Mr. Jim Rakievich reports

MCCOY GLOBAL ANNOUNCES FOURTH QUARTER AND YEAR END 2024 RESULTS AND INCREASE TO ITS QUARTERLY DIVIDEND

McCoy Global Inc. has released its operational and financial results for the year and three months ended Dec. 31, 2024.

Fourth quarter highlights:

• Revenue increased 28 per cent to $25.2-million, compared with $19.7-million in Q4 (fourth quarter) 2023, driven by strong demand for recently commercialized smart products. Smart product revenue accounted for $12.1-million, or 48 per cent, of total revenue, an increase of $3.9-million or 48 per cent from Q4 2023;
• Net earnings of $4.3-million, a 59-per-cent increase from $2.7-million in 2023;
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) increased to $6.5-million, or 26 per cent of revenue, compared with $4.0-million, or 20 per cent of revenue, in 2023;
• Announced the increase of its quarterly cash dividend to 2.5 cents per common share, payable on April 15, 2025, to shareholders of record as of close of business on March 31, 2025.

Annual highlights:

• Revenue increased 11 per cent to $77.5-million, compared with $69.7-million in 2023, driven by strong demand for recently commercialized smart products. Smart product revenue accounted for $29.8-million, or 38 per cent, of total revenue, an increase of $5.3-million from 2023;
• Net earnings of $8.9-million, a 36-per-cent increase from $6.5-million in 2023;
• Adjusted EBITDA of $16.2-million, or 21 per cent of revenue, compared with $13.1-million, or 19 per cent of revenue, in 2023;
• Advanced its technology road map and since Jan. 1, 2024:
  • Reported continued strong market penetration of its flush mount spiders (FMS) in the North America land market. With a growing number of tools operating in field, operators have increasingly recognized the benefits of McCoy's FMS, leading to more widespread adoption. Consolidation in the North American E&P (exploration and production) space has also become a favourable trend as safety and efficiency standards are integrated across these mergers. 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) and McCoy's smarTR;
  • Secured a contract award totalling $4.3-million for several hydraulic smart casing running tools (smartCRTs) destined for the Middle East market. The company's unique, patented solution is a hydraulic option to its smart product suite and is designed to integrate into its smarTR system. This represents an important milestone on the company's journey toward automating tubular running operations. The expedited development and commercialization of this enhancement was a response to certain new casing running tool (CRT) requirements for future contract tender awards announced by national oil companies (NOCs) and major operators in certain key regions in the first quarter of 2024. McCoy's hydraulic smartCRT not only addresses the new contract requirements but also offers an intelligent, connected enhancement to conventional casing running tools available today. This tool provides superior safety, efficiency and simplified operating procedures along with real-time data collection and analysis capabilities. This technology mitigates the risk of conventional, mechanical CRT technology, while providing actionable insights that optimize future performance;
  • Continued McCoy's in-field trials for smarTR progressed in early 2025 with promising initial results, despite being unable to secure rig availability during Q4 2024. The success of McCoy's CRT enhancement has alleviated several external hurdles, while further improving safety, efficiency and simplifying operating procedures of the smarTR system. Due to the challenges securing rig availability with its current in-field partner, McCoy expanded the in-field trials to include an additional three partners in separate regions, including both United States land and the Middle East. As in-field trials continue, the company's product development team will focus on promptly addressing challenges, if and when they are identified. McCoy remains confident in its ability to consistently exceed its internal key performance metrics across several in-field trials in each region. This will allow the company to successfully conclude the in-field trials and shift its focus to successful product adoption and market penetration;
  • Secured a contract award totalling $3.7-million for deepwater offshore integrated casing running systems destined for Latin America and accepted an additional $1.8-million in awards for deepwater systems for separate customers in Brazil. Delivering this technology will complete the first step on a road map to a comprehensive smarTR system tailored for offshore and deepwater markets. This integrated deepwater system differs from our smarTR solution designed for land and shelf that is centered around CRT technology, as deepwater casing installation requires hydraulic power tongs to meet technical specifications for the well profile. The Latin America contract award also marks the first offshore commercial software-as-a-service (SaaS) purchase commitment for its Virtual Thread-Rep technology. McCoy's Virtual Thread-Rep technology enables customers to remotely monitor and control premium connection make-up. It also facilitates the autonomous evaluation and confirmation of premium connection make-up on location. Delivery of the equipment and technology is scheduled to occur in early 2025.

"Two thousand twenty-four has been a transformative year for McCoy Global. Our strategic focus on innovation and operational excellence has yielded significant results, with a 28-per-cent increase in Q4 revenue driven by strong demand for our newly commercialized smart products. We are particularly proud of our advancements in our technology road map, which has positioned us as a leader in the industry," said Jim Rakievich, president and chief executive officer of McCoy. "As we look ahead to 2025, we remain committed to accelerating market adoption of our smart portfolio products and leveraging our strong balance sheet to capitalize on strategic opportunities. Our dedicated team and robust operational framework will continue to drive value for our shareholders and stakeholders alike."

"McCoy Global's financial performance in Q4 2024 reflects our disciplined approach to growth and operational efficiency. We achieved a 59-per-cent increase in net earnings and a 26-per-cent adjusted EBITDA margin, underscoring the profitability of our smart product technologies. Our strong cash flow generation has enabled us to make strategic investments in our rental fleet and technology road map, while also returning capital to shareholders through dividends, which has increased from two cents per share to 2.5 cents per share," said Lindsay McGill, vice-president and chief financial officer of McCoy. "With a robust net cash position of $17.1-million and additional funds available under our credit facilities, we are strategically positioned to drive future growth initiatives and seize opportunities for organic expansion."

Fourth quarter financial highlights:

• Total revenue of $25.2-million, compared with $19.7-million in 2023;
• Net earnings of $4.3-million, compared with net earnings of $2.7-million in 2023;
• Adjusted EBITDA increased to $6.5-million, or 26 per cent of revenue, compared with $4.0-million, or 20 per cent of revenue, in 2023;
• Booked backlog of $23.5-million at Dec. 31, 2024, a 4-per-cent increase from the $22.5-million in the fourth quarter of 2023;
• Book-to-bill ratio was 0.67 for the three months ended Dec. 31, 2024, compared with 0.91 in the fourth quarter of 2023. Subsequent order intake in the first quarter of 2025 is expected to positively support financial performance for the first half of 2025.

Annual financial highlights:

• Total revenue of $77.5-million, a 11-per-cent increase from the $69.7-million reported in 2023, driven by strong demand for recently commercialized smart products;
• Net earnings of $8.9-million, compared with net earnings of $6.5-million in 2023, reaching the highest level since 2014;
• Adjusted EBITDA of $16.2-million, or 21 per cent of revenue, compared with $13.1-million, or 19 per cent of revenue, in 2023, also reaching the highest level since 2014.

Financial summary

Revenue for the three months ended Dec. 31, 2024, increased by 28 per cent compared with the same period in 2023. The growth in revenues was driven by strong demand for newly commercialized smart products in the North American land market. As previously anticipated, the timing of contract awards, order intake and product shipments also impacted revenue on a quarter-to-quarter basis, resulting in a strong sequential increase in revenue. For the three months ended Dec. 31, 2024, smart product revenue of $12.1-million accounted for 48 per cent of revenue (three months ended Dec. 31, 2023 -- 42 per cent). For the year ended Dec. 31, 2024, revenues increased by 11 per cent from the comparative period. This robust revenue growth was driven by strong demand for recently commercialized smart products, with smart product revenue of $29.8-million accounting for 38 per cent of revenue (year ended Dec. 31, 2023 -- 35 per cent).

Gross profit, as a percentage of revenue for the three months and year ended Dec. 31, 2024, was 41 per cent and 36 per cent, respectively, an increase of eight and three percentage points, respectively, from the comparable periods in 2023. The improvements were largely a result of increased production throughput, product mix weighed more heavily toward smart products with favourable product margins compared with legacy capital equipment, as well as supply chain cost containment measures that reduced material cost for a number of product lines. This was partially offset by additional labour costs, production overheads and freight to support increased production throughput and customer technical support.

For the three months ended Dec. 31, 2024, general and administrative expenses (G&A) increased by $1.2-million to $3.7-million, from the comparable period in 2023. For the year ended Dec. 31, 2024, McCoy reported G&A of $10.0-million or 13 per cent of revenue, an increase of $1.4-million from 2023. The increases for both the three months and year ended Dec. 31, 2024, were primarily attributable to increased compensation associated with the corporation's short-term incentive plan, increases in head count, as well as increases in stock-based compensation due to the appreciation of the corporation's stock price on director performance share units and director share units. To a lesser extent, the corporation's investment in an artificial intelligence (AI) platform for enhanced operational decision making and increased travel also impacted G&A. For the year ended Dec. 31, 2024, as a percentage of revenue, G&A increased by one percentage point to 13 per cent compared with 2023.

During the three months and year ended Dec. 31, 2024, product development and support expenditures totalled $2.1-million and $6.2-million, respectively, with the further advancement of McCoy's technology road map initiative through concentrated efforts on accelerating market adoption of new and recently commercialized smart portfolio products, as well as developing, testing and commercializing additional smart product enhancements and complementary product accessories for McCoy's smartCRT. For the three months and year ended Dec. 31, 2024, product development and support expenditures increased to 8 per cent of revenue, an increase of two percentage points from the comparative periods.

For the three months and year ended Dec. 31, 2024, sales and marketing expenses increased from the comparative period to $1.0-million and $3.0-million, respectively, as a result of increased head count and travel to support the corporation's revenue growth and technology adoption, as well as increased marketing initiatives. For the year ended Dec. 31, 2024, as a percentage of revenue, sales and marketing expenses increased by one percentage point compared with 2023 to 4 per cent.

Net earnings for the three months ended Dec. 31, 2024, were $4.3-million or 16 cents per basic share, compared with net earnings of $2.7-million or 10 cents per basic share in the fourth quarter of 2023. Net earnings for the year ended Dec. 31, 2024, were $8.9-million or 33 cents per basic share, compared with net earnings of $6.5-million or 23 cents per basic share in 2023.

Adjusted EBITDA for the three months ended Dec. 31, 2024, was $6.5-million, compared with $4.0-million for the fourth quarter of 2023. For the year ended Dec. 31, 2024, adjusted EBITDA was $16.2-million, compared with $13.1-million in 2023. This growth reflects McCoy's robust operating efficiency, fuelled by significant revenue contributions from innovative smart product technologies, which generally offer higher margins compared with legacy capital equipment.

As at Dec. 31, 2024, the corporation had $17.1-million in net cash, along with an additional $7.9-million available under undrawn credit facilities.

Outlook

In light of the recent trade tariff announcements between the United States and Canada, the corporation has evaluated the potential impacts on its operations. The corporation operates two production facilities in the U.S., where all of McCoy's equipment and technologies are currently produced. These facilities source a considerable portion of components from Canadian suppliers, to which the 25-per-cent tariff on Canadian imports would likely apply. Management expects that the impact of these tariffs will be offset to a substantial degree by the depreciating Canadian dollar. To further mitigate the potential impact of U.S. tariffs on Canadian imports, McCoy has the ability to transition to alternative suppliers or implement other measures that limit or defer financial impact. Management continues to take pro-active steps to mitigate much of the impact the trade tariffs may have and will continue to closely monitor future developments as they are announced. Over all, the tariffs are not expected to have a material impact on McCoy's financial performance, however, circumstances remain very dynamic and this assessment may change.

Over the near and medium term, oil and gas market fundamentals are expected to remain stable for international markets, especially in the Middle East and North Africa (MENA). Increased drilling activity and the entry of new regional players alongside national oil companies' strong focus on increased safety and efficiency will create further opportunities for the company's new products. Additionally, much of the increase in activity levels has been unconventional drilling, where technology and efficiency are a substantially greater focus. 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 equipment on the market.

Turning to the North America land market, where rig count and drilling activity have remained subdued, the market for equipment, particularly standard, legacy products, has been stagnant to declining due to oversupply. Despite this muted backdrop, McCoy's advanced technologies continue to generate growth in this region due to the significantly improved safety features and ability to enhance efficiency and in many cases reduce cost. Recent consolidations in the North American E&P space have led to safety and efficiency standards being integrated across these mergers, creating further opportunities for McCoy's new smart product technologies. As field trials for its integrated smarTR progress toward completion, the company expects 2025 to be an important year for the initial adoption of this technology in the North America land market, setting the stage for future revenue growth in 2026 and beyond.

As it progresses through the commercialization stage of its 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.

With $23.5-million of backlog reported at Dec. 31, 2024, and continued momentum of smart product technology adoption, the company is confident in executing its strategic and financial objectives in 2025. 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 2024 may result in quarter-to-quarter fluctuations in revenues and gross margins, particularly in the first quarter, with revenues and earnings more heavily weighted toward the second half of 2025. McCoy remains confident in the continued strong market penetration of its new technologies in 2025, and with its proven record of operational efficiency and cash flow generation. For 2025 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;
• Focusing on capital allocation priorities, returning excess cash to its 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, 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 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 U.S. 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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