EDMONTON, Aug. 11, 2017 /CNW/ - McCoy Global
Inc. ("McCoy", "McCoy Global" or "the Corporation")
(TSX:MCB) today announced its operational and financial results for
the three months ended June 30,
2017.
Quarterly Highlights
- Enhancement of McCoy Global's strategic vision to align with
industry trends;
- Progress on several new product development initiatives
including the completion of field trials of a next-generation
hydraulic power tong. This technologically advanced product
was specifically developed for the US land market and provides
customers with superior performance and safety features while
reducing the weight and footprint of the equipment on the
rig;
- Executed on operating model changes at McCoy's Edmonton production facility to shift to a
full assembly production model. This initiative will deliver
long-term cost reduction and a more agile cost structure.
"For the past several years, McCoy has focused on leading the
market in tubular make-up and handling equipment solutions, and
while this remains an important component of our business, we have
enhanced our strategy this quarter to align with customer trends we
are seeing in the market," said Jim
Rakievich, President and CEO of McCoy Global. "The oil and
gas industry has been experiencing a fundamental shift towards
mechanized and automated technologies that will result in improved
efficiency, reliability and safety performance. Critical to this
technology shift is accessibility to reliable data, preferably in
real-time. McCoy has been participating in this area of the market
for some time with products such as the weCATTTM,
WINCATT®, and weVERIFYTM. The acquisition of the assets
and business of 3PS Inc. (3PS) on January 1,
2017 advanced our market position in data collection
technologies and better positions us to take advantage of this
growing market. In addition, we will also be focusing on a broader
wellbore integrity solutions market. This will allow our team to
leverage the current expertise, global brand and infrastructure
within McCoy Global to broaden the scope of products and services
we add to our portfolio. Tubular make-up and handling solutions
will continue to play a prominent role within wellbore integrity
solutions as we move forward."
Operational Summary
Since April 1, 2017, McCoy Global
reported:
- Revenue of $9.2 million, compared
to $6.6 million in Q2 2016;
- Net loss of $3.1 million,
compared to net loss of $19.1 million
in Q2 2016. The $3.1 million loss
includes $0.4 million in
restructuring charges and $0.4
million in other losses, net (Q2 2016 - $12.2 million in restructuring and impairment
charges and $0.1 million of other
losses, net);
- Adjusted EBITDA1 of ($0.9
million) compared to ($5.1
million) in Q2 2016;
- Backlog2 of $7.7
million and customer orders of $8.6
million, compared to $8.1
million and $14.1 million,
respectively, in Q1 2017; and
- Book-to-bill ratio3 of 0.93 for the three months
ended June 30, 2017, compared to 1.46
for the three months ended March 31,
2017.
Quarterly Financial Summary
Revenue for the three months ended June
30, 2017 was $9.2 million, a
40% increase from Q2 2016. Industry fundamentals have improved from
2016 with the majority of this increase being driven by aftermarket
and data acquisition opportunities, an improvement in the western
hemisphere and increased revenues from the acquisition of 3PS.
However, market uncertainty continues to create a challenging
environment for customers, who deferred purchasing decisions during
the quarter and remain hesitant to commit to capital equipment
orders.
Gross profit percentage for the three months ended June 30, 2017 increased 56 percentage points from
the second quarter of 2016. Gross profit was positively impacted by
an overall increase in revenue, the sale of higher margin
aftermarket products and services and reductions in production
costs.
G&A expense for the three months ended June 30, 2017 was $2.5
million, a $0.7 million
decrease from the second quarter of 2016. The decrease is largely a
result of the successful implementation of restructuring
initiatives and continued spending discipline.
Sales and marketing expense for the three months ended
June 30, 2017 was $1.0 million, a 4% increase from the comparative
quarter. Increased sales and marketing expense associated with the
3PS acquisition were offset by the impact of 2016 restructuring
efforts.
Research and development costs increased in the second quarter
of 2017 to $1.1 million, from
$0.4 million in the comparative
period. The acquisition of 3PS enhanced McCoy's engineering team,
which will contribute valuable data acquisition technology
expertise. In addition, development and prototype costs were
incurred, as several technology projects progressed and reached
critical milestones.
Net loss for the three months ended June
30, 2017 was $3.1 million
($0.11 loss per basic share),
compared to net loss of $19.1 million
($0.69 loss per basic share) in the
second quarter of 2016.
Adjusted EBITDA1 for the three months ended
June 30, 2017 was ($0.9 million) compared to ($5.1 million) in the second quarter of 2016. The
increase was due to improved industry fundamentals and the
successful implementation of restructuring efforts to lower the
Corporation's cost structure and create a more agile and efficient
organization.
At June 30, 2017, the Corporation
had $17.1 million in cash and cash
equivalents, of which $2.5 million is
restricted, and $5.6 million in
borrowings.
Selected Quarterly Information
|
($000 except per
share amounts and percentages)
|
Q2 2017
|
Q2 2016
|
% Change
|
|
Total
revenue
|
9,214
|
6,583
|
40
|
|
Gross
profit
|
1,648
|
(2,512)
|
166
|
|
as a percentage of
revenue
|
18
|
(38)
|
56
|
|
Net loss
|
(3,097)
|
(19,096)
|
84
|
|
per common share –
basic
|
(0.11)
|
(0.69)
|
84
|
|
per common share
–diluted
|
(0.11)
|
(0.69)
|
84
|
|
Adjusted
EBITDA1
|
(918)
|
(5,068)
|
82
|
|
per common share –
basic
|
(0.03)
|
(0.18)
|
83
|
|
per common share –
diluted
|
(0.03)
|
(0.18)
|
83
|
|
Total
assets
|
68,255
|
79,814
|
(14)
|
|
Total
liabilities
|
16,422
|
14,357
|
14
|
|
Total non-current
liabilities
|
3,428
|
3,594
|
(5)
|
|
1 Adjusted
EBITDA is a non-GAAP measure defined as net (loss) earnings, before
finance charges, net; income tax expense (recovery); depreciation;
amortization; impairment losses; restructuring charges; other
(gains) losses, net; inventory excess and obsolete charges; and
share-based compensation. The Corporation reports on adjusted
EBITDA because it is a key measure 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 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 (loss)
earnings 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." The
Corporation revised its definition of adjusted EBITDA in the fourth
quarter of 2016, as management believes the revised metric provides
a better measure for assessing McCoy Global's current operating
performance without regard to inventory excess and obsolete charges
and other gains or losses, net; which are non-cash or non-recurring
in nature. Adjusted EBITDA should not be used as an exclusive
measure of cash flow since it does not account for the impact of
working capital changes, capital expenditures, debt changes and
other sources and uses of cash, which are disclosed in the
consolidated statements of cash flows.
|
|
|
2 The
Corporation 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 several are 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 habits towards
just-in-time buying, with a preference to standard products
purchased out of finished goods inventory.
|
|
|
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.
|
Conference Call Information
McCoy Global will host a conference call and webcast at
9:00 a.m. Mountain Time (11:00 a.m. Eastern Time) on August 11, 2017. Management participants will
include: Jim Rakievich, President
& CEO; Jacob Coonan, Senior Vice
President and CFO; Kenny Watt,
Senior Vice President, Sales and Technology; and Suzanne Langier, Senior Vice President,
Corporate Services, People and Culture.
Participants calling from Canada or the United
States should call toll-free at: 1-888-231-8191. Callers
from other locations may call in at: 1-647-427-7450. A live audio
webcast of the conference call will be available at the following
link:
http://event.on24.com/r.htm?e=1469237&s=1&k=D2DBDA6DEF4093DD0346769CABB85F75
The conference call will be archived for replay until
Friday, August 18, 2017 at midnight.
To access the archived conference call, dial 1-855-859-2056 or
1-416-849-0833 and enter the replay passcode 55504824.
About McCoy
McCoy provides equipment and 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, the United Kingdom, Singapore and the United Arab Emirates. McCoy's corporate
headquarters are located in Edmonton,
Alberta, Canada.
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.