CALGARY, April 30, 2020 /CNW/ - Pason Systems Inc. (TSX:PSI) announced today its 2020 first quarter results.
Performance Data
Three Months Ended March 31, |
2020 |
2019 |
Change |
|
(CDN 000s, except per share data) (unaudited) |
($) |
($) |
(%) |
|
Revenue |
73,962 |
82,143 |
(10) |
|
EBITDA (1,2) |
33,469 |
40,435 |
(17) |
|
Adjusted EBITDA (1.2) |
33,305 |
40,799 |
(18) |
|
As a % of revenue |
45.0 |
49.7 |
(470) bps |
|
Funds flow from operations |
26,722 |
35,899 |
(26) |
|
Per share – basic |
0.32 |
0.42 |
(24) |
|
Per share – diluted |
0.32 |
0.42 |
(24) |
|
Cash from operating activities |
25,593 |
8,442 |
203 |
|
Capital expenditures |
3,088 |
10,317 |
(70) |
|
Free cash flow (1) |
22,935 |
385 |
n/a |
|
Cash dividends declared |
0.19 |
0.18 |
6 |
|
Net income |
16,552 |
19,044 |
(13) |
|
Net income attributable to Pason |
16,919 |
19,044 |
(11) |
|
Per share – basic |
0.20 |
0.22 |
(10) |
|
Per share – diluted |
0.20 |
0.22 |
(10) |
|
Total interest bearing debt |
— |
— |
— |
|
Shares outstanding end of period (#000's) |
84,096 |
85,801 |
(2) |
(1) |
Non-IFRS financial measures are defined in the Management's Discussion and Analysis section. |
(2) |
Prior period amounts have been restated to conform with current year's presentation. |
Q1 2020 vs Q1 2019
The Company generated consolidated revenue of $74.0 million in the first quarter of 2020, a decrease of 10% from the corresponding period in 2019. The decrease is attributable to a drop in US industry activity, offset by an increased market share in the US business unit.
Adjusted EBITDA decreased to $33.3 million in the first quarter, a decrease of 18% from the corresponding period in 2019. The decrease in adjusted EBITDA was driven by the decrease in gross profit in the US business unit, partially offset by an increase in gross profit in the Canadian business unit.
Funds flow from operations was $26.7 million in the first quarter, a decrease of 26% from the corresponding period in 2019.
Cash from operating activities was $25.6 million in the first quarter of 2020, an increase of $17.2 million from the corresponding period in 2019. In 2019, the Company made a $15.3 million withholding tax payment to the CRA.
Free cash flow was $22.9 million in the first quarter of 2020, compared to $0.4 million from the corresponding period in 2019. In 2019, free cash flow was negatively affected by the operating activities described above and higher capital expenditures in the US business unit.
The Company recorded net income attributable to Pason of $16.9 million ($0.20 per share) in the first quarter of 2020 compared to net income attributable to Pason of $19.0 million ($0.22 per share) recorded in the corresponding period in 2019. The drop in US industry activity, combined with the Company's fixed cost structure, led to a drop in net income. These factors were offset by lower stock-based compensation expense in the first quarter of 2020 relative to the corresponding period in 2019.
President's Message
The first quarter of 2020 started relatively strong, when the unprecedented impact of COVID-19 on global oil demand was not yet clear. As the global economy was shutting down, a disagreement between Russia and Saudi Arabia over proposed production cuts led to an increase in supply at the worst possible time and a collapse of oil prices. The result was that the end of the first quarter 2020 became anemic for the industry.
Accordingly, Pason's operating environment deteriorated in the period with drilling industry activity decreasing by 25% in the United States compared to the same period in 2019. This headwind was partially offset by 7% higher industry activity in Canada, market share gains in the United States, and continued growth in product penetration in all geographies. Revenue per EDR Day for the quarter increased in both the United States and Canada.
Pason generated revenue of $74.0 million in the period, a decrease of 10% compared to the same quarter of last year. Adjusted EBITDA was $33.3 million for the quarter, a decrease of 18%. Adjusted EBITDA as a percentage of revenue was 45% compared to 50% one year ago, highlighting our largely fixed cost structure. Net income attributable to Pason for the quarter was $16.9 million ($0.20 per share), down from $19.0 million ($0.22 per share) in the first quarter of 2019. Capital expenditures for the quarter were $3.0 million and free cash flow was $22.9 million. At March 31, 2020, our working capital position stood at $208 million, including cash and short-term investments of $170 million.
The Company and its Board of Directors are actively assessing an optimal cost structure and capital allocation strategy, including the levels of future dividends, in order to balance the Company's commitment to shareholder returns while preserving its financial strength. Pason will maintain the quarterly dividend to be paid on June 29, 2020 at $0.19 per share and in light of the uncertainties related to COVID-19 and the significant negative impact that a weakened commodity price environment have on the outlook for industry activity, we currently intend to reduce the next quarterly dividend, expected to be declared following the second quarter, to $0.05 per share.
Pason recognizes the uncertainties and concerns caused by the COVID-19 pandemic. The Company is considered an "essential critical infrastructure" company in the United States and an "essential service" in Canada. As such, we continue to support drilling operations and technology solutions, providing valuable services to our customers in support of the global energy infrastructure. The health and safety of all Pason stakeholders - our employees, customers, and vendors, remain a top priority for us. Accordingly, Pason has implemented additional policies and procedures to protect the well-being of our stakeholders. To minimize the impact of COVID-19 on our ongoing operations, we began working remotely where possible since March 16th. We are proud of how our people have responded in these challenging times.
Pason will continue to make operationally sound and fiscally conservative decisions to support our long-term success. In light of the uncertainties related to the outlook for industry activity, Pason has reassessed its cost structure, as well as capital expenditures, for the remainder of 2020. We intend to make reductions to operating and other expenses during the second quarter while retaining key capabilities, people and relationships to strengthen our competitive position for the future. We now intend to spend approximately $10 million in capital expenditures in 2020, which includes the capitalized portion of R&D, down from $25 million announced at the beginning of the year.
Going forward, we will allocate capital to safeguard the long-term prospects of Pason's core drilling-related business and of Energy Toolbase, our foothold in the solar and energy storage market.
The energy world has been upended by the two 2020 oil black swans - a demand collapse and a supply surge. Survival has become the primary focus of many E&P and oilfield service companies. Significantly reduced cash flows for every company in the industry, including Pason, are unavoidable in the short term. However, this environment also provides an opportunity for the strongest companies, such as Pason, to become even stronger by leapfrogging competition in terms of technology and service, and opportunities may emerge to acquire high-quality assets and business lines. As the macro environment for oil corrects over the next 18 to 24 months, the focus will again shift to the long-term future.
Pason will survive and we are confident that we will make it through this much better and stronger than our competitors and peers.
(signed)
Marcel Kessler
President and Chief Executive Officer
April 30, 2020
Management's Discussion and Analysis
The following discussion and analysis has been prepared by management as of April 30, 2020, and is a review of the financial condition and results of operations of Pason Systems Inc. (Pason or the Company) based on International Financial Reporting Standards (IFRS) and should be read in conjunction with the Consolidated Financial Statements and accompanying notes.
Certain information regarding the Company contained herein may constitute forward-looking statements under applicable securities laws. Such statements are subject to known or unknown risks and uncertainties that may cause actual results to differ materially from those anticipated or implied in the forward-looking statements.
All financial measures presented in this report are expressed in Canadian dollars unless otherwise indicated.
Impact of Hyperinflation
In 2018, the Company concluded that its Argentinian subsidiary is operating in a hyperinflationary economy. This conclusion impacts the application of two accounting standards, IAS 21, The Effects of Changes in Foreign Exchange, and IAS 29, Financial Reporting in Hyperinflationary Economies.
The impact of applying IAS 21 to the operating results of Argentina subsidiary for the first quarter of 2020 was to increase revenue by $93 and reduce segment gross profit by $106. The impact of applying IAS 29 to the non-monetary assets and liabilities, and shareholders' equity of the Argentina subsidiary was to record a non-cash net monetary adjustment of $419 for the three months ended March 31, 2020. The impact of applying these two standards on the comparative period in 2019 was not material.
Impact on IFRS Measures
Three Months Ended March 31, |
2020 |
|
(000s) (unaudited) |
($) |
|
Increase in revenue |
93 |
|
(Increase) in rental services and local administration expenses |
(55) |
|
(Increase) in depreciation expense |
(144) |
|
(Decrease) in segment gross profit |
(106) |
|
Net monetary gain presented in other expenses |
419 |
|
Increase in other expenses |
(11) |
|
(Increase) in income tax expenses |
(12) |
|
Increase in net income |
290 |
Impact on Non-IFRS Measures
Three Months Ended March 31, |
2020 |
|
(000s) (unaudited) |
($) |
|
Increase in revenue |
93 |
|
(Increase) in rental services and local administration expenses |
(55) |
|
Net monetary gain presented in other expenses |
419 |
|
Increase in other expenses |
(11) |
|
Increase in EBITDA |
446 |
|
(Elimination) of net monetary gain presented in other expenses |
(419) |
|
(Elimination) of other expenses |
11 |
|
Increase in Adjusted EBITDA |
38 |
Additional IFRS Measures
In its Consolidated Financial Statements, the Company uses certain additional IFRS measures. Management believes these measures provide useful supplemental information to readers.
Funds flow from operations
Management believes that funds flow from operations, as reported in the Consolidated Statements of Cash Flows, is a useful additional measure as it represents the cash generated during the period, regardless of the timing of collection of receivables and payment of payables. Funds flow from operations represents the cash flow from continuing operations, excluding non-cash items. Funds flow from operations is defined as net income adjusted for depreciation and amortization expense, non-cash, stock-based compensation expense, deferred taxes, and other non-cash items impacting operations.
Cash from operating activities
Cash from operating activities is defined as funds flow from operations adjusted for changes in working capital items.
Non-IFRS Financial Measures
These definitions are not recognized measures under IFRS, and accordingly, may not be comparable to measures used by other companies. These Non-IFRS measures provide readers with additional information regarding the Company's ability to generate funds to finance its operations, fund its research and development and capital expenditure program, and pay dividends.
Revenue per EDR day
Revenue per EDR day is defined as the daily revenue generated from all products that the Company has on rent on a drilling rig that has the Company's base EDR installed. This metric provides a key measure on the Company's ability to increase production adoption and evaluate product pricing.
EBITDA
EBITDA is defined as net income before interest income and expense, income taxes, stock-based compensation expense, depreciation and amortization expense, and gains on disposal of investments.
Adjusted EBITDA
Adjusted EBITDA is defined as EBITDA, adjusted for foreign exchange, impairment of property, plant, and equipment, restructuring costs, net monetary adjustments, and other items which the Company does not consider to be in the normal course of continuing operations.
Management believes that EBITDA and Adjusted EBITDA are useful supplemental measures as they provide an indication of the results generated by the Company's principal business activities prior to the consideration of how these results are taxed in multiple jurisdictions, how the results are impacted by foreign exchange or how the results are impacted by the Company's accounting policies for equity-based compensation plans.
Free cash flow
Free cash flow is defined as cash from operating activities plus proceeds on disposal of property, plant, and equipment, less capital expenditures (including changes to non-cash working capital associated with capital expenditures), and deferred development costs. This metric provides a key measure on the Company's ability to generate cash from its principal business activities after funding the capital expenditure program, and provides an indication of the amount of cash available to finance, among other items, the Company's dividend and other investment opportunities.
Overall Performance
Three Months Ended March 31, |
2020 |
2019 |
Change |
|
(000s) (unaudited) |
($) |
($) |
(%) |
|
Revenue |
||||
Drilling Data |
38,671 |
43,253 |
(11) |
|
Mud Management and Safety |
21,397 |
23,674 |
(10) |
|
Communications |
5,078 |
5,957 |
(15) |
|
Drilling Intelligence |
5,395 |
5,973 |
(10) |
|
Analytics and Other |
3,421 |
3,286 |
4 |
|
Total revenue |
73,962 |
82,143 |
(10) |
The Pason Electronic Drilling Recorder (EDR) remains the Company's primary product. The EDR provides a complete system of drilling data acquisition, data networking, and drilling management tools and reports at both the wellsite and at customer offices. The EDR is the base product from which all other wellsite instrumentation products are linked. By linking these products, a number of otherwise redundant elements such as data processing, display, storage, and networking are eliminated. This ensures greater reliability and a more robust system of instrumentation for the customer.
For the first quarter of 2020, industry activity in the US market decreased by 25% in the first quarter of 2020 compared to the corresponding period in 2019. The US business unit experienced a decline in drilling activity as producers reduced capital spending. For the first quarter of 2020, industry activity in the Canadian market increased by 7% compared to the corresponding period in 2019.
Total revenue decreased by 10% in the first quarter of 2020 compared to the corresponding period in 2019 as a result of a decrease in drilling activity in the US business unit.
Analytics and other revenue increased by 4% in the first quarter of 2020 compared to the corresponding period in 2019 predominantly as a result of the revenue generated from the acquisition of Energy Toolbase Software Inc.
US EDR days decreased by 22% in the first quarter of 2020 compared to the corresponding period in 2019, while Canadian EDR days, which includes non-oil and gas-related activity, remained constant from 2019 levels.
In the first quarter of 2020, the Pason EDR was installed on 64% of the land rigs in the US market, an increase of 300bps over the same period in 2019.
In the first quarter of 2020, the Pason EDR was installed on 89% of the land rigs in the Canadian market, a decrease of 500bps over the same period in 2019. In calculating market share, the Company uses the number of EDR days billed and oil and gas drilling days as reported by accepted industry sources.
Discussion of Operations
United States Operations
Three Months Ended March 31, |
2020 |
2019 |
Change |
|
(000s) (unaudited) |
($) |
($) |
(%) |
|
Revenue |
||||
Drilling Data |
24,710 |
29,176 |
(15) |
|
Mud Management and Safety |
14,083 |
17,217 |
(18) |
|
Communications |
2,274 |
3,229 |
(30) |
|
Drilling Intelligence |
2,117 |
3,152 |
(33) |
|
Analytics and Other |
1,803 |
1,691 |
7 |
|
Total revenue |
44,987 |
54,465 |
(17) |
|
Rental services and local administration |
18,052 |
19,090 |
(5) |
|
Depreciation and amortization |
4,579 |
4,774 |
(4) |
|
Segment gross profit |
22,356 |
30,601 |
(27) |
|
Three Months Ended March 31, |
2020 |
2019 |
Change |
|
(unaudited) |
(#) |
(#) |
(%) |
|
Electronic Drilling Recorder (EDR) Rental Days |
43,700 |
55,700 |
(22) |
|
Three Months Ended March 31, |
2020 |
2019 |
Change |
|
(unaudited) |
($) |
($) |
(%) |
|
Revenue per EDR day - USD |
750 |
728 |
3 |
|
Revenue per EDR day - CAD |
1,008 |
968 |
4 |
Revenue from the US operations decreased by 17% in the first quarter of 2020 over the 2019 comparable period (19% when measured in USD).
Analytics and other revenue increased 7% in the first quarter of 2020 over the 2019 comparable period predominantly as a result of the revenue generated from the Energy Toolbase Software Inc. acquisition in the third quarter of 2019.
Industry activity in the US market decreased by 25% in the first quarter of 2020 over the 2019 comparable period. Active rig count declined in most major plays.
US market share was 64% for the first quarter of 2020 compared to 61% during the same period in 2019.
EDR rental days decreased by 22% in the first quarter of 2020 over the 2019 comparable period. Revenue per EDR day increased to US$750 in the first quarter of 2020, an increase of US$22 over the same period in 2019. The increase in revenue per EDR day is due to increased adoption of certain products.
Rental services and local administration decreased by 5% in the first quarter of 2020 over the 2019 comparative period. The decrease in operating costs is attributable to the Company managing field and office staff levels to support the current level of activity. Included in the US business segment are the results of Energy Toolbase Software Inc.
Canadian Operations
Three Months Ended March 31, |
2020 |
2019 |
Change |
|
(000s) (unaudited) |
($) |
($) |
(%) |
|
Revenue |
||||
Drilling Data |
8,457 |
8,092 |
5 |
|
Mud Management and Safety |
5,081 |
4,683 |
8 |
|
Communications |
2,355 |
2,292 |
3 |
|
Drilling Intelligence |
2,977 |
2,490 |
20 |
|
Analytics and Other |
856 |
956 |
(10) |
|
Total revenue |
19,726 |
18,513 |
7 |
|
Rental services and local administration |
5,819 |
5,709 |
2 |
|
Depreciation and amortization |
4,796 |
4,555 |
5 |
|
Segment gross profit |
9,111 |
8,249 |
10 |
|
Three Months Ended March 31, |
2020 |
2019 |
Change |
|
(unaudited) |
(#) |
(#) |
(%) |
|
Electronic Drilling Recorder (EDR) Rental Days |
15,500 |
15,500 |
— |
|
Three Months Ended March 31, |
2020 |
2019 |
Change |
|
(unaudited) |
($) |
($) |
(%) |
|
Revenue per EDR day - CAD |
1,226 |
1,142 |
7 |
Canadian drilling activity in the first quarter of 2020 increased by 7% relative to the same period in 2019, while EDR rental days remained static.
Revenue in the Canadian business unit increased by 7% in the first quarter of 2020 over the 2019 comparative period.
Drilling intelligence revenue increased 20% in the first quarter of 2020 over the 2019 comparative period due to the continued adoption of drilling intelligence products.
Canadian market share was 89% for the first quarter of 2020 relative to 94% in the comparative period in 2019.
Revenue per EDR day increased by $84 to $1,226 during the first quarter of 2020 over the 2019 comparative period. The increase is driven by increased usage of drilling intelligence products.
Depreciation and amortization expense increased by 5% in the first quarter of 2020 over the 2019 comparative period. The increase is due to the Company initiating the amortization of previously deferred research and development projects.
Segment gross profit for the first quarter of 2020 increased by 10% to $9.1 million relative to $8.2 million in segment gross profit in the 2019 comparative period.
International Operations
Three Months Ended March 31, |
2020 |
2019 |
Change |
|
(000s) (unaudited) |
($) |
($) |
(%) |
|
Revenue |
||||
Drilling Data |
5,504 |
5,985 |
(8) |
|
Mud Management and Safety |
2,233 |
1,774 |
26 |
|
Communications |
449 |
436 |
3 |
|
Drilling Intelligence |
301 |
331 |
(9) |
|
Analytics and Other |
762 |
639 |
19 |
|
Total revenue |
9,249 |
9,165 |
1 |
|
Rental services and local administration |
5,283 |
5,306 |
— |
|
Depreciation and amortization |
1,039 |
893 |
16 |
|
Segment gross profit |
2,927 |
2,966 |
(1) |
Revenue in the International business unit increased by 1% in the first quarter of 2020 compared to the same period in 2019. Activity levels in all of the Company's major international markets remained stable in the first quarter of 2020 over the 2019 comparative period.
Depreciation expense increased by 16% in the first quarter of 2020 compared to the same period in 2019 due to hyperinflation accounting.
Segment gross profit was $2.9 million for the first quarter of 2020, an decrease of 1% compared to the same period in 2019.
Corporate Expenses
Three Months Ended March 31, |
2020 |
2019 |
Change |
|
(000s) (unaudited) |
($) |
($) |
(%) |
|
Other expenses |
||||
Research and development |
8,062 |
7,744 |
4 |
|
Corporate services |
3,685 |
3,653 |
1 |
|
Stock-based compensation |
(122) |
3,824 |
— |
|
Other |
||||
Foreign exchange loss |
(47) |
101 |
— |
|
Net interest expense - lease liability |
178 |
137 |
30 |
|
Interest income - short term investments |
(576) |
(185) |
211 |
|
Net monetary gain |
(419) |
— |
— |
|
Equity income |
(244) |
(158) |
54 |
|
Other |
302 |
263 |
15 |
|
Total corporate expenses |
10,819 |
15,379 |
(30) |
Net monetary gain is as a result of applying hyperinflation accounting to the Company's Argentinian subsidiary.
Stock-based compensation was a recovery in the first quarter of 2020 due to the decrease in the Company's stock price.
Q1 2020 vs Q4 2019
Consolidated revenue was $74.0 million in the first quarter of 2020 compared to $68.4 million in the fourth quarter of 2019, an increase of $5.6 million.
Revenue in the US business unit was $45.0 million in the first quarter of 2020 compared to $44.2 million in the fourth quarter of 2019. The increase is attributable to a 200bps increase in market share and the weakening of the Canadian dollar.
Revenue in the Canadian business unit was $19.7 million in the first quarter of 2020 compared to $14.2 million in the fourth quarter of 2019. The increase is attributable an increase in market share and industry activity.
The International business unit reported revenue of $9.2 million in the first quarter of 2020 compared to $10.0 million in the fourth quarter of 2019. The decrease is attributable to a general decrease in industry activity.
Adjusted EBITDA, which adjusts EBITDA for foreign exchange and certain non-recurring charges, was $33.3 million in the first quarter of 2020 compared to $26.6 million in the fourth quarter of 2019. The increase in this financial metric was mostly attributable to the increase in segment gross profit of the Canadian business unit of $4.6 million.
Funds flow from operations was $26.7 million in the first quarter of 2020 compared to $22.1 million in the fourth quarter of 2019.
Stock-based compensation was a recovery of $0.1 million in the first quarter of 2020 compared to an expense of $1.5 million in the fourth quarter of 2019.
The Company recorded net income attributable to Pason in the first quarter of 2020 of $16.9 million ($0.20 per share) compared to net income attributable to Pason of $10.4 million ($0.12 per share) in the fourth quarter of 2019. The increase is mostly attributable to the increase in segment gross profit of the Canadian business unit and the decrease in stock-based compensation.
Condensed Consolidated Interim Balance Sheets
As at |
March 31, 2020 |
December 31, 2019 |
(CDN 000s) (unaudited) |
($) |
($) |
Assets |
||
Current |
||
Cash and cash equivalents |
170,330 |
161,016 |
Trade and other receivables |
63,133 |
59,716 |
Income taxes recoverable - other |
15,304 |
15,304 |
Prepaid expenses |
2,645 |
3,621 |
Income taxes recoverable |
— |
2,382 |
Total current assets |
251,412 |
242,039 |
Non-current |
||
Property, plant and equipment |
120,201 |
118,522 |
Investments |
26,510 |
26,265 |
Intangible assets and goodwill |
52,099 |
51,015 |
Total non-current assets |
198,810 |
195,802 |
Total assets |
450,222 |
437,841 |
Liabilities and equity |
||
Current |
||
Trade payables and accruals |
22,768 |
34,420 |
Income taxes payable |
5,556 |
3,133 |
Stock-based compensation liability |
2,257 |
2,442 |
Lease liability |
3,301 |
3,275 |
Investment - put option |
10,000 |
15,000 |
Total current liabilities |
43,882 |
58,270 |
Non-current |
||
Deferred tax liabilities |
8,983 |
8,566 |
Lease liability |
11,355 |
11,532 |
Stock-based compensation liability |
2,882 |
3,479 |
Obligation under put option |
10,420 |
9,540 |
Total non-current liabilities |
33,640 |
33,117 |
Equity |
||
Share capital |
166,612 |
166,701 |
Share-based benefits reserve |
31,515 |
30,863 |
Foreign currency translation reserve |
81,758 |
57,830 |
Equity reserve |
(8,375) |
(8,375) |
Retained earnings |
101,968 |
99,806 |
Total equity attributable to equity holders of the Company |
373,478 |
346,825 |
Non-controlling interest |
(778) |
(371) |
Total equity |
372,700 |
346,454 |
Total liabilities and equity |
450,222 |
437,841 |
Condensed Consolidated Interim Statements of Operations
Three Months Ended March 31, |
2020 |
2019 |
|||
(CDN 000s, except per share data) (unaudited) |
($) |
($) |
|||
Revenue |
73,962 |
82,143 |
|||
Operating expenses |
|||||
Rental services |
24,781 |
26,794 |
|||
Local administration |
4,373 |
3,311 |
|||
Depreciation and amortization |
10,414 |
10,222 |
|||
39,568 |
40,327 |
||||
Gross profit |
34,394 |
41,816 |
|||
Other expenses |
|||||
Research and development |
8,062 |
7,744 |
|||
Corporate services |
3,685 |
3,653 |
|||
Stock-based compensation (recovery) expense |
(122) |
3,824 |
|||
Other expense |
(806) |
158 |
|||
10,819 |
15,379 |
||||
Income before income taxes |
23,575 |
26,437 |
|||
Income tax provision |
7,023 |
7,393 |
|||
Net income |
16,552 |
19,044 |
|||
Net income attributable to: |
|||||
Shareholders of Pason |
16,919 |
19,044 |
|||
Non-controlling interest |
(367) |
— |
|||
Net income |
16,552 |
19,044 |
|||
Income per share |
|||||
Basic |
0.20 |
0.22 |
|||
Diluted |
0.20 |
0.22 |
Condensed Consolidated Interim Statements of Other Comprehensive Income
Three Months Ended March 31, |
2020 |
2019 |
|
(CDN 000s) (unaudited) |
($) |
($) |
|
Net income |
16,552 |
19,044 |
|
Items that may be reclassified subsequently to net income: |
|||
Tax recovery on net investment in foreign operations related |
|||
to an inter-company financing |
— |
791 |
|
Foreign currency translation adjustment |
23,888 |
(7,526) |
|
Other comprehensive gain (loss) |
23,888 |
(6,735) |
|
Total comprehensive income |
40,440 |
12,309 |
|
Total comprehensive income (loss) attributed to: |
|||
Shareholders of Pason |
40,847 |
12,309 |
|
Non-controlling interest |
(407) |
— |
|
40,440 |
12,309 |
Condensed Consolidated Interim Statements of Cash Flows
Three Months Ended March 31, |
2020 |
2019 |
|
(CDN 000s) (unaudited) |
($) |
($) |
|
Cash from (used in) operating activities |
|||
Net income |
16,552 |
19,044 |
|
Adjustment for non-cash items: |
|||
Depreciation and amortization |
10,414 |
10,222 |
|
Stock-based compensation |
(122) |
3,824 |
|
Deferred income taxes |
7 |
2,775 |
|
Hyperinflationary adjustment |
(444) |
— |
|
Unrealized foreign exchange loss and other |
315 |
34 |
|
Funds flow from operations |
26,722 |
35,899 |
|
Movements in non-cash working capital items: |
|||
(Increase) in trade and other receivables |
(360) |
(9,254) |
|
Decrease in prepaid expenses |
1,099 |
279 |
|
Increase in income taxes |
6,631 |
3,525 |
|
(Decrease) in trade payables, accruals and stock-based |
|||
compensation liability |
(7,463) |
(6,998) |
|
Effects of exchange rate changes |
497 |
(73) |
|
Cash generated from operating activities |
27,126 |
23,378 |
|
Income tax paid |
(1,533) |
(14,936) |
|
Net cash from operating activities |
25,593 |
8,442 |
|
Cash flows from (used in) financing activities |
|||
Proceeds from issuance of common shares |
— |
2,013 |
|
Payment of dividends |
(16,026) |
(15,439) |
|
Repurchase and cancellation of shares under NCIB |
(3,820) |
(2,022) |
|
Repayment of lease liability |
(585) |
(671) |
|
Net cash used in financing activities |
(20,431) |
(16,119) |
|
Cash flows (used in) from investing activities |
|||
Payment on investment - put option |
(5,000) |
— |
|
Additions to property, plant and equipment |
(2,666) |
(9,749) |
|
Development costs |
(422) |
(568) |
|
Proceeds on disposal of investment and property, plant and equipment |
414 |
110 |
|
Changes in non-cash working capital |
16 |
2,150 |
|
Net cash used in investing activities |
(7,658) |
(8,057) |
|
Effect of exchange rate on cash and cash equivalents |
11,810 |
(4,173) |
|
Net increase (decrease) in cash and cash equivalents |
9,314 |
(19,907) |
|
Cash and cash equivalents, beginning of period |
161,016 |
203,838 |
|
Cash and cash equivalents, end of period |
170,330 |
183,931 |
Operating Segments
The Company operates in three geographic segments: Canada, the United States, and International (Latin America, Offshore, the Eastern Hemisphere, and the Middle East). The following table represents a disaggregation of revenue from contracts with customers along with the reportable segment for each category:
Three Months Ended March 31, 2020 |
Canada |
United States |
International |
Total |
|
(CDN 000s) (unaudited) |
($) |
($) |
($) |
($) |
|
Revenue |
|||||
Drilling Data |
8,457 |
24,710 |
5,504 |
38,671 |
|
Mud Management and Safety |
5,081 |
14,083 |
2,233 |
21,397 |
|
Communications |
2,355 |
2,274 |
449 |
5,078 |
|
Drilling Intelligence |
2,977 |
2,117 |
301 |
5,395 |
|
Analytics and Other |
856 |
1,803 |
762 |
3,421 |
|
Total Revenue |
19,726 |
44,987 |
9,249 |
73,962 |
|
Rental services and local administration |
5,819 |
18,052 |
5,283 |
29,154 |
|
Depreciation and amortization |
4,796 |
4,579 |
1,039 |
10,414 |
|
Segment gross profit |
9,111 |
22,356 |
2,927 |
34,394 |
|
Research and development |
8,062 |
||||
Corporate services |
3,685 |
||||
Stock-based compensation |
(122) |
||||
Other expense |
(806) |
||||
Income tax expense |
7,023 |
||||
Net income |
16,552 |
||||
Net income attributable to Pason |
16,919 |
||||
Capital expenditures |
2,054 |
684 |
350 |
3,088 |
|
As at March 31, 2020 |
|||||
Property plant and equipment |
38,941 |
65,791 |
15,469 |
120,201 |
|
Intangible assets |
13,688 |
2,390 |
— |
16,078 |
|
Goodwill |
1,259 |
32,162 |
2,600 |
36,021 |
|
Segment assets |
95,229 |
298,522 |
56,471 |
450,222 |
|
Segment liabilities |
32,821 |
38,774 |
5,927 |
77,522 |
|
Year Ended March 31, 2019 |
Canada |
United States |
International |
Total |
|
(CDN 000s) (unaudited) |
($) |
($) |
($) |
($) |
|
Revenue |
|||||
Drilling Data |
8,092 |
29,176 |
5,985 |
43,253 |
|
Mud Management and Safety |
4,683 |
17,217 |
1,774 |
23,674 |
|
Communications |
2,292 |
3,229 |
436 |
5,957 |
|
Drilling Intelligence |
2,490 |
3,152 |
331 |
5,973 |
|
Analytics and Other |
956 |
1,691 |
639 |
3,286 |
|
Total Revenue |
18,513 |
54,465 |
9,165 |
82,143 |
|
Rental services and local administration |
5,709 |
19,090 |
5,306 |
30,105 |
|
Depreciation and amortization |
4,555 |
4,774 |
893 |
10,222 |
|
Segment gross profit |
8,249 |
30,601 |
2,966 |
41,816 |
|
Research and development |
7,744 |
||||
Corporate services |
3,653 |
||||
Stock-based compensation |
3,824 |
||||
Other expense |
158 |
||||
Income tax expense |
7,393 |
||||
Net income |
19,044 |
||||
Net income attributable to Pason |
19,044 |
||||
Capital expenditures |
904 |
8,782 |
631 |
10,317 |
|
As at March 31, 2019 |
|||||
Property plant and equipment |
42,624 |
71,960 |
14,734 |
129,318 |
|
Intangible assets |
18,978 |
— |
— |
18,978 |
|
Goodwill |
1,259 |
7,625 |
2,600 |
11,484 |
|
Segment assets |
109,912 |
294,585 |
51,536 |
456,033 |
|
Segment liabilities |
39,725 |
25,285 |
4,990 |
70,000 |
Other Expenses
Three Months Ended March 31, |
2020 |
2019 |
||
(CDN 000s) (unaudited) |
($) |
($) |
||
Foreign exchange (gain) loss |
(47) |
101 |
||
Net interest expense - lease liabilities |
178 |
137 |
||
Interest income - short term investments |
(576) |
(185) |
||
Net monetary gain |
(419) |
— |
||
Equity income |
(244) |
(158) |
||
Other |
302 |
263 |
||
Other expenses |
(806) |
158 |
Events After the Reporting Period
On April 30, 2020, the Company announced a quarterly dividend of $0.19 per share on the Company's common shares. The dividend will be paid on June 29, 2020 to shareholders of record at the close of business on June 15, 2020.
In April 2020, the Company entered into an agreement to terminate the lease at its previous US head office in Golden, Colorado. The Company anticipates that in the second quarter of 2020 it will recognize $5.8 million in other income, which is comprised of the derecognition of the previous recorded onerous lease liability of $6.3 million, offset by the termination payment.
First Quarter Conference Call
Pason will be conducting a conference call for interested analysts, brokers, investors and media representatives to review its first quarter 2020 results at 9:00 am (Calgary time) on Friday, May 1, 2020. The conference call dial-in number is 1-888-231-8191 or 1-647-427-7450. You can access the seven-day replay by dialing 1-855-859-2056 or 1-416-849-0833, using password 1196423.
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. Pason's common shares trade on the Toronto Stock Exchange under the symbol PSI.
Additional information, including the Company's Annual Report and Annual Information Form for the year ended December 31, 2019, is available on SEDAR at www.sedar.com or on the Company's website at www.pason.com.
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, and web-based information management, enable collaboration between the rig and the office. Pason's common shares trade on the Toronto Stock Exchange under the symbol PSI.TO.
Certain information regarding the Company contained herein may constitute forward-looking information under applicable securities law. The words "anticipate", "expect", "believe", "may", "should", "will", "estimate", "project", "outlook", "forecast" or other similar words are used to identify such forward-looking information and statements. Forward-looking statements in this document may include statements, express or implied regarding the anticipated business prospects and financial performance of Pason; expectations or projections about future strategies and goals for growth and expansion; expected and future cash flows and revenues; and expected impact of future commitments. These forward-looking statements are based upon various underlying factors and assumptions, including the state of the economy and the oil and gas exploration and production business, in particular; the Company's business prospects and opportunities; and estimates of the financial and operational performance of Pason.
Forward-looking information and statements are subject to known or unknown risks and uncertainties that may cause actual results to differ materially from those anticipated or implied in the forward-looking information and statements. Risk factors that could cause actual results or events to differ materially from current expectations include, among others, the ability of Pason to successfully implement its strategic initiatives and whether such strategic initiatives will yield the expected benefits, the operating performance of Pason's assets and businesses, the price of energy commodities, competitive factors in the energy industry, changes in laws and regulations affecting Pason's businesses, technological developments, and general economic conditions.
Readers are cautioned not to place undue reliance on forward-looking statements as there can be no assurance that the plans, intentions or expectations upon which they are placed will occur. Such forward looking statements, although considered reasonable by management as of the date hereof, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this press release are expressly qualified by this cautionary statement.
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). Furthermore, any forward looking statements contained in this news release are made as of the date of this news release, and Pason does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by securities law.
SOURCE Pason Systems Inc.
about Pason Systems Inc., visit the company's website at www.pason.com or contact [email protected]
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