Mr. Jim Rakievich reports

MCCOY GLOBAL ANNOUNCES SECOND QUARTER 2023 RESULTS AND DECLARATION OF QUARTERLY DIVIDEND

McCoy Global Inc. has released its operational and financial results for the three months ended June 30, 2023. The corporation's board of directors has declared a quarterly cash dividend of one cent per common share payable on Oct. 15, 2023, to shareholders of record as of close of business on Sept. 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.

Second quarter highlights:

• Order intake increased 44 per cent to $16.3-million compared with $11.3-million for the second quarter of 2022, alongside a 75-per-cent increase in order backlog to $25.6-million, compared with $14.6-million for the second quarter of 2022;
• Revenue increased 26 per cent to $16.2-million, compared with $12.9-million in 2022;
• Net earnings increased 36 per cent to $1.4-million compared with the second quarter of 2022 of $1.1-million;
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) increased 25 per cent to $2.9-million, or 18 per cent of revenue, compared with $2.3-million, or 18 per cent of revenue, in 2022;
• Maintained a strong statement of financial position, ending the quarter with $14.7-million of net cash as at June 30, 2023, compared with $4.1-million as at June 30, 2022, with additional funds available under undrawn credit facilities;
• Advanced its digital technology road map:
  • Reported one commercial sale for McCoy's flush mounted spider (FMS) and received purchase order commitments for sale and rental of 33 additional tools scheduled for delivery in 2023 and 2024. 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);
  • The smartCRT was used to run its first commercial casing job in the Middle East North Africa (MENA) region, proving the in-field application of the tool and display. 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 postjob analysis capabilities. This technology effectively mitigates the risk of human error, while providing actionable insights that optimize future performance;
  • Substantially completed the development of the smarTR, with key milestones achieved. McCoy expects further advancements toward commercialization in the coming quarters and looks forward to reporting our progress. McCoy's smarTR is a fully automated casing running system consisting of Virtual Thread-Rep, smartCRT and smartFMS;
• Declared a quarterly cash dividend of one cent per common share payable on Oct. 15, 2023, to shareholders of record as of close of business on Sept. 30, 2023;
• Continued its share repurchase plan and purchased 88,200 common shares at a weighted average price of $1.27; these shares were cancelled prior to June 30, 2023.

"I am pleased with another strong quarterly performance reported by McCoy, which was the result of our concerted effort to deliver on our strategy globally," said Jim Rakievich, president and chief executive officer of McCoy. "Robust market conditions in international markets, especially the MENA region, paired with new international market entrants, resulted in continued strength in order intake and revenue generation for our new products and legacy capital equipment. In the U.S. land market, we have seen tremendous interest in our FMS that offers customers a highly efficient and safe solution by automating manual rig procedures and keeping personnel out of dangerous red zone areas of rig activity. Globally, we are experiencing consistent growth in our CRT market share, and with the continued success with commercialization of McCoy's smart suite of products, as well as the substantial completion for the development of our fully automated package, smarTR, we look forward to continuing reporting on our progress in the year ahead."

"McCoy reported net earnings of $1.4-million on $16.2-million of revenues for the second quarter of 2023. Our second quarter performance was reflective of increased production throughput to deliver on our order backlog from heightened order intake levels in the past three quarters. In the second quarter of 2023, investment in our inventory build plan resulted in elevated inventory balances at the end of the quarter. As we deliver on our order and rental fleet backlog in the second half of the year, we expect inventory balances to reverse in the fourth quarter, resulting in improved profitability and cash flow from operating activities in the fourth quarter and beyond," said Lindsay McGill, vice-president and chief financial officer of McCoy. "As of June 30, 2023, McCoy reported net cash of $14.7-million, and with additional funds available under undrawn credit facilities, McCoy is well positioned for revenue and earnings growth for the remainder of the year and beyond."

Second quarter financial highlights:

• Total revenue of $16.2-million, compared with $12.9-million in Q2 2022;
• Net earnings of $1.4-million, compared with $1.1-million in Q2 2022;
• Adjusted EBITDA increased to $2.9-million, or 18 per cent of revenue, compared with $2.3-million, or 18 per cent of revenue, in 2022;
• Booked backlog of $25.6-million at June 30, 2023, compared with $14.6-million in the second quarter of 2022;
• Book-to-bill ratio was 1.01 for the three months ended June 30, 2023, compared with 0.88 in the second quarter of 2022.

Financial summary

Revenue for the three and six months ended June 30, 2023, showed strong improvement from the comparative periods due to robust market activity in the MENA region, continued market share increase of McCoy's CRT product line, and increasing market adoption of McCoy's newly developed FMS and smartCRT.

Gross profit as a percentage of revenue for the three and six months ended June 30, 2023, was 33 per cent and 31 per cent, respectively, an increase of one and nil percentage points, from the comparable periods in 2022. Increased production throughput, successful supply chain management, and a shift in product mix toward CRTs, smartCRTs and FMS allowed McCoy to improve product margins over all.

For the three and six months ended June 30, 2023, general and administrative increased from the comparative periods due to head count increases to support elevated activity, as well as bad debts provision of $200,000 for the six months ended June 30, 2023 (2022 -- $100,000). As a percentage of revenue, G&A remained consistent and fell 2 per cent, respectively, with the comparative periods.

Sales and marketing expenses increased from the comparative periods due to increased commissions, travel and head count to support increased market activity. As a percentage of revenue, sales and marketing remained the same and decreased 1 per cent, respectively, with the comparative periods.

During the three and six months ended June 30, 2023, the corporation further advanced its digital technology road map initiative by focusing its product development and support resources on accelerating market adoption of new and recently commercialized smart portfolio products, including the smartCRT and McCoy's FMS. As well, final development and test rig trials for the automated smarTR package were completed. The corporation expects capital expenditures for the first suite of smart products under its digital technology road map initiative to have largely concluded. In the current period, product development and support expenses increased from the comparative period due to a decrease in capitalized internal product design and development hours, as well as increased head count and travel to support customer adoption of new technologies.

Finance charges, net, include borrowing costs, finance charges imputed on leases in accordance with IFRS (international financial reporting standards) 16, offset by interest income on cash and cash equivalents. For the three months ended June 30, 2023, finance charges, net, decreased significantly from the comparative period due to full repayment of the corporation's term loan in the first quarter of 2023, as well as interest earned on cash and cash equivalents. For the six months ended June 30, 2023, finance charges, net, were also impacted by prepayment penalties and recognition of the remaining amortized finance charges associated with early repayment of the corporation's term loan.

For the three and six months ended June 30, 2023, other losses, net, comprise foreign exchange losses offset by gains on disposal of property, plant and equipment.

Net earnings for the three months ended June 30, 2023, were $1.4-million or five cents per basic share, compared with net earnings of $1.1-million or four cents per basic share in the second quarter of 2022. Adjusted EBITDA for the three months ended June 30, 2023, was $2.9-million compared with $2.3-million for the second quarter of 2022.

As at June 30, 2023, the corporation had $14.7-million in cash and cash equivalents and no borrowings.

As at June 30, 2023, McCoy's backlog totalled $25.6-million ($19.3-million (U.S.)), which will support strong revenue and earnings performance for the second half of 2023. Recent supply chain disruptions as a result of the British Columbia port strike may impact delivery, and the resulting revenue, for certain orders planned for late September, 2023; however, McCoy's supply chain team is working diligently to mitigate this risk to the greatest extent possible, and in any event, the company expects to recover from any impact by early Q4 2023.

In the short and medium term, oil and gas market fundamentals continue to be positive in international markets, particularly the MENA and other international regions. Increased drilling activity levels, both land and offshore, paired with new international market entrants, will serve to further drive demand for McCoy's new products with market-leading technologies that provide superior safety, efficiency and simplified operating procedures, as well as for the company's legacy capital equipment, 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 DWCRT tool introduced in 2019. In the first half of 2023, McCoy received orders from five new customers and two new geographies for the DWCRT. Looking ahead, the company expects further growth in orders intake and revenue generation from this product line as it continues to gain market share with its product.

Turning to the North America land market, despite decreasing rig count and drilling activity negatively affecting McCoy's traditional capital equipment and aftermarket sales in the region, the company continues to see robust order intake for its new FMS technology due to the performance and safety advantages inherent in its unique design, and the continued tightening labour market faced by many of the company's customers.

As McCoy progresses through the commercialization stage of its digital technology road map initiative, it expects future revenues to become less dependent on the cyclicity 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, McCoy continues to focus on its key strategic initiatives to deliver value to all 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 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 shareholders in the form of share buybacks and quarterly dividends.

The company believes this strategy, together with its committed and agile team, McCoy's global brand recognition, intimate customer knowledge, strong balance sheet, 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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