McCoy Global Q1 '25 Update - $MCB.to

Quick update after Q1 2025

*Disclosure: I own shares in MCB. I am not a professional. Please do your own due diligence.

Price: $3.32 CAD

MC: 94 million CAD

EV: 85 million CAD

Yield: 3%

1 year performance: +73%

MCB reported this morning before the market opened. Results were a bit ahead of my expectations and the stock was up/down %

*all numbers in CAD unless stated otherwise

Quarter Recap

• Revenue of 19.3 million compared to 16.5 million last year

  • Revenue from SmartProducts was 11.4 million vs 5.1 million last year

  • Revenue from the legacy part of the business was 8 million vs. 11.5 million last year

• Adjusted EBITDA of 3.5 million compared to 2.3 million last year

  • Adjusted EBITDA margin at 18% compared to 14% last year

• Backlog at 27.5 million compared to 25.2 million last year

• Book to bill ratio was 1.21

• As one would expect, there was some cautious statements on the near term for the business given the tariff situation.

Valuation

I have them at 4.9x EV/ttm EBITDA and about 9x EV/ttm FCF. This gets cheaper as their customers continue to adopt their new products.

Closing Thoughts

There are a few important things to me that I think tell the story of McCoy.

1. I think some investors are too fixated on the near term with regards to SaaS revenue. This line item is still a couple years away from being meaningful. In order to get to the SaaS revenue we would see lots of product sales as adoption continues. And the initial pricing is more focused on adoption, so they may have some adjustments to make on SaaS pricing.

2. The latest order mentioned on April 23 is very telling for their product portfolio. If the remaining land market follows this large player in the Permian than McCoy products become the new standard.

3. The chart below copied from the financial statements shows the mix of revenue of the legacy business and the SmartProducts. This is a new disclosure for them. You can see how important the new products have been in insulating them from the stagnant US land market. I think this resilience deserves a better multiple.

We have some short term headwinds as Trump continues his desire to be the center of attention no matter the costs. Who knows what things look like in the next few months and quarters, but MCB looks very bright a couple years down the road. The dividend and NCIB should provide some support in the shares.

I will add on weakness.

Thanks for reading.

Dean

* long MCB.to