McCoy Global Inc. Announces Fourth Quarter 2018 Results
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Edmonton, Alberta – 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, 2018.
“We have been disciplined in managing our business and implementing cost reductions and operating efficiencies during the extended downcycle for the global energy industry. In 2018 we experienced some strengthening of industry fundamentals and delivered solid financial results, including two consecutive quarters of positive earnings and adjusted EBITDA to close out the year,” said Jim Rakievich, President and CEO of McCoy Global.
“For 2019 we will continue to manage the business with the focus on generating positive cash flow and adjusted EBITDA and maintaining our strong balance sheet despite the ongoing uncertain market fundamentals. Over the latter half of 2018, McCoy invested in working capital to support the sharp increase in customer demand. With activity levels expected to stabilize heading into 2019, generating operating cashflows and increasing working capital efficiency is another key priority for the Corporation going forward.
“I thank our employees for their focus on introducing new technologies and finding creative ways to partner with customers while still tightly managing the costs in our business. Achievements in the past year included commercializing the new 10” 40K hydraulic power tong in response to the changing land market in North America and our next generation McCoy Torque-Turn System (MTT), as well as developing a comprehensive technology strategy to address customer challenges. We possess the engineering know-how and expertise to implement the data-driven technology customers are demanding in all markets, and specifically in offshore and international operations. Organic growth via McCoy’s increased investments in new data driven technologies will also remain a priority.”
Quarterly Operational Summary
Since October 1, 2018, McCoy Global reported:
• An increase of revenue to $13.5 million, compared to $10.1 million in Q4 2017;
• Net earnings of $0.9 million, a significant increase from net loss of $6.3 million in Q4 2017;
• Adjusted EBITDA1 of $0.8 million, compared to ($0.9 million) in Q4 2017;
• Backlog2 of $15.0 million at December 31, 2018, compared to $8.7 million at December 31, 2017. The improved order backlog, coupled with McCoy’s continued discipline on managing its costs, has positioned
the Corporation with a stable beginning to 2019;
• Book-to-bill ratio3 of 0.90 for the three months ended December 31, 2018, compared to 1.15 for the three months ended December 31, 2017;
• A strong cash balance of $11.4 million at December 31, 2018;
• McCoy successfully commercialized its next generation McCoy Torque-Turn System, delivering the first units in the fourth quarter; and
• Investment in new technology remains a priority with the Corporation developing a technology strategy called the Digital Technology Roadmap to address customer challenges around complex well construction and evolving data acquisition and automation demands.
Quarterly Financial Summary
Revenue for the three months ended December 31, 2018 was $13.5 million, an increase of $3.4 million from the fourth quarter of 2017 due to strengthening industry fundamentals for the majority of 2018. The increase was
driven by an increase in capital equipment order intake from the Eastern Hemisphere coupled with revenues from the product launch of the 10” 40K hydraulic power tong for the North American land market.
Gross profit as a percentage of revenue for the three months ended December 31, 2018 was 31%, an increase of 45 percentage points from the fourth quarter of 2017. The significant improvement was due to increased production through-put and cost reductions realized as a result of the restructuring initiatives implemented in 2017, in addition to a recovery for excess and obsolete inventory of $0.7 million in 2018 (2017 - $3.7 million charge).
G&A expense for the three months ended December 31, 2018 was $2.0 million, a decrease of $0.3 million compared to the fourth quarter of 2017. As a percentage of revenue, G&A expense decreased by 8%, as McCoy’s
current overhead cost structure can be leveraged for revenue growth. Sales & Marketing expense for the three months ended December 31, 2018 decreased by $0.4 million from the fourth quarter of 2017. As a percentage of revenue this was a 5% decrease, resulting from restructuring efforts, which saw the consolidation of the sales force in key regions globally and allowed for the realization of several efficiencies R&D expenditures for the three months ended December 31, 2018 were $0.8 million, a small increase of $0.2 million from the fourth quarter of 2017. During the quarter the Corporation allocated resources to plan and execute the first phase of its Digital Technology Roadmap strategy.
Net earnings for the three months ended December 31, 2018 were $0.9 million ($0.03 earnings per basic share), compared to net loss of $6.3 million ($0.23 loss per basic share) in the fourth quarter of 2017. Adjusted EBITDA1 for the three months ended December 31, 2018 was $0.8 million compared to ($0.9 million) for the fourth quarter of 2017.
As at December 31, 2018 the Corporation had $11.4 million in cash and cash equivalents, of which $0.5 million was restricted per the conditions of the Corporation’s credit facility.