McCoy Global Q2 2026 Update – MCB.TO

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

McCoy Global provides equipment and technologies used in tubular running operations during oil and gas well construction. The company is focused on automating well construction through products including smartCRT, smarTR and related software, and operates in more than 50 countries through direct sales and distributors.

Price: $2.22 CAD

MC: ~65.2 million CAD (diluted)

EV: ~59.4 million CAD

Yield: 0% (dividend still paused)

1 year performance: -29%

McCoy Global reported last week. I had no expectations going into the quarter given all the shipping disruptions. I was looking for some comments on the backlog and demand moving forward.

all numbers in CAD unless stated otherwise

• Revenue: $17.2M vs $24.1M (-28.3% YoY)

• Gross Profit: $3.5M vs $8.7M (-59.7% YoY)

• Gross Margin: 20.4% vs 36.2% (-43.7% YoY)

• Adjusted EBITDA: $1.9M vs $4.8M (-60.0% YoY)

• Adjusted EBITDA Margin: 11.2% vs 20.0% (-44.2% YoY)

• Cash and cash equivalents: $7.7M vs $6.6M (+16.5% YoY)

• Net cash: $8.3M

• Revenue: $26.6M vs $43.4M (-38.7% YoY)

• Gross Profit: $4.0M vs $15.3M (-73.6% YoY)

• Gross Margin: 15.2% vs 35.3% (-57.0% YoY)

• Adjusted EBITDA: $0.7M vs $8.3M (-92.1% YoY)

• Adjusted EBITDA Margin: 2.5% vs 19.1% (-87.1% YoY)

• smartProduct revenue: $10.5M vs $13.9M (-24.4% YoY)

• smartProduct revenue mix: 60.7% vs 57.6% (+5.4% YoY)

• Legacy product revenue: $6.8M vs $10.2M (-33.6% YoY)

• smarTR systems continued operating in live field environments during the quarter

• smartTSA field trials continued during Q2

• smartTSA and additional smarTR accessories are being developed as the remaining system elements required to achieve targeted labour reductions of up to 67%

• Product, parts and consumables revenue: $14.9M vs $20.9M (-28.9% YoY)

• Rental revenue: $1.0M vs $1.4M (-33.1% YoY)

• Services revenue: $1.4M vs $1.7M (-17.0% YoY)

• Order intake: $12.0M vs $22.5M (-46.7% YoY)

• Q1 2026 order intake: $6.5M, including the cancellation of $6.5M of previously booked backlog

• Q1 2026 order intake excluding the cancellation: $13.0M

• Backlog: $18.4M vs $24.6M (-25.2% YoY)

• Backlog sequential change: $18.4M vs $23.3M at March 31, 2026 (-21.0%)

• Book-to-bill: 0.70x vs 0.93x (-24.7% YoY)

• Middle East backlog exposure: approximately 30% of June 30, 2026 backlog; prior-year comparison not disclosed

• McCoy expects 2026 capital expenditures to be lower than 2025

• Remaining 2026 Technology Roadmap spending is expected to be up to US$1.1M

• Remaining 2026 strategic rental-equipment and maintenance production-equipment spending is expected to be up to US$0.6M

• Rental-equipment investment is expected to be largely transferred from existing inventory

• McCoy entered into a new US$10.0M asset-based revolving credit facility in May

  • Available borrowing capacity at June 30 was $12.4M, with no borrowings outstanding

  • The facility requires a minimum 1.0x trailing-12-month fixed-charge coverage ratio

• McCoy obtained a waiver relating to compliance with a financial covenant during Q2

• The quarterly dividend remained paused during the first half of 2026

• No shares were repurchased under the NCIB during the first half of 2026

• Middle East

  • Disruptions lasted longer than expected and continue to delay shipments, capital decisions and contract awards.

  • About 30% of backlog is for the Middle East.

• Orders and backlog

  • Q1 order intake was distorted by a $6.5M backlog cancellation; excluding it, Q1 orders would have been $13.0M versus $12.0M in Q2.

  • Customers are increasingly buying just-in-time, making order timing and backlog conversion less predictable.

• Margins

  • Lower volumes hurt fixed-cost absorption.

  • McCoy also used strategic pricing on certain tong and mechanical CRT orders to move inventory and expand its installed base.

• Cost reductions

  • March workforce reductions lowered operating costs in Q2 while McCoy continued spending on product development and customer support.

• smarTR

  • Fully integrated systems remain in the field with selected customers.

  • Adoption is expected to be gradual as customers evaluate the labour savings and operating efficiencies against replacing fully depreciated conventional equipment.

• Technology Roadmap

  • smartTSA field trials continued, along with development of additional smarTR accessories and software.

• Middle East tenders

  • Several TRS awards under consideration over the next 12 months represent more than 100 rigs.

  • smartCRT is one of two non-proprietary tools qualified under one of the larger tender frameworks.

  • Another NOC tender cycle expected in 2027 represents more than 200 rigs.

• Cash flow

  • Most of Q2 operating cash flow came from working-capital releases, including lower receivables and inventory.

• North America

  • Land activity remains subdued and smarTR commercialization is continuing with selected partners.

• Middle East

  • Logistics disruptions, project deferrals and weaker order activity are expected to continue through 2026 before conditions begin to normalize.

• Middle East opportunities

  • Tender opportunities covering more than 100 rigs remain under consideration over the next 12 months, with another potential 200+ rig tender cycle expected in 2027.

• smarTR

  • McCoy is working to qualify smarTR under additional tender frameworks.

  • North American adoption is expected to remain gradual as customers evaluate the economics in the field.

• Technology Roadmap

  • McCoy plans to continue investing in smartTSA, smarTR accessories, software and controlled commercial deployments.

• Capital spending

  • 2026 capex is expected to remain below 2025 levels.

  • Remaining spending is expected to include up to US$1.1M for the Technology Roadmap and US$0.6M for rental and maintenance equipment.

• Long-term demand

  • McCoy believes underlying Middle East demand remains intact and expects drilling requirements, safety mandates and automation to support smartProduct demand once conditions stabilize.

• CFO transition

  • Lindsay McGill plans to begin maternity leave in Q4, with an interim CFO expected to be appointed.

I have MCB at 6.5x EV/ttm adjusted EBITDA. Of course, I don’t think this is the metric to look at for MCB. It’s really about when/if shipping returns or there is some sort of work around and what the demand picture looks like in 9-12 months.

McCoy’s Q2 results showed a recovery from the very weak first quarter, with revenue nearly doubling sequentially and Adjusted EBITDA returning to positive territory. At the same time, revenue remained 28% below last year and backlog fell 25%.

The disruptions are expected to continue for the remainder of 2026. So (as usual) the operational impacts will reverberate through time much longer than the initial disruption.

I was happy to see the credit facility provide some additional liquidity flexibility in the short term. It looks like they did what was necessary to reduce the risk of needing to raise capital at a depressed price, even if it meant sacrificing some margin. I would have liked to see orders stronger in Q2. They were down a bit from Q1 if you remove the middle east 6.5 million cancellation.

Having said all that, MCB seems to be able to stay afloat here. The share price could do anything in the short term, but the smart products are still filling a need in industry. The short term is uncertain, but in the medium term we could see news on the large tenders or something around the US land market.

What I’m watching now is order intake and backlog, the covenant waiver, and any progress on the Middle East tenders or smarTR adoption in the US land market.

I continue to hold my shares. I think MCB is a decent risk/reward here if you can stomach the volatility.

Thanks for reading my work.

Dean

long MCB.TO