McCoy Global 2019 First Quarter Financial Statements
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McCOY GLOBAL ANNOUNCES FIRST QUARTER 2019 RESULTS
Edmonton, Alberta – 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, 2019.
“We remained disciplined in the management of our business and advanced the development of new technology to better serve our customers during the first quarter of 2019. We have gained solid footing in an ever-changing global energy marketplace and are proving our ability to drive revenue growth and profitability despite uncertain market fundamentals,” said Jim Rakievich, President and CEO of McCoy Global. “For the first quarter of the year, we recorded our third consecutive quarter of positive earnings and adjusted EBITDA. Although customer order activity was slow in Q1 with bookings below our expectations, we experienced an uptick and renewed acceleration in the month of April, having received several orders totalling $7.2 MM for
the second quarter. We are encouraged by the improving outlook in the international and offshore markets. With the number of active drilling rigs on the rise, and our strong market position in these markets, we are well positioned to capitalize on this opportunity.
“We are very encouraged with the progress that our engineering team has made in development of our new data driven technologies that we believe will be ready for first field trials in the second half of 2019 and we expect to launch first phase of our new product solutions for customers in Q4 of this year.”
Since January 1, 2019, McCoy Global reported:
- A third consecutive quarter of positive net earnings and positive adjusted EBITDA
- Revenue of $14.8 million, compared to $11.2 million in the first quarter of 2018
- Net earnings of $0.5 million, compared to net loss of $2.0 million in the first quarter of 2018
- Adjusted EBITDA1 of $0.7 million, compared to adjusted EBITDA loss of $0.5 million in the first quarter of 2018
- Backlog2 of $9.9 million and customer orders of $10.1 million, compared to $15.0 million and $12.1 million, respectively, for the three months ended December 31, 2018. Market uncertainty in early 2019 drove delays in project approvals for many customers, and as a result backlog decreased in comparison to the previous quarter.
- Book-to-bill ratio3 of 0.68, compared to 0.90 for the three months ended December 31, 2018
- The decline in first order intake for the first quarter of 2019, was offset by $7.2 million of orders received in the month of April 2019
- The Corporation continued its focus on developing new technology including deploying $0.5 million towards its “Digital Technology Roadmap.” This strategic initiative is a priority as the industry trends toward data acquisition and automation solutions for customers, with commercialization of two key products planned for 2019
- Purchased and cancelled 144,400 common shares under McCoy’s current normal course issuer bid (“NCIB”) which continues until June 4, 2019
Revenue for the three months ended March 31, 2019 was $14.8 million, an increase of $3.6 million, or 32% from the first quarter of 2018. Industry fundamentals strengthened for the majority of 2018 and McCoy entered 2019
with backlog of $15.0 million, supporting strong revenues for the quarter. Gross profit for the three months ended March 31, 2019 was $4.6 million, an increase of $1.7 million, or 58% from the first quarter of 2018. Gross profit percentage for the three months ended March 31, 2019 increased 5 percentage points compared to the first quarter of 2018 due to additional production through-put combined with cost reductions from restructuring initiatives implemented in previous years in addition to continued focus on supply chain efficiencies. Gross profit in the comparative period includes the transitional impact of consolidating production facilities and the costs associated with transitioning to an assembly production model.
General and administration (“G&A”) expense for the three months ended March 31, 2019 was consistent at $2.4 million, compared to the first quarter of 2018. As a percentage of revenue, G&A expense decreased by 4% as McCoy’s current overhead cost structure can be leveraged for revenue growth.
Sales and marketing (“Sales & Marketing”) expense for the three months ended March 31, 2019 was $0.6 million, compared to $0.8 million in the first quarter of 2018. Sales & Marketing spend has decreased year over year due to previously announced restructuring initiatives. Sales & Marketing spend has remained consistent over recent quarters.
Research and development (“R&D”) expenditures for the three months ended March 31, 2019 were $1.3 million, compared to $0.7 million in the first quarter of 2018. R&D expenditures increased year over year as a result of
strategic expenditures on McCoy’s Digital Technology Roadmap initiative. Development of this technology strategy began during the current quarter and is planned to launch before the end of 2019. Net earnings for the three months ended March 31, 2019 was $0.5 million or $0.02 earnings per basic share, compared to net loss of $2.0 million or ($0.07) loss per basic share in the first quarter of 2018.
Adjusted EBITDA1 for the three months ended March 31, 2019 was $0.7 million, compared to $0.5 million loss for the first quarter of 2018. Adjusted EBITDA for the three months ended March 31, 2019 was negatively impacted
by $0.8 million due to recovery of excess and obsolete inventory provisions (three months ended March 31, 2018 - $0.1 million recovery). For the three months ended March 31, 2019, the adoption of IFRS 16 resulted in a $0.2 million increase in EBITDA and adjusted EBITDA. Adjusted EBITDA for the three months ended March 31, 2018 has not been restated for the adoption of this standard.
As at March 31, 2019, the Corporation had $10.3 million in cash and cash equivalents, of which $0.5 million was restricted per the conditions of the Corporation’s credit facility. During the three months ended March 31, 2019, cashflows were impacted by investment activities primarily related to investment in McCoy’s ‘Digital Technology Roadmap’ for the development of two strategic products scheduled for commercialization by the end of 2019 and additions to the Corporation’s rental fleet. Cashflows were also impacted by financing activities related to repayment of the Corporation’s borrowings and the principal portion of lease payments, offset by positive operating cashflows.