CALGARY, AB, Aug. 9, 2021 /CNW/ - Pason Systems Inc.
(TSX: PSI) announced today its 2021 second quarter results and the
declaration of 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 six months ended June 30,
2021, as well as the Annual Information Form for the year
ended December 31, 2020. All of these
documents are available on SEDAR at www.sedar.com.
Financial Highlights
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|
2021
|
2020
|
Change
|
2021
|
2020
|
Change
|
(CDN 000s, except per
share data)
|
($)
|
($)
|
(%)
|
($)
|
($)
|
(%)
|
North American
Revenue
|
34,928
|
22,959
|
52
|
69,507
|
86,781
|
(20)
|
International
Revenue
|
7,809
|
3,038
|
157
|
14,873
|
12,287
|
21
|
Solar and Energy
Storage Revenue
|
856
|
851
|
1
|
1,768
|
1,742
|
1
|
Total
Revenue
|
43,593
|
26,848
|
62
|
86,148
|
100,810
|
(15)
|
EBITDA
(1)
|
14,984
|
4,271
|
251
|
30,657
|
37,740
|
(19)
|
Adjusted EBITDA
(1)
|
12,786
|
(848)
|
nmf
|
25,956
|
32,457
|
(20)
|
As a % of
revenue
|
29.3
|
nmf
|
nmf
|
30.1
|
32.2
|
(210) bps
|
Funds flow from
operations
|
14,662
|
134
|
10,842
|
28,392
|
26,856
|
6
|
Per share –
basic
|
0.18
|
—
|
nmf
|
0.34
|
0.32
|
6
|
Per share –
diluted
|
0.18
|
—
|
nmf
|
0.34
|
0.32
|
6
|
Cash from operating
activities
|
9,841
|
29,953
|
(67)
|
20,926
|
55,546
|
(62)
|
Capital
expenditures
|
4,520
|
799
|
466
|
6,369
|
3,887
|
64
|
Free cash flow
(1)
|
5,684
|
29,888
|
(81)
|
14,860
|
52,823
|
(72)
|
Cash dividends
declared (per share)
|
0.05
|
0.19
|
(74)
|
0.10
|
0.38
|
(74)
|
Net income
(loss)
|
4,880
|
(4,799)
|
nmf
|
8,871
|
11,753
|
(25)
|
Net income (loss)
attributable to Pason
|
5,307
|
(4,487)
|
nmf
|
9,622
|
12,432
|
(23)
|
Per share –
basic
|
0.06
|
(0.05)
|
nmf
|
0.12
|
0.15
|
(21)
|
Per share –
diluted
|
0.06
|
(0.05)
|
nmf
|
0.12
|
0.15
|
(21)
|
(1) Non-GAAP
financial measures are defined under Non-GAAP Financial Measures in
the Company's Management Discussion and Analysis.
|
As
at
|
June 30,
2021
|
December 31,
2020
|
Change
|
(CDN 000s)
|
($)
|
($)
|
(%)
|
Cash and cash
equivalents
|
135,033
|
149,282
|
(10)
|
Working
capital
|
165,010
|
167,366
|
(1)
|
Total interest
bearing debt
|
—
|
—
|
—
|
Shares outstanding
end of period
|
82,775,041
|
83,088,941
|
—
|
Pason's financial results for the three months ended
June 30, 2021 reflect the Company's strong competitive
positioning, prudent balance sheet, and operating leverage as
industry conditions continued to improve from the lows experienced
in 2020. In comparison to the second quarter of 2020, which
reflected the beginning of historically low activity levels due to
impacts of the COVID-19 pandemic, financial results in the second
quarter of 2021 have improved significantly. Although improved,
results still reflect ongoing headwinds associated with the
COVID-19 pandemic on the oil and gas industry, and on a year to
date basis, Pason's 2021 results continue to reflect the decline in
industry activity from the first quarter of 2020.
Pason generated $43.6 million in
revenue in the second quarter of 2021, a 62% increase from the
$26.8 million generated in the second
quarter of 2020 as industry activity improved significantly, and
further, the Company grew Revenue per Industry day by 13% during
the same period. The second quarter is generally the weakest
quarter due to spring break-up in Canada, however, the Company experienced a
2.4% sequential increase in revenue from the $42.6 million generated in the first quarter of
2021, as the improvement in drilling activity in other regions and
sequential growth in Revenue per Industry day muted the expected
seasonal decline in Canada.
With this increase in revenue, Pason generated $12.8 million in Adjusted EBITDA, or 29.3% of
revenue in the second quarter of 2021 compared to an $0.8 million loss in the second quarter of 2020.
While the Company incurred certain incremental expenses to support
increased levels of activity, such as equipment repairs, research
and development costs and compensation expenses, second quarter
results continue to demonstrate the Company's strong operating
leverage through improving industry conditions.
Revenue in the North American business unit was $34.9 million during the second quarter of 2021,
an increase of 52% from the comparable period in 2020, as average
North American industry days improved 37% year over year. In the
second quarter, Pason grew Revenue per Industry Day from the low
points of the downturn as the Company's competitive position and
product adoption remained strong. Year over year, North American
Revenue per Industry Day increased 13% to $728 from the comparable period in 2020,
primarily due to an increase in North American market share,
geographical mix, and further reflects the challenging pricing
environment experienced in the second quarter of 2020.
Sequentially, growth in Revenue per Industry day from $720 in the first quarter to $728 in the second quarter, and steadily
improving industry activity in the United
States resulted in a 1% increase in revenue quarter over
quarter.
The International business unit reported revenue of $7.8 million in the second quarter of 2021
compared to $3.0 million in the
comparative period of 2020. The second quarter of 2020
represented the beginning of historical low levels of global
drilling activity as the impacts of the COVID-19 pandemic caused
operators in many international regions to suspend drilling
operations. Since then, international industry activity has
improved, and Pason has defended its leading competitive position
in Latin America and Australia. Sequentially, the International
business unit reported an 11% increase compared to revenue of
$7.1 million in the first quarter of
2021, which represents continued improvements in drilling activity
in Pason's international end markets, particularly Argentina, as impacts of the COVID-19 pandemic
continued to ease.
Revenue generated by the Solar and Energy Storage business unit
was $0.9 million in both the second
quarter of 2021 and the 2020 comparative period, for which the
majority is comprised of subscription- based software licenses for
the Company's solar energy planning tools.
In the second quarter, Pason recognized $3.0 million in government wage assistance,
primarily related to the Canada
Emergency Wage Subsidy (CEWS) (Q2 2020: $4.4
million). The Company has excluded this benefit in its
calculation of Adjusted EBITDA. In July of 2021, the Government of
Canada announced the extension of
the CEWS program to the end of October
2021. The Company intends to participate through the
duration of this program extension as applicable.
The Company recorded net income attributable to Pason of
$5.3 million ($0.06 per share) in the second quarter of 2021
compared to a net loss attributable to Pason of $4.5 million ($0.05
per share) recorded in the corresponding period in 2020. The year
over year increase is due to the factors outlined above.
Pason's balance sheet remains strong with no interest bearing
debt and $135.0 million in cash and
cash equivalents as at June 30, 2021
(December 31, 2020: $149.3 million). Pason generated $14.7 million in funds flow from operations in
the second quarter (Q2 2020: $0.1
million), which was partially used for investments in
working capital to meet improving industry activity levels,
resulting in cash generated from operating activities of
$9.8 million (Q2 2020: $30.0 million). In contrast, the Company
experienced a significant working capital release in the second
quarter of 2020 given the steep decline in activity levels
experienced.
Pason's capital expenditures increased to $4.5 million during the second quarter of 2021
from $0.8 million in the second
quarter of 2020, which represented a quarter where capital
expenditure programs were halted given the existing uncertainty
around industry conditions at the time. Capital expenditures in the
current quarter are comprised primarily of rental equipment to meet
activity levels, and also a $1.5
million purchase of equipment and technology from a contract
manufacturer wishing to divest a portion of its business. Resulting
Free Cash Flow for the second quarter was $5.7 million (Q2 2020: $30.0 million).
During the second quarter, Pason repurchased and cancelled
313,900 shares for total cash consideration of $3.0 million (Q2 2020: 50,000 shares for
$0.3 million). The Company also
declared and paid a quarterly dividend of $0.05 per share in the second quarter for a total
of $4.2 million (Q2 2020:
$0.19 per share for a total of
$16.0 million).
Additionally, in the second quarter, the Company increased its
minority investment in Intelligent Wellhead Systems Inc. (IWS) and
acquired a portion of outstanding common shares for total cash
consideration of $7.1 million. IWS is
a privately-owned oil and gas technology and service company that
provides engineered controls, data acquisition, and software to
automate workflows and processes at live well operations in the
completions segment of the oil and gas industry. The Company's
initial minority investment was made in 2019, and consisted of
total consideration of $25.0 million.
The investment consisted of initial cash consideration of
$10.0 million and $15.0 million payable in three separate
$5.0 million put options, exercisable
at IWS' discretion for a period of up to three years. The first
$5.0 million put obligation was
exercised in the third quarter of 2020, while the second was
exercised during the second quarter of 2021 to fund IWS' recent
growth.
President's Message
Pason's President and Chief Executive Officer Jon Faber stated:
"The second quarter of 2021 marks
the first time in which the prior year comparator reflects the full
effects of the COVID-19 global pandemic. Comparing results of a
year ago to those of this quarter provides a sense of how the
industry landscape has improved. North American land drilling
activity increased by 37% from the second quarter of 2020. The
increase in industry activity in North
America and international markets, coupled with a
strengthened competitive position, drove a 62% year over year
increase in consolidated revenue to $43.6
million. The investments we made through the downturn to
protect and grow our technology and service capabilities are
delivering value. Revenue per Industry Day in North America grew by 13% from the second
quarter of 2020, reflecting an expansion in market share, strong
product adoption and a more favourable pricing environment.
Increased industry activity in our international markets helped
drive 157% year over year growth in revenue in our International
business unit."
"Adjusted EBITDA of $12.8 million
compared to an Adjusted EBITDA loss of $0.8
million in the prior year. The fixed nature of a significant
portion of our operating cost base continues to deliver strong
earnings as revenue increases. Compared to the second quarter of
2020, Adjusted EBITDA increased by 81
cents for every dollar of increased revenue. We expect
incremental margins will be strong as the industry continues to
recover; however, we look to strike the right balance between
effective cost management and ensuring we have the capabilities in
place to fully participate in the recovery. As a result, we
anticipate certain operating costs, notably product repairs and
staffing, will continue to increase in the coming quarters in
anticipation of future activity levels. Further, the current
challenges facing all industries around supply chain disruptions
and prevailing rates of inflation will likely put some pressure on
margins, at least in the short term."
"We will continue to make the necessary capital investments to
support increasing activity and product enhancements. Free cash
flow of $5.7 million in the second
quarter reflected increased investments in capital expenditures and
working capital. Net income attributable to Pason for the quarter
was $5.3 million or $0.06 per share."
"Our balance sheet remains strong. We ended the second quarter
with $135 million of cash and cash
equivalents and $165 million of
positive working capital."
"We are maintaining a balanced approach to capital allocation –
making growth-focused investments in the drilling-related business,
establishing additional sources of revenue not directly tied to
North American land drilling for longer term growth, and returning
capital to shareholders. Capital expenditures in the second quarter
totaled $4.5 million and we expect to
spend up to $15 million in capital
expenditures in 2021. Also in the second quarter, Intelligent
Wellhead Systems (IWS) exercised one of the two remaining
$5 million put options for growth
capital, and we also increased our minority ownership stake in the
business by acquiring a portion of the outstanding common shares
for $7.1 million. We continue to be
impressed by IWS' technology and trajectory of product adoption,
and we are optimistic about the medium-term outlook for the
business. We returned $7.2 million to
shareholders through a combination of dividends and share
repurchases in the quarter and are maintaining our quarterly
dividend at $0.05 per share."
"Energy Toolbase (ETB), our subsidiary in the solar and energy
storage markets, made continued progress in the second quarter.
Subscriptions for our leading economic analysis and proposal
generation software package remain strong, and the team delivered a
significant release of the next generation of the tool in the
quarter. The pipeline of new opportunities and bookings for our
energy storage control system continues to grow. We remain focused
on developing and commercializing an integrated platform to enable
the modeling, control and monitoring of energy storage
systems."
"Our outlook for growth continues to improve. While North
American land drilling activity has more than doubled since
bottoming in June 2020, activity
levels remain significantly lower than pre-pandemic levels. In
August 2019, there were over 1,000
active land drilling rigs in North
America, compared to 625 today. At the same time, global oil
demand currently sits at 97% of its August
2019 levels and leading supply indicators are constructive.
WTI oil prices have recently traded above US$70 per barrel for the first time since
October 2018. US land production is
approximately 10% lower than August
2019 and the inventory of drilled but uncompleted wells
(DUCs) in the US has been reduced by more than 20% over the same
timeframe. While uncertainty still weighs on oil markets due to
potential demand implications from COVID-19 variants and supply
questions around OPEC+ production levels and compliance, industry
analysts continue to expect the US land rig count to grow from 475
rigs today and exit 2021 at approximately 500 rigs and to push
toward 600 rigs in 2022. At over 150 rigs, the Canadian land rig
count is more than 10% higher than in August
2019 and is also expected to grow further through 2022."
"Pason is well positioned to participate in the continued growth
of the drilling industry. Our data and technology solutions
continue to be aligned with customers' efforts to increasingly
utilize automation and analytics to improve drilling performance
and are supported by unmatched service quality," concluded Mr.
Faber.
Quarterly Dividend
Pason announced today that the Board of Directors have declared
a quarterly dividend of five cents
(C$0.05) per share on the company's
common shares. The dividend will be paid on September 29, 2021, to shareholders of record at
the close of business on September 15,
2021.
Pursuant to the Canadian Income Tax Act, dividends paid by the
Company to Canadian residents are considered to be "eligible"
dividends.
Second Quarter Conference Call
Pason will be conducting a conference call for interested
analysts, brokers, investors, and media representatives to review
its 2021 second quarter results at 9:00 a.m.
(MDT) on Wednesday, August 11th, 2021. The
conference call dial-in number is 1-888-664-6383 or 1-416-764-8650.
You can access the fourteen-day replay by dialing 1-888-390-0541 or
1-416-764-8677, using password 846427#.
An archived audio webcast of the conference call will also be
available on Pason's website at www.pason.com.
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 under
the heading, "Risk and Uncertainty", in our management's discussion
and analysis for the year ended December 31,
2020 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 Energy
Toolbase (ETB), the Company also provides products and services for
the solar power and energy storage industry. ETB's solutions enable
solar and energy storage developers to model, control and measure
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.