MCCOY GLOBAL INC. 
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
"Our first quarter performance was limited by several COVID related lockdowns in active jurisdictions in the Eastern Hemisphere which led to a
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 atMarch 31, 2021 , compared to$9.7 million as atDecember 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 forJune 1, 2021 .
Revenue for the three months ended
Gross profit as a percentage of revenue for the three months ended
General and administration (G&A) expense for the three months ended
Sales & Marketing expense for the three months ended
Research and Development (R&D) expenditures for the three months ended
Net loss for the three months ended
Adjusted EBITDA1 for the three months ended
As at
Selected Quarterly Information
( | 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
( | 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
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
Throughout McCoy's 100-year history, it has proudly called
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
2
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.
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
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