EDMONTON, May 11, 2018 /CNW/ - 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,
2018.
"During the first quarter of 2018 improving industry
fundamentals contributed to an increase in customer orders, revenue
and backlog. We closed the quarter with a backlog of $10.1 million, the highest backlog we have
reported since mid-2015," said Jim
Rakievich, President and CEO of McCoy Global. "Since 2015,
significant efforts have been made to restructure McCoy in parallel
to declining market conditions. These disruptive actions have taken
substantial organizational resources and are now effectively
complete."
"Gross profit improved to 26% during the quarter. The increase
in gross profit was offset by customer pricing pressure, product
mix and the transitionary impacts of moving our Edmonton production facility to Louisiana during the quarter. Looking forward,
the energy and efforts of McCoy's team will shift from internal
restructuring activities to be fully focused on revenue growth and
profitability," continued Jim
Rakievich. "McCoy continues to have a strong platform for
growth and during the quarter we secured our first orders for our
new high torque hydraulic power tong and next generation torque
turn system. We remain focused on introducing new technologies and
identifying strategic acquisition opportunities that complement the
Corporation's technology platforms and which will deliver both
value and innovative solutions to customer challenges."
Operational Summary
Since January 1, 2018, McCoy
Global reported:
- Revenue of $11.2 million,
compared to $10.2 million in Q1
2017
- Net loss of $1.9 million, which
includes $0.8 million in
restructuring charges, compared to net loss of $3.6 million in Q1 2017, which includes
$1.0 million in restructuring
charges
- Adjusted EBITDA1 of ($0.5
million), compared to $0.02
million in Q1 2017
- Backlog2 of $10.1
million and customer orders of $12.5
million, compared to $8.1
million and $14.6 million,
respectively, for Q1 2017
- Book-to-bill ratio3 of 1.11, compared to 1.43 in Q1
2017
- Securing a $4.0 million USD four
year term loan to provide additional liquidity to continue to
evaluate strategic growth opportunities and be responsive to
revenue opportunities
- Receiving customer orders for McCoy's recently developed new
high torque hydraulic power tong and next generation torque turn
system
- Transitioning McCoy's production facility in Edmonton, Alberta to Broussard, Louisiana, resulting in the closure
of operations in Edmonton and the
ramp-up of production capabilities in Broussard. Canadian customers continue to be
supported as a service and rental shop was opened in the quarter in
Edmonton
- Consolidating McCoy's Eastern Hemisphere operations in the UAE.
McCoy will continue to support the European and Asia Pacific regions with a lower cost
structure model
- Purchasing 103,400 common shares under McCoy's normal course
issuer bid ("NCIB"). McCoy anticipates being active with its NCIB
program through 2018
Quarterly Financial Summary
Revenue for the three months ended March
31, 2018 was $11.2 million, an
increase of $1.0 million, or 10% from
the first quarter of 2017, as overall industry fundamentals
continued to follow a positive trend. Most of the revenue increase
is attributable to aftermarket revenues and increases from the
Eastern Hemisphere, including equipment orders in the offshore
market.
Gross profit percentage for the three months ended March 31, 2018 increased eight percentage points
from the first quarter of 2017. However, included in gross
profit is the impact of inventory provision adjustments, which in
the first quarter of 2017 were a $1.1
million expense and in the first quarter of 2018 were a
$0.1 million recovery. Gross profit
has fluctuated since the first quarter of 2017. During the second
half of 2017, McCoy transitioned its production model to a full
assembly model (with the exception of the dies and inserts product
line which continues to be manufactured in-house). In addition, in
the first quarter of 2018 McCoy completed the move of its
Edmonton, Alberta production
facility to Broussard, Louisiana.
These strategic events impacted gross profit during the execution
of these transitions given their disruptive nature. Customer
pricing pressure is also impacting gross profit, particularly in
the Western Hemisphere.
General and administrative expense ("G&A") for the three
months ended March 31, 2018 was
$2.3 million, compared to
$2.1 million in the first quarter of
2017. As a percentage of revenue, G&A decreased by 1%.
Restructuring efforts have resulted in a simpler organizational
structure that will be better situated to increase in scale in
response to market improvements without adding significant
costs.
Sales and marketing expense ("Sales & Marketing") for the
three months ended March 31, 2018 was
$0.8 million, comparable to
$0.9 million in the first quarter of
2017. As a percentage of revenue Sales & Marketing declined
2%.
Research and development expenditures ("R&D expenditures")
for the three months ended March 31,
2018 was $0.7 million compared
to $0.9 million in the first quarter
of 2017. R&D expenditures declined as a result of the timing of
product development costs being incurred.
Net loss for the three months ended March
31, 2018 was $1.9 million
($0.07 loss per basic share),
compared to net loss of $3.6 million
($0.13 loss per basic share) in the
first quarter of 2017. Net loss was impacted by restructuring
charges related to initiatives to reduce the Corporation's cost
structure.
Adjusted EBITDA1 for the three months ended
March 31, 2018 was ($0.5 million) compared to $0.02 million for the first quarter of 2017.
As at March 31, 2018, the
Corporation had $12.3 million in cash
and cash equivalents, and no borrowings. $0.5 million of cash and cash equivalents is
restricted as per the Corporation's credit facility. Subsequent to
March 31, 2018, McCoy secured a
$4.0 million USD four year term loan,
which will provide additional liquidity to continue to evaluate
strategic growth opportunities and respond to revenue
opportunities.
Selected Quarterly Information
|
($000 except per
share amounts and percentages)
|
Q1 2018
|
Q1 2017
|
% Change
|
|
Total
revenue
|
11,243
|
10,214
|
10
|
|
Gross
profit
|
2,896
|
1,845
|
57
|
|
as a percentage of
revenue
|
26
|
18
|
8
|
|
Net loss
|
(1,951)
|
(3,576)
|
45
|
|
per common share –
basic
|
(0.07)
|
(0.13)
|
46
|
|
per common share
–diluted
|
(0.07)
|
(0.13)
|
46
|
|
Adjusted
EBITDA1
|
(482)
|
15
|
(3,313)
|
|
per common share –
basic
|
(0.02)
|
0.00
|
-
|
|
per common share –
diluted
|
(0.02)
|
0.00
|
-
|
|
Total
assets
|
50,429
|
73,028
|
(31)
|
|
Total
liabilities
|
9,879
|
17,215
|
(43)
|
|
Total non-current
liabilities
|
632
|
3,475
|
(82)
|
|
1
|
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 losses
(gains), net; restructuring charges; share-based compensation; and
impairment charges. The Corporation reports on EBITDA and adjusted
EBITDA because they are important measures 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,
unusual (i.e. infrequent and not considered part of ongoing
operations), 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. 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. In certain instances, the
order is secured by a deposit and/or requires 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 are generally within six months.
|
|
|
|
3
|
The book-to-bill
ratio is a measure of the amount of net sales orders received to
revenues recognized. 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.
|
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 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.