McCOY GLOBAL ANNOUNCES FOURTH QUARTER AND YEAR END 2019 RESULTS
McCoy Global reports:
• Strengthened financial performance accompanied by positive earnings for 2019, including $6.9 million of annual cashflow generated from operating activities;
• Advancing its digital technology strategy with the introduction of new product offerings; and
• Successful purchase and integration of a strategic acquisition.
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, 2019.
“We made excellent progress in advancing McCoy’s digital technology strategy by introducing two new products and successfully integrating a strategic acquisition in the fourth quarter. Although revenue for the fourth quarter declined both sequentially and in comparison to the prior period, our dedicated management efforts resulted in positive net earnings and Adjusted EBITDA1. Disciplined execution in increasing working capital efficiency was also evident, driving $4.2 million of cashflow from operating activities for the fourth quarter of 2019,” said Jim Rakievich, President and CEO of McCoy Global.
“The continued gradual recovery of international and offshore markets drove $14.5 million in order intake for the fourth quarter of 2019, with strong order intake and quoting activity continuing into early 2020. This will support revenues for the first half of 2020. However, the U.S. land market continues to prove challenging and recent global developments illustrate the volatile nature of commodity prices and the uncertain market environment that lies ahead. We continue to remain focused on driving profitability despite this uncertainty, and accordingly we initiated further cost reductions to our business late in the fourth quarter, which we expect will positively impact financial results in 2020.
“The increased emphasis on capital discipline from our customers is driving the need for increased efficiency through innovative technologies and we remain committed to developing data driven solutions through our ‘Digital Technology Roadmap’ initiative. In 2019, we introduced the first two new products under this initiative, Virtual Threadrep™ and Calcert™, to deliver reliable data resulting in more efficient decisions during the operational well construction process. These technologies are quickly gaining traction with our customers. We are committing additional funds in 2020 to complete the next phase of our ‘Digital Technology Roadmap’.“
Quarterly Operational Summary
Since October 1, 2019, McCoy Global reported:
• Significantly advancing its technology strategy, or “Digital Technology Roadmap”, by introducing the first two products under the initiative;
• Completing another critical component of its technology strategy with the acquisition and successful integration of DrawWorks LP;
• Revenue of $11.9 million, compared to $13.5 million in Q4 2018;
• Net earnings of $0.1 million, compared to $0.9 million in Q4 2018;
• Adjusted EBITDA of $1.5 million, compared to $0.8 million in Q4 2018;
• Backlog of $12.2 million at December 31, 2019, an increase of $2.4 million, or 24%, from September 30, 2019;
• Book-to-bill ratio of 1.23 for the three months ended December 31, 2019, compared to 0.90 for the three months ended December 31, 2018;
• A cash balance of $8.9 million at December 31, 2019; and with $4.2 million of cash flow generated from operating activities; and
• McCoy announced the appointment of Mr. William “John” Walker to its Board of Directors. As McCoy Global continues to advance its Digital Technology Roadmap, Mr. Walker’s addition to the Board of Directors will strengthen McCoy’s depth of industry knowledge and customer-centric focus.
Quarterly Financial Summary
Revenue for the three months ended December 31, 2019 was $11.9 million, a decrease of $1.7 million from the fourth quarter of 2018 resulting from the decline in order intake experienced in the third quarter as a result of challenged North American activity levels and the timing of international orders received.
Gross profit as a percentage of revenue for the three months ended December 31, 2019 was 33%, an increase of 2 percentage points from the fourth quarter of 2018. This improvement was the result of a favourable product mix alongside continued focus on supply chain efficiencies.
General and administration (G&A) expense for the three months ended December 31, 2019 was $2.2 million, a slight increase of $0.2 million compared to the fourth quarter of 2018. Late in the fourth quarter of 2019, the Corporation initiated further cost reduction actions that will be reflected in the results of future periods. The Corporation continues to monitor its overhead spend and expects future G&A expenditures to continue to decline as a percentage of revenue as the Corporation’s current overhead cost structure can be leveraged for revenue growth.
Sales & Marketing expense for the three months ended December 31, 2019 decreased by $0.2 million or 25% from the fourth quarter of 2018 due to restructuring initiatives that took place in the third quarter of 2019. Sales & Marketing expense is expected to remain consistent on a go-forward basis.
Research and Development (R&D) expenditures for the three months ended December 31, 2019 were $1.3 million, an increase of $0.5 million from the fourth quarter of 2018. During the quarter, the Corporation continued to focus on developing new technology to address customer challenges. McCoy successfully completed the first phase of its technology strategy with the introduction of two new digital products. In addition to these products, McCoy has developed the cloud-based platform and digital infrastructure to further enable future digital product offerings and enhancements.
Net earnings for the three months ended December 31, 2019 were $0.1 million ($nil earnings per basic share), compared to net earnings of $0.9 million ($0.03 earnings per basic share) in the fourth quarter of 2018.
Adjusted EBITDA for the three months ended December 31, 2019 was $1.5 million compared to $0.8 million for the fourth quarter of 2018.
As at December 31, 2019 the Corporation had $8.9 million in cash and cash equivalents, of which $0.5 million was restricted per the conditions of the Corporation’s credit facility.
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