Third Quarter Highlights:
- Revenue increased 36% to
$16.9 million , compared to$12.4 million in 2022; - Net earnings increased 593% to
$1.9 million compared to the third quarter of 2022 of$0.3 million ; - Adjusted EBITDA1 increased 251% to
$3.9 million , or 23% of revenue, compared to$1.1 million , or 9% of revenue, in 2022; - Maintained a strong statement of financial position, ending the quarter with
$14.0 million of net cash5 as atSeptember 30, 2023 , after returning over$2.7 million to shareholders in the quarter through the completion of the normal course issuer bid (NCIB) announced in August and dividends; - Advanced its Digital Technology Roadmap:
- Reported eleven (11) commercial sales and two (2) tool rentals for McCoy's Flush
Mount Spider (FMS) sinceJanuary 1, 2023 . An additional twenty-six (26) tools are scheduled for delivery in the fourth quarter of 2023 and early 2024. With a growing number of tools delivered in the third quarter and coming months, we expect the increased exposure with operators will showcase the benefits of McCoy's FMS, and in turn, further accelerate adoption in the coming quarters. McCoy's FMS is a hydraulic rotary flush mounted spider that when fully connected (smartFMSTM), handles casing while providing information on the state of the tool to the driller's display in real-time as well as the ability to integrate with McCoy Smart Casing Running Tool (smartCRT™). - Reported two (2) commercial sales for McCoy's smartCRTTM since
January 1, 2023 , and delivered two (2) rental tools inLatin America to a large multinational customer committed to utilizing our technology. In addition, purchase order commitments were received from a new market entrant inLatin America as well as a purchase commitment for a further two (2) rental tools from our large multinational customer. McCoy's smartCRTTM is an intelligent, connected enhancement of our conventional casing running tool that offers superior safety, efficiency, and simplified operating procedure, with real-time data collection and post-job analysis capabilities. This technology effectively mitigates the risk of human error, while providing actionable insights that optimize future performance. - Completed the development and test-rig trials of the smarTRTM and have since begun in-field trials with our partnering customer in
North America . McCoy's smarTRTM is a fully automated casing running system.
- Reported eleven (11) commercial sales and two (2) tool rentals for McCoy's Flush
- Declared a quarterly cash dividend of
$0.01 per common share payable onJanuary 15, 2024 , to shareholders of record as of close of business onDecember 31, 2023 .
"McCoy's strong third quarter performance was the result of our concerted effort to deliver on our technology strategy globally, particularly through the continued market adoption of McCoy's DWCRTTM, FMS, and smartCRTTM by both leading regional participants and large multinational customers." said
"Strong EBITDA performance was driven by market share increase of McCoy's DWCRTTM, as well as further deliveries of McCoy's new technologies including the FMS and smartCRTTM, and resulted in
Third Quarter Financial Highlights:
- Total revenue of
$16.9 million , compared with$12.4 million in Q3 2022; - Net earnings of
$1.9 million , compared to$0.3 million in Q3 2022; - Adjusted EBITDA1 increased to
$3.9 million , or 23% of revenue, compared with$1.1 million , or 9% of revenue, in 2022; - Booked backlog2 of
$24.7 million atSeptember 30, 2023 , compared to$27.4 million in the third quarter of 2022; - Book-to-bill ratio3 was 0.91 for the three months ended
September 30, 2023 , compared with 1.90 in the third quarter of 2022.
Financial Summary
Revenue for the three and nine months ended
Gross profit percentage for the three and nine months ended
For the three and nine months ended
Sales & Marketing expenses increased from the comparative periods by 31% due to increased commissions, travel, and headcount to support increased market activity. As a percentage of revenue, Sales & Marketing decreased one percentage point with the comparative periods.
During the three and nine months ended
Finance (income) charges, net, includes borrowing costs, finance charges imputed on leases in accordance with IFRS 16, offset by interest income on cash and cash equivalents. For the three months ended
For the three and nine months ended
Net earnings for the three months ended
Selected Quarterly Information
( | Q3 2023 | Q3 2022 | % Change |
Total revenue | 16,878 | 12,410 | 36 % |
Gross profit | 6,175 | 3,149 | 96 % |
as a percentage of revenue | 37 % | 25 % | 12 % |
Net earnings | 1,900 | 274 | 593 % |
as a percentage of revenue | 11 % | 2 % | 9 % |
per common share – basic | 0.07 | 0.01 | 600 % |
per common share – diluted | 0.07 | 0.01 | 600 % |
Adjusted EBITDA1 | 3,856 | 1,099 | 251 % |
as a percentage of revenue | 23 % | 9 % | 14 % |
per common share – basic | 0.14 | 0.04 | 250 % |
per common share – diluted | 0.13 | 0.04 | 225 % |
Total assets | 73,547 | 66,181 | 11 % |
Total liabilities | 20,811 | 21,229 | (2 %) |
Total non-current liabilities | 3,547 | 4,979 | (29 %) |
Summary of Quarterly Results
( | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 |
Revenue | 16,878 | 16,248 | 16,864 | 18,264 | 12,410 | 12,863 | 8,891 | 9,451 | 9,855 |
Net earnings | 1,900 | 1,427 | 528 | 7,264 | 274 | 1,051 | 174 | 2,464 | 621 |
as a % of revenue | 11 % | 9 % | 3 % | 40 % | 2 % | 8 % | 2 % | 26 % | 6 % |
per share – basic | 0.07 | 0.05 | 0.02 | 0.26 | 0.01 | 0.04 | 0.01 | 0.09 | 0.02 |
per share – diluted | 0.07 | 0.05 | 0.02 | 0.25 | 0.01 | 0.04 | 0.01 | 0.08 | 0.02 |
EBITDA1 | 3,641 | 2,639 | 1,954 | 7,319 | 1,149 | 1,943 | 1,146 | 3,504 | 1,550 |
as a % of revenue | 22 % | 16 % | 12 % | 40 % | 9 % | 15 % | 13 % | 37 % | 16 % |
Adjusted EBITDA1 | 3,856 | 2,862 | 2,419 | 3,681 | 1,099 | 2,296 | 1,461 | 1,213 | 1,376 |
as a % of revenue | 23 % | 18 % | 14 % | 20 % | 9 % | 18 % | 16 % | 13 % | 14 % |
*Net earnings for Q4 2022 includes a |
Outlook and Forward-Looking Information
As at
Over the short and medium term, forecasts for oil & gas market fundamentals continue to be robust for international markets, particularly the MENA and other international regions. In addition to increased drilling activity, new regional entrants paired with National Oil Companies' (NOC) strong focus on increased safety and efficiency will serve to further drive opportunities for our new products. We are well positioned to take advantage of these trends with market leading technologies that provide superior safety, efficiency, and simplified operating procedures, as well as expert technical support with local presence and the broadest portfolio of TRS equipment on the market.
The global CRT market continues to grow as customer preference shifts from running casing with traditional hydraulic power tongs to CRTs due to advantages of time and cost savings, risk reduction, and improved safety. This is another area of opportunity for McCoy with its DWCRTTM tool introduced in 2019. During the nine months ended
Turning to the
As we progress through the commercialization stage of our 'Digital Technology Roadmap' initiative, we expect future revenues to become less dependent on the cyclicality of drilling activity, and more driven by technology adoption, demand from new local and regional market entrants, and market share gains in new geographies.
For the remainder of 2023 and beyond, we continue to focus on our key strategic initiatives to deliver value to all our stakeholders:
- Accelerating market adoption of new and recently developed 'smart' portfolio products;
- Taking advantage of the current market trajectory by focusing on revenue generation from new and existing customers;
- Focusing on capital allocation priorities; a) investment in growth through both organic and strategic M&A opportunities where returns are favourable and b) return excess cash to our shareholders in the form of share buy-backs and quarterly dividends.
We believe this strategy, together with our committed and agile team, McCoy's global brand recognition, application expertise, strong balance sheet, and global footprint will further advance McCoy's competitive position and generate strong returns on invested capital.
About
Throughout McCoy's 100-year history, it has proudly called
1 EBITDA is calculated under IFRS and is reported as an additional subtotal in the Corporation's consolidated statements of cash flows. EBITDA is defined as net earnings (loss), before depreciation of property, plant, and equipment; amortization of intangible assets; income tax expense (recovery); and finance charges, net. Adjusted EBITDA is a non-GAAP measure defined as net earnings (loss), 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 (gains) losses, net; restructuring charges; share-based compensation; and impairment losses. The Corporation reports on EBITDA and adjusted EBITDA because they are key measures used by management to evaluate performance. The Corporation believes adjusted EBITDA assists investors in assessing
( |
Q3 2023 |
Q3 2022 |
Net earnings | 1,900 | 274 |
Depreciation of property, plant, and equipment | 493 | 403 |
Amortization of intangible assets | 513 | 275 |
Income tax expense | 743 | - |
Finance charges, net | (8) | 197 |
EBITDA | 3,641 | 1,149 |
Recovery of excess and obsolete inventory | (74) | (5) |
Other losses (gains), net | 13 | (59) |
Share-based compensation | 276 | 14 |
Adjusted EBITDA | 3,856 | 1,099 |
2
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.
4 New product and technology offerings as products or technologies introduced to our portfolio in the past 36 months.
5 Net cash is a non-GAAP measure defined as cash and cash equivalents, plus: restricted cash, less: borrowings.
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.
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