|
0.01
|
0.05
|
(80)
|
|
per common share –
diluted
|
0.01
|
0.05
|
(80)
|
|
Total
assets
|
52,658
|
59,630
|
(12)
|
|
Total
liabilities
|
17,154
|
21,780
|
(21)
|
|
Total non-current
liabilities
|
9,725
|
7,879
|
23
|
Summary of Quarterly Results
|
($000 except per
share amounts)
|
Q4
2020
|
Q3
2020
|
Q2
2020
|
Q1
2020
|
Q4
2019
|
Q3
2019
|
Q2
2019
|
Q1
2019
|
|
Revenue
|
9,369
|
7,621
|
10,361
|
11,323
|
11,875
|
15,222
|
11,455
|
14,840
|
|
Net (loss)
earnings
|
(2,150)
|
(720)
|
782
|
(87)
|
61
|
1,238
|
(1,590)
|
524
|
|
Basic &
diluted
(loss) earnings
per share
|
(0.08)
|
(0.03)
|
0.03
|
-
|
-
|
0.04
|
(0.06)
|
0.02
|
|
EBITDA
|
(1,116)
|
312
|
1,886
|
1,078
|
1,176
|
2,144
|
(828)
|
1,289
|
|
Adjusted
EBITDA
|
153
|
365
|
1,327
|
1,919
|
1,487
|
2,213
|
(61)
|
713
|
Annual Financial Summary
Revenue for the year ended December 31,
2020 was $38.7 million, a
decrease of $14.8 million, or 28%
from 2019. While revenues for the first half of 2020 were supported
by strong order intake in late 2019 and early 2020, capital
equipment and aftermarket revenues were largely impacted by the
COVID-19 pandemic, particularly in the US land market. Despite the
decline in revenue and significant degradation of market
conditions, McCoy grew revenues from its new product and technology
offerings to $9.6 million or 25% of
revenue (2019 - $9.1 million or 17%
of revenue).
Gross profit percentage for the year ended December 31, 2020 was 21%, a decrease of 10
percentage points from 2019. The decline is a result of a
significant reduction in revenue and production through-put, offset
by the impact of committed cost reductions initiatives.
G&A expense for the year ended December 31, 2020 decreased by $3.0 million, or 34%, from 2019. As a percentage
of revenue, G&A expense declined by 2 percentage points year
over year. This was largely attributable to cost reduction
initiatives enacted in April 2020.
The Corporation continues to focus on driving incremental
efficiencies into this area of the business.
Sales & Marketing expense for the year ended December 31, 2020 decreased by $0.8 million, or 36%, from 2019. The reduction is
a result of effective restructuring initiatives.
R&D expenditures for the year ended December 31, 2020 were $4.4 million, a decline of $1.2 million from the comparative period. McCoy
further advanced its 'Digital Technology Roadmap' initiative
through the development of three 'Smart' product offerings that
will be digitally integrated into an automated tubular running
system. Due to financial uncertainty caused by the COVID-19
pandemic, the Corporation initially reduced its planned 2020 annual
capital budget of US$2.7 million by
60%. However, the Corporation successfully secured a term facility
in October 2020, which allowed the
Corporation to reinstate the capital spend for the procurement of
product prototype materials with only modest impact to key
milestones as initially planned. As such, capitalized development
expenditures for the year ended December 31,
2020 include $0.9 million of
external costs for product prototypes for McCoy's
SmartCRTTM and SmartFMSTM.
Net loss for the year was $2.1
million ($0.08 loss per basic
share), compared to net earnings of $0.2
million ($0.01 earnings per
basic share) in 2019.
Adjusted EBITDA1 for the year ended December 31, 2020 was $3.8
million, compared to $4.4
million in 2019.
Selected Annual Information
|
($000 except per
share amounts and percentages)
|
2020
|
2019
|
% Change
|
|
Total
revenue
|
38,674
|
53,392
|
(28)
|
|
Gross
profit
|
7,951
|
16,328
|
(51)
|
|
as a percentage of
revenue
|
21%
|
31%
|
(32)
|
|
Net (loss)
earnings
|
(2,175)
|
233
|
(1,033)
|
|
per common share –
basic
|
(0.08)
|
0.01
|
(900)
|
|
per common share –
diluted
|
(0.08)
|
0.01
|
(900)
|
|
Adjusted
EBITDA1
|
3,766
|
4,352
|
(13)
|
|
per common share –
basic
|
0.14
|
0.16
|
(13)
|
|
per common share –
diluted
|
0.14
|
0.16
|
(13)
|
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".
|
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.