McCoy Q2 2024 Update

Quick update after Q2 2024

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

Price: $2.00 CAD

MC: 57.4 million CAD

EV: 49.3 million CAD

Yield: 4%

1 year performance: +37%

*All numbers in CAD unless stated otherwise.

MCB reported Friday morning. Results were ahead of my expectations and the stock was up 7.5% on the day.

Quarter Recap

• Revenue came in at 19.9 million vs 16.2 million last year.

• EBITDA was 4.7 million vs 2.9 million last year.

• Book to bill was at 0.84 leading to the backlog down to 22.3 million at the end of the quarter vs 25.2 million in Q1 2024.

• They continue to advance on their digital technology roadmap.

Valuation

MCB is trading at 3.3x EV/EBITDA.

Closing Thoughts

Though these numbers look pretty good, there are a couple of concerns I have.

1. Inventory levels are growing faster than revenue.

   A company that is growing will have to invest in inventory to match the higher top line. That I’m comfortable with. I would like to see inventory levels stay here and the top line grow. I am not sure that is possible as I’m not an expert on what their inventory mix is other than what is stated in the financials.

1. Order intake is lower than revenue leading to them eating into the backlog.

   I am less concerned about the nominal number for backlog and more focused on the order intake numbers over the last 4-6 quarters. Unless there is a meaningful increase in orders, I don’t think we see EBITDA ramp significantly higher from here until the more software focused revenue takes over.

Despite these concerns, I think MCB is a reasonable bet in my OFS basket here. There is a few ways to win with the stock. I continue to hold my shares.

Thanks for reading.

Dean

* long MCB.to