Mr. Jim Rakievich reports

MCCOY GLOBAL ANNOUNCES FIRST QUARTER 2023 RESULTS AND REINSTATEMENT OF QUARTERLY DIVIDEND

McCoy Global Inc. has released its operational and financial results for the three months ended March 31, 2023. The corporation's board of directors has declared a quarterly cash dividend of one cent per common share payable on July 15, 2023, to shareholders of record as of close of business on June 30, 2023. The dividend per common share is a regular dividend and is an eligible dividend for purposes of the Income Tax Act (Canada) and any similar provincial/territorial legislation.

First quarter highlights:

• Order intake increased 46 per cent to $19.3-million compared with $13.2-million for the first quarter of 2022, alongside a 66-per-cent increase in order backlog to $26.1-million, compared with $15.7-million for the first quarter of 2022.
• Revenue increased 90 per cent to $16.9-million, compared with $8.9-million in 2022.
• Net earnings increased 203 per cent to $500,000 compared with the first quarter of 2022 of $200,000.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) increased 66 per cent to $2.4-million, or 14 per cent of revenue, compared with $1.5-million, or 16 per cent of revenue, in 2022.
• Maintained a strong statement of financial position, ending the quarter with $19.9-million of net cash as at March, 2023, compared with $6.8-million as at March, 2022, with additional funds available under undrawn credit facilities.
• Advanced its digital technology road map:
  • Reported four commercial sales for McCoy's flush mounted spider (FMS) and received purchase order commitments for sale and rental of seven additional tools scheduled for delivery in 2023. McCoy's FMS is a hydraulic rotary flush mounted spider that, when fully connected (smartFMS), 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). Subsequent to March 31, 2023, McCoy received additional purchase order commitments for sale and rental of 18 more tools scheduled for delivery in 2023.
  • Reported the second commercial sale for McCoy's smartCRT and received purchase order commitments for the rental of four additional tools. McCoy's smartCRT is an intelligent, connected enhancement of its conventional casing running tool that offers superior safety, efficiency and simplified operating procedure, with real-time data collection and analysis capabilities. This technology effectively mitigates the risk of human error, while providing actionable insights that optimize future performance.
• Reinstituted a quarterly cash dividend of one cent per common share payable on July 15, 2023, to shareholders of record as of close of business on June 30, 2023, a first since 2014.
• Subsequent to March 31, increased its revolving demand facility from $2.5-million (U.S.) to $5.5-million (U.S.). In addition to increasing the demand facility, the corporation secured a commitment for a $3.4-million (U.S.) term loan, bearing interest at U.S. prime plus 0.90 per cent. The commitment is valid until Dec. 31, 2023, and is subject to customary terms and conditions, including a financial covenant minimum debt service coverage ratio.

"McCoy's strong first quarter performance was the result of the continued execution of our strategy to develop and commercialize smart technologies and grow key strategic customer relationships. Market adoption of our newly commercialized FMS and smartCRT has steadily accelerated through 2023, with first quarter revenues including shipments of five units of McCoy's FMS and McCoy's smartCRT, and purchase and rental commitments for an additional 29 FMS and smartCRT tools. In both international and the North American land market, we expect to see growing interest in our new technologies that deliver superior safety, efficiency and simplified operating procedures," said Jim Rakievich, president and chief executive officer of McCoy. "Our base TRS product lines, including hydraulic power tongs, torque turn systems, and aftermarket parts and consumables, have increased in demand and are providing consistent revenue contributions. Targeted efforts to grow market share of McCoy's DWCRT, McCoy's casing running tool introduced in 2019, have also resulted in successfully securing purchase commitments from five new customers in two new geographies. With the recent success in the commercialization of McCoy's smart suite of products, we are excited to see the return on our invested capital as we progress through 2023 and beyond."

"For the first quarter of 2023, McCoy reported net earnings of $500,000 on $16.9-million of revenues. Our first quarter performance was driven by increased production throughput to meet continued strength in customer demand. Looking ahead, with a disciplined approach to our overhead cost structure, we expect to evidence strong operating leverage as we deliver on our $26.1-million backlog," said Lindsay McGill, vice-president and chief financial officer of McCoy. "As of March 31, 2023, McCoy reported net cash of $19.9-million, and with the announcement of the increase to our undrawn revolving demand facility from $2.5-million (U.S.) to $5.5-million (U.S.) in May, 2023, and $3.4-million (U.S.) committed term facility, McCoy is well positioned for revenue and earnings growth in the year ahead."

Quarter financial highlights:

• Total revenue of $16.9-million, compared with $8.9-million in Q1 2022.
• Net earnings of $500,000, compared with $200,000 in Q1 2022.
• Adjusted EBITDA increased to $2.4-million, or 14 per cent of revenue, compared with $1.5-million, or 16 per cent of revenue, in 2022.
• Booked backlog of $26.1-million at March 31, 2023, compared with $15.7-million in the first quarter of 2022.
• Book-to-bill ratio was 1.14 for the three months ended March 31, 2023, compared with 1.48 in the first quarter of 2022.

Financial summary

Revenue of $16.9-million for the three months ended March 31, 2023, nearly doubled from the comparative period due to increased customer demand for capital equipment and related parts and accessories sales. Revenue in the first quarter of 2023 included $1.4-million of smartCRT and FMS sales, both newly commercialized products as a part of the corporation's digital technology road map.

Gross profit, as a percentage of revenue for the three months March 31, 2023, was 29 per cent, a decrease of one percentage point compared with the comparative period in 2022. The slight decline in gross profit percentage was due to material cost headwinds in the current supply-chain-challenged environment as well as a shift in product mix weighted more heavily toward capital equipment, which has typically commanded higher material cost compared with aftermarket product lines. This was largely offset by an increase in production throughput.

For the three months ended March 31, 2023, general and administrative expenses (G&A) of $2.2-million increased by $600,000 or 41 per cent from the comparable quarter in 2022. As a percentage of revenue, for the three months ended March 31, 2023, G&A declined from the comparative period to 13 per cent of revenue (2022 -- 18 per cent). The corporation continues to maintain discipline around overhead expenditures as the order book builds. G&A was impacted by head count increases and wage adjustments to support the increase in activity, bad debts provision of $100,000 (2022 -- nominal recoveries of previously impaired trade accounts) as well as stock-based compensation expense of $400,000 (2022 -- $300,000).

For the three months ended March 31, 2023, sales and marketing expenses increased from the comparative period by $100,000 to $500,000 as a result of increased travel and head count to support the increase in market activity. Over all, the sales and marketing expenses as a percentage of revenue decreased to 3 per cent from 4 per cent in the comparative quarter in 2022.

During the three months ended March 31, 2023, McCoy further advanced its digital technology road map initiative with accelerated market adoption of its smartCRT and smartFMS, in addition to continued development of smart product offerings that will be digitally integrated into its automated tubular running system smartTR. For the quarter ended March 31, 2023, capitalized development expenditures were nil (three months ended March 31, 2022 -- $400,000). For the three months ended March 31, 2023, product develop and support expenses of $900,000 increased from the comparative period (2022 -- $600,000) due to a decrease in capitalized internal product design and development hours, as well as increased travel to support customer adoption of new technologies.

For the three months ended March 31, 2023, other gains, net, comprise foreign exchange losses. In the comparative period, other gains, net, primarily comprise gains on disposal of property, plant and equipment offset by costs associated with strategic alternatives assessment and foreign exchange losses.

Net earnings for the three months ended March 31, 2023, were $500,000 or two cents per basic share, compared with net earnings of $200,000 or one cent per basic share in the first quarter of 2022. Adjusted EBITDA for the three months ended March 31, 2023, was $2.4-million compared with $1.5-million for the first quarter of 2022.

As at March 31, 2023, the corporation had $19.9-million in cash and cash equivalents, of which $900,000 was restricted under the conditions of the corporation's credit facility. In the three months ending March 31, 2023, McCoy fully repaid its senior credit facility of $4.6-million ($3.4-million (U.S.)) bearing interest at U.S. prime plus 4.95 per cent.

Outlook

As at March 31, 2023, McCoy's backlog totalled $26.1-million ($19.3-million (U.S.)), which will support strong revenue and earnings performance for the remainder of 2023. Looking ahead, increased production throughput, as well as diligent supply chain management and disciplined overhead expenditures, are expected to further demonstrate solid operating leverage as orders and revenues sustain at the levels seen in the past three quarters.

Despite current economic uncertainty and threats of a recession, over the short to medium term, global oil and gas market fundamentals continue to be positive, particularly in international regions. Increased drilling activity levels, paired with new international market entrants, will serve to further enhance commercial opportunities for new products, as well as for the company's legacy capital equipment. With respect to international markets, McCoy continues to see a growing trend of drilling contractors, new local and regional market entrants, and in some cases national oil companies entering the tubular running services (TRS) space, taking market share from large multinational service companies. This trend benefits McCoy considerably as it creates additional capital equipment demand over and above market growth from increased drilling activity alone, as these new entrants require significant capital investment in capital equipment to execute tubular running service contracts. McCoy is aptly positioned to respond to this demand with its strong brand of product quality and responsive, local customer support. Among its competitors, McCoy offers the broadest portfolio of TRS equipment and now offers market leading technologies that provide superior safety, efficiency and simplified operating procedures.

The global CRT market continues to grow as customers experience the advantages of running casing with the CRT versus conventional power tongs, in the form of time and cost savings, risk reduction, and improved safety. This is another area of opportunity for McCoy with its DWCRT tool introduced in 2019. In the first quarter of 2023, McCoy received orders from five new customers and two new geographies for the DWCRT. Looking ahead, it expects continued growth in orders intake and revenue generation from this product line as more and more markets adopt this technology as the preferred method to run casing.

Turning to the North America land market, despite flat active drilling activity driven by low natural gas prices as well as economic uncertainties, McCoy anticipates meaningful opportunities for its new offerings with the continued tightening labour market faced by many of its customers. This was seen in the recent $4.1-million of orders received for McCoy's FMS in April, 2023. Commercialized in 2022, the FMS technology provides casing running service providers with performance and safety advantages inherent with its unique design features. The company expects to see continued success with this patented technology for the remainder of 2023 and beyond. However, the outlook for revenue growth for McCoy's traditional capital product lines in this region is cautious with potential softness in drilling activity and a lingering oversupply of capital equipment remaining.

As it progresses through 2023, McCoy continues to focus on its key strategic initiatives to deliver value to all of its 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 key strategic customers;
• Continuing to seek and evaluate acquisition opportunities where the strategic fit and returns on invested capital are acceptable;
• Generating cash flow from operations through fiscal discipline and working capital efficiency;
• Return excess cash to the company's shareholders in the form of share buybacks and quarterly dividends.

McCoy believes this strategy, together with its committed and agile team, McCoy's global brand recognition, intimate customer knowledge, and global footprint will further advance McCoy's competitive position and generate strong returns on invested capital.

About McCoy Global Inc.

McCoy Global is transforming well construction using automation and machine learning to maximize wellbore integrity and collect precise connection data critical to the global energy industry. The corporation has offices in Canada, the United States and the United Arab Emirates and operates internationally in more than 50 countries through a combination of direct sales and key distributors.

Throughout McCoy's 100-year history, it has proudly called Edmonton, Alta., Canada, its corporate headquarters. The corporation's shares are listed on the Toronto Stock Exchange and trade under the symbol MCB.

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