Mr. Jim Rakievich reports

MCCOY GLOBAL ANNOUNCES FOURTH QUARTER AND YEAR END 2023 RESULTS AND DOUBLES ITS QUARTERLY DIVIDEND

McCoy Global Inc. has released its operational and financial results for the year and three months ended Dec. 31, 2023.

Annual highlights:

• Total revenue of $69.7-million, a 33-per-cent increase from the $52.4-million reported in 2022, driven by strong demand for recently commercialized new products;
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $13.1-million, or 19 per cent of revenue, compared with $8.5-million, or 16 per cent of revenue, in 2022, reaching the highest level since 2014.

Fourth quarter highlights:

• Revenue increased 8 per cent to $19.7-million, compared with $18.3-million in 2022, driven by strong demand for the newly commercialized smart products, particularly McCoy's flush-mount spider (FMS);
• Adjusted EBITDA increased to $4-million, or 20 per cent of revenue, compared with $3.7-million, or 20 per cent of revenue, in 2022;
• Advanced its digital technology road map and, since Jan. 1, 2023:
  • Reported 39 commercial sales for McCoy's FMS and 23 additional tools scheduled for delivery in early 2024; with a growing number of tools delivered in the fourth quarter and coming months, the company expects the increased exposure with operators will showcase the benefits of McCoy's FMS and, in turn, further accelerate adoption in the year ahead; 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);
  • Reported two commercial sale for McCoy's smartCRT and delivered four rental tools in Latin America to a large multinational customer committed to utilizing the company's technology; in addition, purchase order commitments were received from a new market entrant in Latin America; the smartCRT has successfully executed multiple commercial casing jobs in the Middle East/North Africa (MENA) region, proving the in-field application of the tool and display; the company expects to continue to build upon the tool's in-field performance record in 2024 and further accelerate customer adoption; McCoy's smartCRT is an intelligent, connected enhancement of the company's 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;
  • Completed the development of the smarTR and has since began in-field trials with the company's partnering customer in North America; McCoy expects further advancements toward commercialization and looks forward to reporting its progress on key milestones.
• Announced the doubling of its quarterly cash dividend to two cents per common share payable on April 15, 2024, to shareholders of record as of close of business on March 31, 2024.

"McCoy's strong fourth quarter results reflect the successful execution of our growth strategy. McCoy's revenue and adjusted EBITDA was driven by robust demand for the newly commercialized smart products we invested in under our digital technology road map initiative, with particular emphasis on the success of the flush-mount spider (FMS) in the North American land market in Q4," said Jim Rakievich, president and chief executive officer of McCoy. "Looking ahead, oil and gas market fundamentals remain robust for international markets, especially in the MENA region. Though timing and product mix of customer purchase commitments may result in quarter-to-quarter fluctuations in revenues and gross margins, we anticipate sustained success beyond drilling activity cycles as adoption of our smart technologies continues to accelerate."

"For the fourth quarter of 2023, McCoy reported net earnings of $2.7-million on $19.7-million of revenues, generating $4.2-million of operating cash flows. Looking ahead, with continued strong customer demand, alongside a disciplined approach to our overhead structure, we expect to manifest solid operating leverage as we deliver on our $22.5-million backlog," said Lindsay McGill, vice-president and chief financial officer of McCoy. "McCoy remains confident in the continued strong adoption of its new technologies in 2024, and, with its proven track record of operational efficiency and cash flow generation, McCoy has since doubled its quarterly dividend to two cents per share."

Fourth quarter financial highlights:

• Total revenue of $19.7-million, compared with $18.3-million in 2022;
• Net earnings of $2.7-million, compared with net earnings of $7.3-million in 2022, with the comparative period benefiting from a $3.9-million gain on sale and leaseback of McCoy's facility in Cedar Park, Tex., and $1-million recovery of income taxes;
• Adjusted EBITDA increased to $4-million, or 20 per cent of revenue, compared with $3.7-million, or 20 per cent of revenue, in 2023;
• Booked backlog of $22.5-million at Dec. 31, 2023, a 5-per-cent decline from the $24.7-million in the fourth quarter of 2022;
• Book-to-bill ratio was 0.91 for the three months ended Dec. 31, 2023, compared with 0.81 in the fourth quarter of 2022.

Annual financial highlights:

• Total revenue of $69.7-million, a 33-per-cent increase from the $52.4-million reported in 2022, driven by strong demand for recently commercialized new products;
• Net earnings of $6.5-million, compared with net earnings of $8.8-million in 2022, with the comparative period benefiting from a $3.9-million gain on sale and leaseback of McCoy's facility in Cedar Park, Tex., and $1-million recovery of income taxes;
• Adjusted EBITDA of $13.1-million, or 19 per cent of revenue, compared with $8.5-million, or 16 per cent of revenue, in 2022, reaching the highest level since 2014.

Financial summary

Revenue of $19.7-million for the three months ended Dec. 31, 2023, grew 8 per cent in comparison with 2022, driven by strong customer demand for McCoy's FMS, particularly in the North America land market. For the year ended Dec. 31, 2023, revenues of $69.7-million benefited from continued market share increase of McCoy's DWCRT as well as further deliveries of McCoy's new technologies, including the FMS and smartCRT. In the comparative period, revenues benefited from strengthened industry fundamentals and key capital equipment orders received from new market entrants in several regions in the Middle East and North Africa.

Gross profit, as a percentage of revenue for both the three months and year ended Dec. 31, 2023, was 33 per cent, an increase of one percentage point and three percentage points, respectively, from the comparable periods in 2022. The improvement was largely a result of increased production throughput as well as product mix weighed more heavily toward the new products with favourable product margins compared with legacy capital equipment. This was partially offset by additional labour costs to support increased production throughput as increased customer technical support.

For the three months Dec. 31, 2023, general and administrative expenses (G&A) increased by $500,000 to $2.5-million, from the comparable periods in 2022, primarily attributable to the appreciation of the corporation's stock price on director performance share units and director share units. For the year ended Dec. 31, 2023, McCoy reported G&A of $8.6-million, or 12 per cent of revenue. On an annual basis, G&A increased from 2022 due to increased stock-based compensation of $1.3-million (2022: $600,000), attributable to the appreciation of the corporation's stock price on director performance share units and director share units. In addition, head count increases to support increased operational activities, the impact of full-year reversal of wage rollbacks that took place in June, 2022, and inflationary pressures on service provider pricing also contributed to the increase in G&A. For the year ended Dec. 31, 2023, as a percentage of revenue, G&A remained flat at 12 per cent compared with 2022.

During the three months and year ended Dec. 31, 2023, product development and support expense totalled $1.1-million and $4.1-million, respectively, with the further advancement of McCoy's digital technology road map initiative through concentrated efforts on accelerating market adoption of new and recently commercialized smart portfolio products, including the smartCRT and FMS. Field trials for the automated smarTR system commenced in Q3 and will continue into 2024. In the comparative periods, product development and support included internal product development hours and field trial support, in addition to $600,000 of external spend related to field trials, prototype materials and certification costs.

For the three months and year ended Dec. 31, 2023, sales and marketing expenses increased from the comparative period to $700,000 and $2.4-million, respectively, as a result of increased sales and marketing activity to support newly commercialized smart products. For the year ended Dec. 31, 2023, as a percentage of revenue, sales and marketing expenses remained unchanged at 3 per cent compared with 2022.

For the three months and year ended Dec. 31, 2023, other losses, net of $200,000 and $300,000, respectively, comprise primarily foreign exchange losses. For the three months and year ended Dec. 31, 2022, other gains comprise primarily $4.1-million of gains on disposal of property, plant and equipment, including the impact of the sale and leaseback transaction the corporation completed in December, 2022, offset by foreign exchange losses.

Net earnings for the three months ended Dec. 31, 2023, were $2.7-million, or 10 cents per basic share, compared with net earnings of $7.3-million, or 26 cents per basic share in the fourth quarter of 2022. Net earnings for the year ended Dec. 31, 2023, were $6.5-million, or 23 cents per basic share, compared with net earnings of $8.8-million, or 31 cents per basic share in 2022. Net earnings for the three months and year ended Dec. 31, 2022, benefited from a $3.9-million gain on property, plant and equipment recognized in conjunction with the sale-leaseback of McCoy's facility in Cedar Park, Tex., as well as a $1-million recovery of income tax expense, largely from the recovery of previously unrecognized deferred tax assets.

Adjusted EBITDA for the three months ended Dec. 31, 2023, was $4-million, compared with $3.7-million for the fourth quarter of 2022. For the year ended Dec. 31, 2023, adjusted EBITDA was $13.1-million, compared with $8.5-million in 2022. This growth reflects McCoy's robust operating efficiency, fuelled by significant revenue contributions from innovative technologies such as FMS, DWCRTs and smartCRTs, which generally offer higher margins compared with legacy capital equipment. Adjusted EBITDA performance for the three months and year ended Dec. 31, 2023, was impacted by increased revenues and production throughput, offset to a lesser extent by escalated freight costs and adjustments in work force compensation to support revenue expansion.

As at Dec. 31, 2023, the corporation had $15.7-million in net cash, along with an additional $11.1-million available under undrawn credit facilities that were renewed throughout the year.

Outlook

Over the short term and medium term, oil and gas market fundamentals remain robust for international markets, especially in the Middle East and North Africa. Increased drilling activity and the entry of new regional players alongside National Oil Companies' (NOC) strong focus on increased safety and efficiency will create further opportunities for the company's new products. McCoy is well positioned to capitalize on these trends with market-leading technologies and product enhancements that provide superior safety, efficiency and simplified operating procedures as well as expert technical support with local presence and the broadest portfolio of TRS (tubular running services) equipment on the market.

Turning to the North America land market, despite flat rig count and drilling activity, McCoy anticipates continued robust order intake for its new FMS technology in 2024 due to the performance and safety advantages inherent in its unique design, along with the continuing labour challenges faced by many of the company's customers.

As McCoy progresses through the commercialization stage of its digital technology road map initiative, the company expects 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.

From Jan. 1 to March 13, 2024, order intake amounted to $15.6-million, on pace with Q4 2023 order intake. With $22.5-million ($17-million (U.S.)) of backlog reported at Dec. 31, 2023, the company is confident in delivering strong revenue and earnings performance for 2024. However, timing delays experienced on certain customer purchase commitments, shifts in product mix, and greater-than-anticipated book-and-ship revenues that positively impacted Q4 2023 may result in quarter-to-quarter fluctuations in revenues and gross margins, particularity in the first quarter, with revenues and earnings more heavily weighted toward the second half of 2024. McCoy remains confident in the continued strong adoption of its new technologies in 2024, and, with its proven record of operational efficiency and cash flow generation, McCoy has since doubled its quarterly dividend to two cents per share. For 2024 and beyond, the company 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 (merger and acquisition) opportunities where returns are favourable; and (b) 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, application expertise, 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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