CALGARY,
AB, Nov. 2, 2023 /CNW/ - Pason Systems Inc.
("Pason" or the "Company") (TSX: PSI) announced today its 2023
third quarter results and declared a 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, 2023, as well as the Annual
Information Form for the year ended December
31, 2022. All of these documents are available on SEDAR at
www.sedar.com.
Financial Highlights
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|
2023
|
2022
|
Change
|
2023
|
2022
|
Change
|
(CDN 000s, except per
share data)
|
($)
|
($)
|
( %)
|
($)
|
($)
|
( %)
|
North American
Revenue
|
72,163
|
75,245
|
(4)
|
219,256
|
196,882
|
11
|
International
Revenue
|
15,313
|
15,829
|
(3)
|
45,883
|
38,831
|
18
|
Solar and Energy
Storage Revenue
|
5,618
|
1,428
|
293
|
10,875
|
4,865
|
124
|
Total
Revenue
|
93,094
|
92,502
|
1
|
276,014
|
240,578
|
15
|
Adjusted EBITDA
(1)
|
42,281
|
46,231
|
(9)
|
132,578
|
110,566
|
20
|
As a % of
revenue
|
45.4
|
50.0
|
(460)
bps
|
48.0
|
46.0
|
200 bps
|
Funds flow from
operations
|
40,233
|
35,968
|
12
|
117,017
|
88,914
|
32
|
Per share –
basic
|
0.50
|
0.44
|
15
|
1.45
|
1.08
|
34
|
Per share –
diluted
|
0.50
|
0.43
|
16
|
1.45
|
1.07
|
35
|
Cash from operating
activities
|
31,698
|
30,743
|
3
|
107,621
|
84,472
|
27
|
Net capital
expenditures (2)
|
6,682
|
6,696
|
nmf
|
29,907
|
17,708
|
69
|
Free cash flow
(1)
|
25,016
|
24,047
|
4
|
77,714
|
66,764
|
16
|
Cash dividends declared
(per share)
|
0.12
|
0.08
|
50
|
0.36
|
0.24
|
50
|
Net income
|
27,399
|
33,739
|
(19)
|
87,815
|
69,732
|
26
|
Net income attributable
to Pason
|
27,732
|
34,246
|
(19)
|
89,044
|
71,359
|
25
|
Per share –
basic
|
0.35
|
0.42
|
(17)
|
1.10
|
0.87
|
27
|
Per share –
diluted
|
0.35
|
0.41
|
(17)
|
1.10
|
0.86
|
27
|
(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, net of
proceeds on disposal from Pason's Condensed Consolidated Interim
Statement of Cash Flows.
|
As at
|
September 30,
2023
|
December 31,
2022
|
Change
|
(CDN 000s)
|
($)
|
($)
|
( %)
|
Cash and cash
equivalents
|
138,359
|
132,057
|
5
|
Short-term
investments
|
40,035
|
40,377
|
(1)
|
Total Cash
(1)
|
178,394
|
172,434
|
3
|
Working
capital
|
221,310
|
213,899
|
3
|
Total interest bearing
debt
|
—
|
—
|
—
|
Shares outstanding end
of period (#)
|
79,766,501
|
81,526,954
|
(2)
|
(1) Total Cash is
defined as total cash and cash equivalents and short-term
investments from Pason's Condensed Consolidated Interim Balance
Sheets.
|
Pason's financial results for the three and nine months ended
September 30, 2023 reflect the
Company's strong competitive positioning, prudent balance sheet,
and continued ability to outpace underlying industry activity.
Pason generated $93.1 million of
revenue during the three months ended September 30, 2023, a 1% increase from the three
months ended September 30, 2022.
While industry activity levels in North
America, the Company's largest end market, decreased by 14%
year over year, the Company was able to grow Revenue per Industry
Day by 12% in that same period, posting a new record quarterly
level. In addition, the Company's Solar Energy & Storage
business unit generated its highest level of quarterly revenue to
date, with $5.6 million recognized in
the third quarter of 2023, a 293% increase from the $1.4 million generated in the third quarter of
2022. With this revenue, Pason generated $42.3 million in Adjusted EBITDA, or 45.4% of
revenue in the third quarter of 2023, compared to $46.2 million in the third quarter of 2022, or
50.0% of revenue. A comparison of Adjusted EBITDA margin year over
year reflects the Company's mostly fixed cost base for its drilling
related business units, which is currently sized for higher levels
of activity than seen in the third quarter of 2023.
Resulting net income attributable to Pason of $27.7 million ($0.35 per share) in the third quarter of 2023
compared to net income attributable to Pason of $34.2 million ($0.42 per share) in the corresponding period of
2022. The year over year decline is driven by the lower level of
Adjusted EBITDA seen in the third quarter of 2023 as outlined
above, along with higher levels of depreciation expense with
increased capital expenditures in recent quarters, and higher stock
based compensation expense as a result of current quarter share
price changes on the Company's cash settled stock based
compensation plans.
Industry activity in North
America declined by 14% compared to the prior year
comparative period, primarily driven by a decline in US rig counts.
Despite this, Pason's Revenue per Industry Day in the third quarter
of 2023 of $975 was a new quarterly
record for the Company and a 12% increase from the comparative 2022
period. Revenue per Industry Day in the current quarter continues
to represent strong product adoption and improved pricing for the
Company's products and technologies. As a result, improvements in
Revenue per Industry Day largely offset the decline in industry
activity, and revenue only fell by 4% year over year, from
$75.2 million in the third quarter of
2022 to $72.2 million in the third
quarter of 2023. Total revenue and Revenue per Industry Day for the
North American business unit also benefited from a stronger US
dollar in the current quarter, in comparison to the prior year
comparative period. North American segment gross profit was
$42.9 million during the third
quarter of 2023 compared to $49.0
million in the comparative period of 2022, with lower levels
of revenue in the current quarter over the business unit's mostly
fixed cost base, which is in place to support higher levels of
activity than seen in the third quarter of 2023.
The International business unit generated $15.3 million of revenue in the third quarter of
2023 compared to $15.8 million in the
comparative period of 2022. The year over year decrease is
primarily due to the impacts of hyperinflationary accounting on the
Company's Argentinian operations. Excluding this adjustment, the
International business unit would have generated $15.6 million of revenue in the current quarter,
resulting in a year over year increase of 14% compared to
$13.7 million in the third quarter of
2022. This year over year increase reflects higher levels of
activity in the Company's international end markets, along with
improved product adoption and a more favorable pricing environment.
Resulting International segment gross profit was $7.3 million during the third quarter of 2023
compared to $7.8 million in the 2022
comparative period due to the year over year decline in reported
revenue over the segment's mostly fixed cost base.
The Solar and Energy Storage business unit generated
$5.6 million in revenue in the third
quarter of 2023, a new quarterly record and a significant increase
from the comparative period in 2022 driven primarily by increased
control system sales. Quarterly revenue for the Solar and Energy
Storage business unit will fluctuate with the timing of control
system project deliveries. Segment gross profit was $0.6 million for the third quarter of 2023
compared to a segment gross loss of $1.0
million in the comparable period in 2022.
Sequentially, Q3 2023 revenue of $93.1
million represented a 10% increase from $84.7 million generated in the second quarter of
2023. While drilling activity remained relatively flat in
North America, Revenue per
Industry Day grew by 7% with a more favorable mix of drilling
activity and higher levels of product adoption. Resulting North
American revenue grew by 7% from $67.3
million in the second quarter of 2022 to $72.2 million in the current quarter. Sequential
revenue growth also reflects the record quarterly revenue result in
the third quarter from the Solar and Energy Storage business unit,
as further outlined above. The Company's gross profit increased
sequentially with the increase in revenue, from $46.1 million in Q2 2023 to $50.8 million in Q3 2023. Similarly, Adjusted
EBITDA was $42.3 million in the third
quarter of 2023, a 12% increase from $37.9
million in the second quarter of 2023. Sequential gross
profit and Adjusted EBITDA increases reflect the Company's
primarily fixed cost structure, and the record quarterly result
from the Company's Solar and Energy Storage business unit.
For the nine month period ended September
30, 2023, Pason generated $276.0
million of revenue, a 15% increase from $240.6 million recorded in the corresponding 2022
period. Adjusted EBITDA for the nine months ended September 30, 2023 was $132.6 million or 48.0% of revenue, compared to
$110.6 million, or 46.0% of revenue
in the first nine months of 2022. Net income attributable to Pason
in the nine months ended September 30,
2023 was $89.0 million
($1.10 per share), up from
$71.4 million ($0.87 per share) in the comparative 2022 period.
A comparison of year to date results reflects the Company's
operating leverage with higher levels of revenue generated per
operating day, improved industry conditions in the first quarter of
2023, and the effects of a strengthening US dollar.
Pason's balance sheet remains strong, with no interest bearing
debt and $178.4 million in Total Cash
as at September 30, 2023, compared to $172.4 million at December
31, 2022. During the third quarter of 2023, Pason generated
$31.7 million in net cash from
operating activities and $25.0
million in Free Cash Flow, both representing slight
increases from the levels generated in the 2022 comparative period
while the Company continued to make required investments in working
capital and capital expenditures.
In the third quarter of 2023, Pason returned $15.6 million to shareholders through the
Company's quarterly dividend of $9.6
million and $6.0 million in
share repurchases. Also in the third quarter of 2023, the Company
approved and funded $5.0 million of
the available preferred share subscriptions for its non-controlling
investment in Intelligent Wellhead Systems Inc. ("IWS"). Subsequent
to September 30, 2023, the Company
approved the final $5.0 million of
the remaining available preferred share subscriptions.
President's Message
Pason's President and Chief Executive Officer Jon Faber stated:
"Pason's third quarter 2023 financial and operational results
again demonstrated the company's ability to outpace underlying
drilling industry activity. Consolidated revenue in the quarter
increased modestly from the same period in 2022, while North
American land drilling activity decreased by 14%. Growing customer
demand for data to be used in their automation and analytics
efforts continue to support Pason's dominant market share position
and drive increases in Revenue per Industry Day."
"Consolidated revenue totaled $93.1
million in the third quarter. Our North American business
unit generated Revenue per Industry Day of $975, a 12% increase from the third quarter of
2022, driven by higher product adoption and improved price
realization. Our International business unit also posted strong
results in the quarter, with revenue up 14% before the impacts of
hyperinflationary accounting related to our Argentinian operations.
The majority of our operating costs are fixed in nature and reflect
the investments we continue to make in our field service, support
functions and technology development with a view toward expected
medium-term activity levels."
"Energy Toolbase, which participates in the solar and energy
storage markets, had an excellent quarter with revenue of
$5.6 million, compared to
$1.4 million the same period in 2022,
primarily as a result of increased number of control system
deliveries in the quarter. We continue to see strong growth in our
pipeline of control systems opportunities, though the timing of
bookings and deliveries can fluctuate meaningfully between
quarters."
"Net capital expenditures of $6.7
million and free cash flow of $25.0
million in the third quarter were both similar to the third
quarter of 2022. Net income attributable to Pason decreased 19%
year-over-year to $27.7 million,
reflecting higher depreciation and amortization expense as a result
of higher levels of capital expenditures in recent quarters."
"For the nine-month period ended September 30, consolidated revenue of
$276.0 million represented a 15%
year-over-year increase, while North American land drilling
activity was unchanged over the same period. Adjusted EBITDA of
$132.6 million was up 20%
year-over-year, while free cash flow of $77.7 million and net income attributable to
Pason of $89.0 million represented
16% and 25% increases, respectively."
"We allocate capital in three important areas: (1) supporting
and strengthening our core, drilling-related business; (2)
investing in growth opportunities beyond the core; and (3)
returning capital to shareholders."
"In the first nine months of 2023, net capital expenditures were
$30.0 million; our expectation of
full year capital expenditures of approximately $45 million in 2023 is unchanged and we expect
our 2024 capital program will be at a similar level. During the
third quarter, we funded an additional $5
million of growth capital for Intelligent Wellhead Systems
under our previously announced preferred share financing agreement,
with the final $5 million tranche
funded subsequent to the end of the quarter. In the nine month
period ended September 30, we
returned $51.9 million to
shareholders, with $29.0 million paid
in dividends and $22.9 million in
share repurchases."
"Our balance sheet allows us to withstand slowdowns in industry
activity while making growth-related investments. As at
September 30, 2023, we had cash and
short-term investments of $178.4
million and positive working capital of $221.3 million."
"We expect North American land rig counts to plateau near
current levels in the near term before beginning to steadily
increase. Oil prices have held above US$80 per barrel as supply measures and
geopolitical tensions come into greater focus. With production,
crude oil and product inventories and the inventory of drilled but
uncompleted wells ("DUCs") all below pre-pandemic levels, any
efforts to increase supply will require additional drilling
activity."
"Pason remains well equipped to deliver exceptional operational
and financial results, and to capitalize on increasing levels of
drilling activity," 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 29, 2023, to shareholders of record at
the close of business on December 15,
2023.
Third Quarter Conference
Call
Pason will be conducting a conference call for interested
analysts, brokers, investors, and media representatives to review
its 2023 third quarter results at 9:00 a.m.
(MST) on Friday, November 3, 2023. 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 009529#.
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, 2022
under the heading, "Risk and Uncertainty," in our management's
discussion and analysis for the year ended December 31, 2022, 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 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 Software, Inc. ("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.