CALGARY,
AB, Nov. 2, 2022 /CNW/ - Pason Systems Inc.
("Pason" or the "Company") (TSX: PSI) announced today its 2022
third quarter results and the declaration of an increased quarterly
dividend. The following news release should be read in conjunction
with the Company's Management Discussion and Analysis ("MD&A"),
the unaudited Interim Condensed Consolidated Financial Statements
and related notes for the three and nine months ended September 30, 2022, as well as the Annual
Information Form for the year ended December
31, 2021. All of these documents are available on SEDAR at
www.sedar.com.
Financial Highlights
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|
2022
|
2021
|
Change
|
2022
|
2021
|
Change
|
(CDN 000s, except per
share data)
|
($)
|
($)
|
( %)
|
($)
|
($)
|
( %)
|
North American
Revenue
|
75,245
|
46,106
|
63
|
196,882
|
115,613
|
70
|
International
Revenue
|
15,829
|
10,434
|
52
|
38,831
|
25,307
|
53
|
Solar and Energy
Storage Revenue
|
1,428
|
1,165
|
23
|
4,865
|
2,933
|
66
|
Total
Revenue
|
92,502
|
57,705
|
60
|
240,578
|
143,853
|
67
|
EBITDA
(1)
|
50,659
|
24,870
|
104
|
117,018
|
55,527
|
111
|
Adjusted EBITDA
(1)
|
46,231
|
22,356
|
107
|
110,566
|
48,312
|
129
|
As a % of
revenue
|
50.0
|
38.7
|
1,130
bps
|
46.0
|
33.6
|
1,240 bps
|
Funds flow from
operations
|
35,968
|
19,983
|
80
|
88,914
|
48,375
|
84
|
Per share –
basic
|
0.44
|
0.24
|
82
|
1.08
|
0.59
|
85
|
Per share –
diluted
|
0.43
|
0.24
|
82
|
1.07
|
0.59
|
85
|
Cash from operating
activities
|
30,743
|
17,074
|
80
|
84,472
|
38,000
|
122
|
Capital expenditures
(2)
|
6,915
|
1,205
|
474
|
18,106
|
7,574
|
139
|
Free cash flow
(1)
|
24,047
|
16,261
|
48
|
66,764
|
31,121
|
115
|
Cash dividends declared
(per share)
|
0.08
|
0.05
|
60
|
0.24
|
0.15
|
60
|
Net income
|
33,739
|
12,775
|
164
|
69,732
|
21,646
|
222
|
Net income attributable
to Pason
|
34,246
|
13,074
|
162
|
71,359
|
22,696
|
214
|
Per share –
basic
|
0.42
|
0.16
|
163
|
0.87
|
0.27
|
222
|
Per share –
diluted
|
0.41
|
0.16
|
163
|
0.86
|
0.27
|
222
|
(1) Non-GAAP financial
measures are defined under Non-GAAP Financial Measures in the
Company's Management Discussion and Analysis.
|
(2) Includes additions
to property plant, and equipment and development costs from Pason's
Condensed Consolidated Interim Statement of Cash Flows
|
As at
|
September 30,
2022
|
December 31,
2021
|
Change
|
(CDN 000s)
|
($)
|
($)
|
( %)
|
Cash and cash
equivalents
|
206,027
|
158,283
|
30
|
Working
capital
|
226,343
|
184,083
|
23
|
Total interest bearing
debt
|
—
|
—
|
—
|
Shares outstanding end
of period (#)
|
81,758,607
|
82,194,051
|
(1)
|
Pason's financial results for the three and nine months ended
September 30, 2022, reflect improved industry conditions,
increasing demand for the Company's products and technologies,
strong
competitive positioning and
operating leverage. Financial results have improved significantly
compared to the comparative periods in 2021.
Pason generated $92.5 million in
revenue in the third quarter of 2022, representing a 60% increase
from the $57.7 million generated in
the third quarter of 2021 as drilling activity in Pason's operating
regions continued to improve. With this increase in revenue, Pason
generated $46.2 million in Adjusted
EBITDA, or 50.0% of revenue in the third quarter of 2022, compared
to $22.4 million in the third quarter
of 2021, or 38.7% of revenue. While the Company incurred
incremental expenses to support increased activity levels, and
further faced inflationary effects on certain operating costs,
third quarter results continue to demonstrate the Company's strong
operating leverage through improved industry conditions. As a
result, the Company generated net income attributable to Pason of
$34.2 million ($0.42 per share) in the third quarter of 2022
compared to net income attributable to Pason of $13.1 million ($0.16 per share) in the corresponding period of
2021.
Industry conditions in North
America continued to steadily improve in the third quarter
of 2022, with a 49% increase in industry activity compared to the
comparative period in 2021. For the fifth consecutive quarter, the
North American business unit outpaced the improvement in industry
activity, generating $75.2 million of
revenue in the third quarter of 2022, a 63% increase from
$46.1 million in the comparative
period of 2021. Revenue per Industry Day of $871 in Q3 2022 was a new quarterly record for
the Company and a 14% increase from the comparable period in 2021.
The year over year increase was driven by the strengthening US
dollar relative to the Canadian dollar, and also represents strong
product adoption and improved pricing for the Company's products
and technologies. North American segment gross profit was
$49.0 million during the third
quarter of 2022 compared to $24.8
million in the comparative period of 2021, demonstrating
strong operating leverage with improving activity levels.
The International business unit generated $15.8 million of revenue in the third quarter of
2022 compared to $10.4 million in the
comparative period of 2021. The year over year increase of 52% is
due to increased industry activity in the international markets
that the Company serves and higher levels of revenue generated per
drilling day with improved product adoption. The International
business unit also benefited from a stronger US dollar in the
quarter. For the three months ended September 30, 2022, International segment gross
profit was $7.8 million during the
third quarter of 2022 compared to $5.0
million in the 2021 comparative period.
Revenue generated by the Solar and Energy Storage business unit
was $1.4 million, an increase of 23%
from the comparative period in 2021. The increase in revenue is
primarily due to increased sales of the Company's subscription
based software licenses. Segment gross loss for the third quarter
of 2022 of $1.0 million reflects
investments made for future growth, compared to a $0.4 million segment gross loss in the comparable
period in 2021.
Sequentially, Q3 2022 revenue of $92.5
million increased 26% from the $73.6
million generated in Q2 2022 as Canadian drilling activity
resumed from the spring break-up lows seen in the second quarter,
and Pason also saw continued activity level growth in other end
markets. Similarly, Adjusted EBITDA was $46.2 million in the third quarter of 2022
compared to $31.0 million in the
second quarter of 2022. The sequential Adjusted EBITDA increase
reflects the Company's primarily fixed cost structure and strong
operating leverage. The Company recorded net income
attributable to Pason in the third quarter of 2022 of $34.2 million ($0.42 per share) compared to net income
attributable to Pason of $18.5
million ($0.23 per share) in
the second quarter of 2022. The increase in net income attributable
to Pason is driven by the improvement in operating results.
For the nine month period ended September
30, 2022, Pason generated $240.6
million of revenue, a 67% increase from $143.9 million recorded in the corresponding 2021
period. Adjusted EBITDA for the nine months ended September 30, 2022 was $110.6 million or 46.0% of revenue, compared to
$48.3 million, or 33.6% of revenue in
the first nine months of 2021. Net income attributable to Pason in
the nine months ended September 30,
2022 was $71.4 million
($0.87 per share), up from
$22.7 million ($0.27 per share) in the comparative 2021 period.
A comparison of year to date results reflects improved industry
conditions, higher levels of revenue generated per operating day,
the effects of a strengthening US dollar, and strong
operating leverage.
Pason's balance sheet remains strong, with no interest bearing
debt and $206.0 million in cash and
cash equivalents as at September 30,
2022, compared to $158.3
million at December 31, 2021.
During the third quarter of 2022, Pason generated $30.7 million in net cash from operating
activities (Q3 2021: $17.1 million) as the Company's operating
results improved and the Company managed required investments in
working capital while revenue levels grew.
During the third quarter of 2022, Pason incurred $6.9 million of capital expenditures,
representing net additions to rental equipment to meet activity
levels, investments associated with the ongoing refresh of the
Company's fleet and technology platform, and also an element of
catch up from lower capital expenditure levels throughout 2020 and
2021. Resulting Free Cash Flow generated in Q3 2022 was
$24.0 million compared to
$16.3 million generated in the third
quarter of 2021. In the third quarter of 2022, Pason returned
$11.7 million to shareholders,
through the Company's quarterly dividend for $6.6 million and $5.1
million in share repurchases.
President's Message
Pason's President and Chief Executive Officer Jon Faber stated:
"Pason delivered exceptional operational and financial results
in the third quarter of 2022. Consolidated quarterly revenue of
$92.5 million represented the highest
quarterly revenue since the first quarter of 2015, and quarterly
Adjusted EBITDA of $46.2 million was
the highest since the fourth quarter of 2014."
"North American rig counts in the quarter were similar to those
in the first quarter of 2020, the last period prior to the onset of
the COVID-19 pandemic, while revenue and Adjusted EBITDA were 25%
and 39% higher, respectively, compared to the first quarter of
2020. Since bottoming during the most extreme depths of the
pandemic in the third quarter of 2020, quarterly revenue has
increased by $69.4 million and we
generated $0.68 of Adjusted EBITDA
from every additional dollar of revenue generated."
"Our third quarter results speak to the continued strength of
our competitive position and our leading technology and service
offering. The 60% increase in consolidated revenue significantly
outpaced a 49% increase in underlying North American land drilling
activity. Adjusted EBITDA margins of 50% reflect both the
significant operating leverage in our business and the effects of a
strengthening US dollar."
Pason generated Revenue per Industry Day of $871 in the third quarter, a new quarterly record
for the Company and a 14% year-over-year increase from the third
quarter of 2021. We maintain a leading market position, coupled
with strong product adoption and improved pricing for the Company's
products and technologies. Revenue per Industry Day also benefited
from the strengthening US dollar in the quarter.
"Our International Business Unit posted a 52% year-over-year
increase in revenue to $15.8 million
and generated $7.8 million in segment
gross profit. Our Solar and Energy Storage segment recorded
$1.4 million in revenue, up 23%
compared to the third quarter of 2021. Sequentially, revenue for
this segment decreased due to the timing of the commissioning of
control system projects and associated revenue recognition, while
subscription revenue for our economic modeling software increased
in the quarter."
"Free cash flow for the third quarter totaled $24.0 million, up 48% from the same quarter of
2021. We maintain a balance sheet that allows us to both withstand
the inevitable volatility of North American land drilling and to
make growth-related investments. At the end of the third quarter,
we had $206 million in cash and cash
equivalents and $226 million of
positive working capital."
"Our capital allocation priorities remain unchanged. We are
investing in capital expenditures and working capital that allow us
to generate continued growth and profitability within our core
drilling-related business while navigating the ongoing challenges
of supply chain uncertainties. We are pursuing additional revenue
growth not directly tied to North American land drilling through
Energy Toolbase (ETB), which focuses on the solar and energy
storage market, and our minority investment in Intelligent Wellhead
Systems (IWS), which participates in the oil and gas completions
market. We are committed to returning capital to our shareholders
through our regular quarterly dividend and share repurchases."
"In the third quarter, we recorded $6.9
million in capital expenditures, bringing our total capital
expenditures for the first nine months of the year to $18.1 million. We continue to expect 2022 capital
expenditures to total approximately $30
million, which would imply significantly higher sequential
capital expenditures in the fourth quarter provided expected
equipment delivery timelines are met. Customer demands and
requirements for data continue to increase and evolve in order to
enable their automation and analytics technology initiatives. We
see opportunities to renew and extend the capabilities of important
parts of our hosting platform to maintain our leading market
position and reinforce the foundation for future product
development and continued revenue growth. As such, we currently
expect to spend approximately $45
million in capital expenditures in 2023 and anticipate
capital expenditures to remain at this level for a couple of years
before beginning to trend lower. While this level of capital
expenditures is higher than we have incurred since 2015, as a
rental business we have redeployed idled assets through a series of
industry downturns. Further, over the past two years, maintenance
capital spending on operational equipment such as trucks has been
delayed by acute supply chain shortages. Our capital intensity
remains lower than the Company's historical annual capital
expenditures."
"When we took the extraordinary measure of significantly
reducing our dividend in the third quarter of 2020, we communicated
our intention to establish a more flexible approach to capital
allocation. This included establishing the regular dividend at a
lower percentage of free cash flow than prior to the pandemic and
an increased use of share repurchases to return capital to
shareholders. We continue to favour flexibility in our capital
allocation. As we consider the impressive free cash flow generation
capabilities of our business, we are able to meaningfully
increase the fixed amount of returns to shareholders through the
regular dividend while preserving our ability to adjust total
shareholder returns over time through share repurchases. As a
result, we are increasing our regular quarterly dividend from
$0.08 per share to $0.12 per share. At our current share count, the
proforma aggregate annual dividends of $39.2
million compares to free cash flow of $90.8 million over the trailing twelve month
period. While the board will continue to regularly consider the
appropriate level of regular dividend payments, following this
increase, we expect potential future increases to the regular
dividend to be more modest over time. In the third quarter, we also
returned $5.1 million to shareholders
through share repurchases."
"As we look ahead to the end of this year and into 2023,
macroeconomic conditions continue to become challenging, with
central banks moving more aggressively to address high prevailing
levels of inflation by significantly raising interest rates. There
are growing concerns around economic recession and questions around
the potential impact on global oil demand. At the same time, the
world is wrestling with a global energy crisis with significant
shortages and elevated prices in many countries, with concerns
becoming more heightened as cold winter weather approaches in the
Northern Hemisphere. Geopolitical instability has placed an
increased focus and attention on where commodities are sourced. WTI
oil prices have retreated to approximately US$85 per barrel. We expect that these factors
will continue to result in volatility in the financial trading in
oil commodities in the near-term, however, supply and demand
fundamentals for the physical commodity remain constructive."
"US storage of crude oil and petroleum products, including the
Strategic Petroleum Reserve ("SPR"), are at levels last seen in
2005. US land production remains approximately 8% below
pre-pandemic levels. The inventory of drilled but uncompleted wells
("DUCs") in the US has decreased for 27 consecutive months, though
the pace of decline has slowed, suggesting the DUC inventory may be
plateauing at a minimum level. There is a finite limit to how much
supply can come from drawing down on storage and uncompleted well
inventories; meeting continuing global demand for oil will require
new drilling. As a result, we continue to expect land drilling
activity to steadily grow over the coming quarters, albeit at a
more modest pace than witnessed over the past two years, owing in
part to the potential demand impacts from economic recession, as
well as continued challenges around labour availability and
tightening availability of high spec rigs."
"Pason is well equipped to provide the drilling data and
technologies that are being used by companies in their automation
and analytics efforts as they seek to develop energy resources in a
profitable and responsible manner" concluded Mr. Faber.
Quarterly Dividend
Pason announced today that the Board of Directors have declared
a quarterly dividend of twelve cents
(C$0.12) per share on the company's
common shares. The dividend will be paid on December 30, 2022, to shareholders of record at
the close of business on December 15,
2022.
Third Quarter Conference
Call
Pason will be conducting a conference call for interested
analysts, brokers, investors, and media representatives to review
its 2022 third quarter results at 9:00 a.m.
(MDT) on Thursday, November 3, 2022. The conference call
dial-in numbers are 1-888-664-6383 or 1-416-764-8650, and the call
will be simultaneously audio webcast via: www.pason.com/webcast.
You can access the fourteen-day replay by dialing 1-888-390-0541 or
1-416-764-8677, using password 656202#.
An archived audio webcast of the conference call will also be
available on Pason's website at www.pason.com/investors.
Forward Looking
Information
Certain statements contained herein constitute "forward-looking
statements" and/or "forward-looking information" under applicable
securities laws (collectively referred to as "forward-looking
statements"). Forward‐looking statements can generally be
identified by the words "anticipate", "expect", "believe", "may",
"could", "should", "will", "estimate", "project", "intend", "plan",
"outlook", "forecast" or expressions of a similar nature suggesting
a future outcome or outlook.
Without limiting the foregoing, this document includes, but is
not limited to, the following forward‐looking statements: the
Company's growth strategy and related schedules; divergence in
activity levels between the geographic regions in which we operate;
demand fluctuations for our products and services; the Company's
ability to increase or maintain market share; projected future
value, forecast operating and financial results; planned capital
expenditures; expected product performance and adoption, including
the timing, growth and profitability thereof; potential dividends
and dividend growth strategy; future use and development of
technology; our financial ability to meet long-term commitments not
included in liabilities; the collectability of accounts receivable;
the application of critical accounting estimates and judgements;
treatment under governmental regulatory and taxation regimes; and
projected increasing shareholder value.
These forward-looking statements reflect the current views of
Pason with respect to future events and operating performance as of
the date of this document. They are subject to known and unknown
risks, uncertainties, assumptions, and other factors that could
cause actual results to be materially different from results that
are expressed or implied by such forward-looking statements.
Although we believe that these forward-looking statements are
reasonable based on the information available on the date such
statements are made and processes used to prepare the information,
such statements are not guarantees of future performance and
readers are cautioned against placing undue reliance on
forward-looking statements. By their nature, these statements
involve a variety of assumptions, known and unknown risks and
uncertainties and other factors, which may cause actual results,
levels of activity and achievements to differ materially from those
expressed or implied by such statements. Such risks and
uncertainties include, but are not limited to: the state of the
economy; volatility in industry activity levels and resulting
customer expenditures on exploration and production activities;
customer demand for existing and new products; the industry shift
towards more efficient drilling activity and technology to assist
in that efficiency; the impact of competition; the loss of key
customers; the loss of key personnel; cybersecurity risks; reliance
on proprietary technology and ability to protect the Company's
proprietary technologies; changes to government regulations
(including those related to safety, environmental, or taxation);
the impact of extreme weather events and seasonality on our
suppliers and on customer operations; and war, terrorism,
pandemics, social or political unrest that disrupts global
markets.
These risks, uncertainties and assumptions include but are not
limited to those discussed in Pason's Annual Information Form for
the year ended December 31, 2021
under the heading, "Risk and Uncertainty," in our management's
discussion and analysis for the year ended December 31, 2021, and in our other filings with
Canadian securities regulators. These documents are on file with
the Canadian securities regulatory authorities and may be accessed
through the SEDAR website (www.sedar.com) or through Pason's
website (www.pason.com).
Forward-looking statements contained in this document are
expressly qualified by this cautionary statement. Except to the
extent required by applicable law, Pason assumes no obligation to
publicly update or revise any forward-looking statements made in
this document or otherwise, whether as a result of new information,
future events or otherwise.
Pason Systems Inc.
Pason Systems Inc. is a leading global provider of specialized
data management systems for drilling rigs. Our solutions, which
include data acquisition, wellsite reporting, remote
communications, web-based information management, and analytics,
enable collaboration between the rig and the office. Through our
subsidiary, Energy Toolbase (ETB), we provide products and services
for the solar power and energy storage industry. ETB's solutions
enable project developers to model, control and monitor economics
and performance of solar energy and storage projects. Pason's
common shares trade on the Toronto Stock Exchange under the symbol
PSI.
For more information about Pason Systems Inc., visit the
company's website at www.pason.com or contact
investorrelations@pason.com.
Additional information on risks and uncertainties and other
factors that could affect Pason's operations or financial results
are included in Pason's reports on file with the Canadian
securities regulatory authorities and may be accessed through the
SEDAR website (www.sedar.com) or through Pason's website
(www.pason.com).
SOURCE Pason Systems Inc.