CALGARY, May 1, 2019 /CNW/
- Pason Systems Inc. (TSX:PSI) announced today its 2019 first
quarter results.
Performance Data
Three Months Ended
March, 31
|
2019
|
2018
|
Change
|
(CDN 000s, except per
share data)
|
($)
|
($)
|
(%)
|
Revenue
|
82,143
|
73,813
|
11
|
EBITDA
(1)
|
40,435
|
32,220
|
25
|
Adjusted EBITDA
(1)
|
40,641
|
34,753
|
17
|
As a % of
revenue
|
49.5
|
47.1
|
240bps
|
Funds flow from
operations
|
35,899
|
33,958
|
6
|
Per share –
basic
|
0.42
|
0.40
|
5
|
Per share –
diluted
|
0.42
|
0.40
|
5
|
Cash from operating
activities
|
8,442
|
24,344
|
(65)
|
Capital
expenditures
|
10,317
|
5,797
|
78
|
Free cash flow
(1)
|
385
|
18,906
|
(98)
|
Cash dividends
declared
|
0.18
|
0.17
|
6
|
Net Income
|
19,044
|
12,359
|
54
|
Per share –
basic
|
0.22
|
0.15
|
47
|
Per share –
diluted
|
0.22
|
0.14
|
57
|
Total interest
bearing debt
|
—
|
—
|
—
|
Shares outstanding
end of period (#000's)
|
85,801
|
85,172
|
1
|
|
(1) Non-IFRS
financial measures are defined in the Management's Discussion and
Analysis section.
|
|
Current period
amounts are in accordance with IFRS following the adoption of IFRS
16, Leases as discussed in Note 3 in the
Consolidated Financial Statements. Prior periods have not been
restated.
|
Q1 2019 vs Q1 2018
The Company generated consolidated
revenue of $82.1 million in the first
quarter of 2019, an increase of 11% from the same period in 2018.
In the US business unit, industry activity increased by 7% while
market share increased to 61% from 60% in the prior year. In
Canada, industry activity
decreased by 32% while market share increased. The International
business unit saw increases in activity in each of the Company's
major markets.
Adjusted EBITDA increased to $40.6
million in the first quarter, an increase of 17% from the
same period in 2018. The increase in adjusted EBITDA was driven by
the increase in activity in both the US and International business
units, offset by a drop in Canadian gross profit and an increase in
research and development expense.
Funds flow from operations increased to $35.9 million in the first quarter, an increase
of 6% from the same period in 2018. The increase is driven by the
increase in adjusted EBITDA, offset by an increase in current tax
expense as a result of the Company no longer having tax loss carry
forwards to reduce current tax expense.
Cash from operating activities decreased to $8.4 million in the first quarter of 2019, with
the decrease attributable to:
- during the first quarter of 2019, the Company paid withholding
tax owing to the CRA of $15.3 million
as part of the Bilateral Advanced Pricing Arrangement entered into
with the CRA and the IRS. The Company will recover this amount from
the IRS when its previous years US tax returns are reassessed.
- during the current quarter, the Company paid out the 2018 short
term incentive plan. In prior years, the majority of this payment
was made in the same year that it was earned.
- the increase in current income tax expense described
above.
Free cash flow was significantly lower than the first quarter of
2018 due to the drop in cash from operating activities described
above combined with an increase in capital expenditures in the US
business unit.
The Company recorded net income of $19.0
million ($0.22 per share) in
the first quarter of 2019, compared to net income of $12.4 million ($0.14 per share) recorded in the same period in
2018. Net income was positively impacted from the increased level
of activity in the US and international markets, a smaller foreign
exchange loss, offset by an increase in both stock-based
compensation expense and research and development costs.
President's Message
Pason continues to perform well in all geographies, and we are
pleased with our financial results in the first quarter of 2019.
Pason generated revenue of $82.1
million in the period, an increase of 11% compared to the
same quarter last year. The main drivers of revenue growth were
increased industry activity in the United
States, higher activity levels in all Pason's international
markets, and an increase in the penetration of new Drilling
Intelligence products.
Adjusted EBITDA was $40.6 million
for the quarter, an increase of 17%. Adjusted EBITDA as a
percentage of revenue was 50% compared to 47% one year ago. The
driver of this improvement was the increase in revenue with high
incremental margins. Adjusted EBITDA was also positively impacted
by the adoption of IFRS 16 (Leases) in the first quarter. Pason
recorded net income for the quarter of $19.0
million ($0.22 per share)
compared to $12.4 million
($0.15 per share) in the prior year
quarter.
At March 31, 2019, our working
capital position stood at $258
million, including cash and cash equivalents of $184 million. We are maintaining our quarterly
dividend at $0.18 share.
At the beginning of last year, we began reporting our revenue
along five product categories to better reflect the changing nature
of Pason's business as follows:
- Drilling Data contains all products and services
associated with acquiring, displaying, storing, and delivering
drilling data. Revenue in this segment increased 16% in the first
quarter compared to the prior year period and accounted for 53% of
our total revenue. The increase was driven by a 7% increase in
total US land drilling activity and market share gains in both
the United States and Canada, and partially offset by a 32% decline
in Canadian drilling activity. Internationally, drilling activity
increased in all major markets with the largest absolute increases
in Australia and Argentina.
- Mud Management & Safety includes products such as
the Pit Volume Totalizer, Smart Alarms, Gas Analyzer, Hazardous Gas
Alarm, and the Electronic Choke Actuator. In the first quarter, Mud
Management & Safety revenue increased 11% and generated 29% of
total revenue.
- Communications includes satellite and terrestrial
Internet bandwidth, Wireless Rigsite, VoIP and Intercom services
and accounted for 7% of total revenue. Revenue in this segment is
showing negative growth because of the transition from satellite to
terrestrial bandwidth with lower pricing, while we share cost
savings and provide a better user experience for our
customers.
- Drilling Intelligence bundles Pason's product offerings
targeted at enabling our customers' drilling optimization and
automation efforts. It contains products such as autodrillers, abbl
Directional Advisor®, the ExxonMobil Drilling Advisory System® and
Pivot, a pipe oscillation system for improving slide drilling.
Drilling Intelligence is our highest growth segment as revenue
increased 30% in the first quarter compared to the prior year and
accounted for 7% of our total revenue.
- Analytics & Other includes our Verdazo Discovery
Analytics product suite, various reports, and other revenue
streams. This segment is not as directly correlated to drilling
activity, grew 14% and accounted for 4% of total revenue in the
first quarter.
R&D and IT expenses, including deferred development costs,
grew 13% in the first quarter compared to the prior year period.
The drivers of this growth were additions to R&D staff and the
ongoing transition to a more cloud-based IT infrastructure, which
implies lower capital spending but higher operating costs in the IT
space.
From a macro perspective, driven by a solid demand outlook and
OPEC and Russia production cuts
taking full effect, the oil market sentiments should steadily
improve over the course of this year. There are clear signs that
E&P investments are starting to normalize as the industry moves
toward a more sustainable financial stewardship of the global
resource base. This means that higher investments in the
international markets are required simply to keep production flat,
while North America land is set
for somewhat lower investments.
We expect international drilling activity and rig counts to
further increase in 2019. Conversely in North American land, we see
lower capital spending relative to last year as companies aim to
spend within cash flow, repair balance sheets and improve
shareholder returns. We expect US land drilling activity and rig
counts to trend down slightly from current levels before starting
to increase again towards the end of this year. In Canada, infrastructure issues continue to
weigh heavily on the outlook for the upstream sector. With drilling
activity constrained by operator access to oil and gas markets,
Canadian rig counts are expected to remain materially below last
year's levels.
In this environment, we are prudently managing our fixed costs
and maintaining flexibility for our plans for 2019, which gives us
the means and confidence to address any activity scenario. Our
capital expenditures will be relatively modest going forward with a
larger portion of development efforts focused on software and
analytics. We intend to spend up to $30
million in capital expenditures in 2019. Our highly capable
and flexible IT and communications platform can host additional new
Pason and third-party software at the rigsite and in the cloud.
Our market positions remain strong, and we expect to be able to
deliver growth through higher product adoption going forward. We
are the service provider of choice for many leading operators and
drilling contractors with Pason equipment installed on over 65% of
all active land drilling rigs in the Western Hemisphere.
Marcel Kessler
President and Chief Executive Officer
May 1, 2019
Management's Discussion and Analysis
The following discussion and analysis has been prepared by
management as of May 1, 2019, 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 IFRS 16
The Company adopted IFRS 16, Leases, effective January 1, 2019, using the modified retrospective
approach. This new standard supersedes IAS 17, Leases, and
introduces a single lessee accounting model by eliminating a
lessee's classification of leases as either operating leases or
finance leases. Comparative figures have not been restated. Further
disclosure is provided in Note 3 to the Condensed Consolidated
Interim Financial Statements.
The impact of adopting this new standard on IFRS Measures and
Non-IFRS Measures is described below. The figures presented below
are the 2019 actual numbers that are classified differently than
the 2018 comparative figures. Effectively, the operating expense
line items recognized under the previous standard will be
bifurcated between depreciation expense and interest expense.
Impact on IFRS Measures
Three Months Ended
March 31
|
2019
|
(000s)
|
($)
|
Reduction in rental
services and local administration
|
272
|
Reduction in research
and development expenses
|
233
|
Reduction in
corporate services costs
|
296
|
(Increase) in
depreciation of right of use assets
|
(799)
|
(Increase) in net
interest expense on lease liabilities
|
(130)
|
Reduction in Income
tax provision
|
32
|
(Decrease) in net
income
|
(96)
|
Increase in
depreciation of right of use assets
|
799
|
(Reduction) in Income
tax provision
|
(32)
|
Total increase in
funds flow from operations and cash from operating
activities
|
671
|
Impact on Non-IFRS Measures
Three Months Ended
March 31
|
2019
|
(000s)
|
($)
|
Decrease in rental
services and local administration - Canada operating
segment
|
40
|
Decrease in rental
services and local administration - United States operating
segment
|
197
|
Decrease in rental
services and local administration - International operating
segment
|
35
|
Decrease in research
and development expenses
|
233
|
Decrease in corporate
services costs
|
296
|
Total increase in
EBITDA and Adjusted EBITDA
|
801
|
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 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, 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 it's 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
|
2019
|
2018
|
Change
|
(000s)
|
($)
|
($)
|
(%)
|
Revenue
|
|
|
|
Drilling
Data
|
43,253
|
37,295
|
16
|
Mud Management and
Safety
|
23,674
|
21,260
|
11
|
Communications
|
5,957
|
7,798
|
(24)
|
Drilling
Intelligence
|
5,973
|
4,581
|
30
|
Analytics and
Other
|
3,286
|
2,879
|
14
|
Total
revenue
|
82,143
|
73,813
|
11
|
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.
Total revenue increased 11% for the three months ending
March 31, 2019, over the same period
in 2018. This increase is attributable to an increase in revenue
per EDR day in all three operating segments combined with an
increase in the activity in the US and International operating
segment.
Industry activity in the US market increased 7% in the first
quarter of 2019 compared to the corresponding period in 2018, while
first quarter Canadian industry activity decreased by 32%.
US EDR days increased by 9% in the first quarter of 2019
compared to the corresponding period in 2018, while Canadian EDR
days, which includes non-oil and gas-related activity, decreased
27% from 2018 levels.
In the first quarter of 2019, the Pason EDR was installed on 61%
of the land rigs in the US market, an increase of 100bp over the
same time period in 2018.
In the first quarter of 2019, the Pason EDR was installed on 94%
of the land rigs in the Canadian market compared to 88% during the
same period of 2018. For the purposes of market share, the Company
uses the number of EDR days billed and oil and gas drilling days as
reported by accepted industry sources.
Revenue generated from the Company's other wellsite
instrumentation products was largely driven by the increase in
drilling activity in the US market combined with increases in the
adoption of certain EDR peripherals, most notably the alarms and
sensors, and an increase in revenue from the Company's drilling
intelligence products. Communication revenue has decreased over the
same period in 2018 as the Company continues to share cost savings
with its customers.
First quarter revenue was positively impacted by a stronger US
dollar relative to the Canadian dollar.
For the first quarter of 2019, the Company saw an increase in
activity in all major regions of the International operating
segment with the largest increases in Australia and Argentina.
Discussion of Operations
United States Operations
Three Months Ended
March, 31
|
2019
|
2018
|
Change
|
(000s)
|
($)
|
($)
|
(%)
|
Revenue
|
|
|
|
Drilling
Data
|
29,176
|
23,698
|
23
|
Mud Management and
Safety
|
17,217
|
13,236
|
30
|
Communications
|
3,229
|
3,698
|
(13)
|
Drilling
Intelligence
|
3,152
|
2,144
|
47
|
Analytics and
Other
|
1,691
|
1,332
|
27
|
Total
revenue
|
54,465
|
44,108
|
23
|
Rental services
and local administration
|
19,090
|
16,885
|
13
|
Depreciation and
amortization
|
4,774
|
3,828
|
25
|
Segment gross
profit
|
30,601
|
23,395
|
31
|
|
Current period
amounts are in accordance with IFRS following the adoption of IFRS
16, Leases as discussed in Note 3 in the
Consolidated Financial Statements. Prior periods have not been
restated.
|
Three Months Ended
March, 31
|
2019
|
2018
|
Change
|
(000s)
|
(#)
|
(#)
|
(%)
|
Pason Electronic
Drilling Recorder (EDR) Rental Days
|
55,700
|
50,900
|
9
|
|
|
|
|
Three Months Ended
March, 31
|
2019
|
2018
|
Change
|
|
($)
|
($)
|
(%)
|
Revenue per EDR day -
USD
|
728
|
678
|
7
|
Revenue per EDR day -
CAD
|
968
|
857
|
13
|
Revenue from the US operations increased by 23% in the first
quarter of 2019 over the 2018 comparable period (17% when measured
in USD).
Industry activity in the US market increased by 7% in the first
quarter of 2019 over the 2018 comparable period. US market share
was 61% for the first quarter of 2019 compared to 60% during the
same period in 2018.
EDR rental days increased by 9% in the first quarter of 2019
over the 2018 comparable period. Revenue per EDR day increased to
US $728 in the first quarter of 2019,
an increase of US$50 over the same
period in 2018. The increase in revenue per EDR day was driven by
higher adoption of drilling intelligence products and other
peripheral products and selective price increases on certain
products.
Rental services and local administration increased by 13% in the
first quarter of 2019 over the 2018 comparative period (9% when
measured in USD). The increase in operating costs is attributable
higher field staff levels and higher direct costs to support
additional activity.
Depreciation expense increased by 25% in the first quarter of
2019 over the 2018 comparative period. The increase is due to the
adoption of IFRS 16, Leases, the stronger US dollar relative to the
Canadian dollar, and a slight increase in the capital program.
Segment gross profit increased by $7.2
million or 31% in the first quarter of 2019 over the 2018
comparative period. The Company benefited from a stronger US dollar
relative to the Canadian dollar.
Canadian Operations
|
|
|
|
Three Months Ended
March, 31
|
2019
|
2018
|
Change
|
(000s)
|
($)
|
($)
|
(%)
|
Revenue
|
|
|
|
Drilling
Data
|
8,092
|
9,920
|
(18)
|
Mud Management and
Safety
|
4,683
|
6,661
|
(30)
|
Communications
|
2,292
|
3,769
|
(39)
|
Drilling
Intelligence
|
2,490
|
2,118
|
18
|
Analytics and
Other
|
956
|
956
|
—
|
Total
revenue
|
18,513
|
23,424
|
(21)
|
Rental services
and local administration
|
5,709
|
7,328
|
(22)
|
Depreciation and
amortization
|
4,555
|
4,385
|
4
|
Segment gross
profit
|
8,249
|
11,711
|
(30)
|
|
|
|
|
Current period
amounts are in accordance with IFRS following the adoption of IFRS
16, Leases as discussed in Note 3 in the
Consolidated Financial Statements. Prior periods have not been
restated.
|
|
Three Months Ended
March, 31
|
2019
|
2018
|
Change
|
(000s)
|
(#)
|
(#)
|
(%)
|
Pason Electronic
Drilling Recorder (EDR) Rental Days
|
15,500
|
21,100
|
(27)
|
|
|
|
|
Three Months Ended
March, 31
|
2019
|
2018
|
Change
|
|
($)
|
($)
|
(%)
|
Revenue per EDR day -
CAD
|
1,142
|
1,070
|
7
|
Canadian drilling activity in the first quarter of 2019
decreased by 32% relative to the same period in 2018. Rig activity
reflected the challenging industry outlook which lead to among
other things a lack of urgency on the part of operators to
drill.
Canadian segment revenue decreased by 21% in the first quarter
of 2019 over the 2018 comparative period. Canadian market share was
94% for the first quarter of 2019 compared to 88% during the
same period of 2018.
EDR rental days decreased 27% in the first quarter of 2019
compared to 2018. Revenue per EDR day increased by $72 to $1,142
during the first quarter of 2019 compared to 2018. The increase is
driven by the successful introduction of drilling intelligence
products.
Rental services and local administration decreased by 22% in the
first quarter of 2019 relative to the same period in 2018.
Depreciation and amortization expense increased by 4% in the
first quarter of 2019 over the 2018 comparative period. The
increase is due to the adoption of IFRS 16, Leases, off set by a
greater proportion of research and development project costs being
expensed for accounting purposes.
Segment gross profit for the first quarter of 2019 decreased 30%
to $8.2 million compared to
$11.7 million in segment gross profit
in the 2018 comparative period.
International Operations
|
|
|
|
Three Months Ended
March, 31
|
2019
|
2018
|
Change
|
(000s)
|
($)
|
($)
|
(%)
|
Revenue
|
|
|
|
Drilling
Data
|
5,985
|
3,677
|
63
|
Mud Management and
Safety
|
1,774
|
1,363
|
30
|
Communications
|
436
|
331
|
32
|
Drilling
Intelligence
|
331
|
319
|
4
|
Analytics and
Other
|
639
|
591
|
8
|
Total
revenue
|
9,165
|
6,281
|
46
|
Rental services
and local administration
|
5,306
|
4,683
|
13
|
Depreciation and
amortization
|
893
|
962
|
(7)
|
Segment gross
profit
|
2,966
|
636
|
366
|
|
|
|
|
Current period
amounts are in accordance with IFRS following the adoption of IFRS
16, Leases as discussed in Note 3 in the
Consolidated Financial Statements. Prior periods have not been
restated.
|
Drilling activity increased in all of the Company's major
international markets, although the majority of the absolute gains
were seen in Australia,
Argentina, and the Andean
region.
Revenue in the International segment increased by 46% in the
first quarter of 2019 compared to the same period in 2018.
Rental services and local administration expenses increased by
13% in the first quarter of 2019 compared to the same period in
2018.
Depreciation expense decreased by 7% in the first quarter of
2019 compared to the same period in 2018.
Segment gross profit was $3.0
million for the first quarter of 2019, an improvement from
the $0.6 million profit recorded in
the corresponding period in 2018.
Corporate Expenses
|
|
|
|
Three Months Ended
March, 31
|
2019
|
2018
|
Change
|
(000s)
|
($)
|
($)
|
(%)
|
Other
expenses
|
|
|
|
Research and
development
|
7,744
|
6,359
|
22
|
Corporate
services
|
3,653
|
3,805
|
(4)
|
Stock-based
compensation
|
3,824
|
2,534
|
51
|
Other
|
|
|
|
Foreign exchange
loss
|
101
|
2,404
|
(96)
|
Net interest expense -
lease liability
|
137
|
—
|
—
|
Interest income -
short term investments
|
(185)
|
—
|
—
|
Other
|
105
|
129
|
(19)
|
Total corporate
expenses
|
15,379
|
15,231
|
1
|
|
|
|
|
Current period
amounts are in accordance with IFRS following the adoption of IFRS
16, Leases as discussed in Note 3 in the
Consolidated Financial Statements. Prior periods have not been
restated.
|
Research and development expenses increased in the first quarter
of 2019 over the 2018 comparative period due to additions to the
R&D personnel and the Company's continued transition towards
more Cloud-based IT infrastructure, focusing on maximizing uptime
service to customers and enhancing disaster recovery and business
continuity capabilities.
Net interest expense - lease liability is a result of the
adoption of the new lease accounting standard.
Q1 2019 vs Q4 2018
Consolidated revenue was $82.1
million in the first quarter of 2019 compared to
$82.0 million in the fourth quarter
of 2018, an increase of $0.1 million.
Industry activity increased in the Canadian and International
markets. The US market recorded an increase in revenue per EDR day,
offset by a 5% decrease in activity.
Revenue in the US segment was $54.5
million in the first quarter of 2019 compared to
$55.3 million in the fourth quarter
of 2018. The Canadian segment earned revenue of $18.5 million in the first quarter of 2019
compared to $17.9 million in the
fourth quarter of 2018. The International segment earned revenue of
$9.2 million in the first quarter of
2019 compared to $8.7 million in the
fourth quarter of 2018.
Adjusted EBITDA, which adjusts EBITDA for foreign exchange and
certain non-recurring charges, was $40.6
million in the first quarter of 2019 compared to
$39.3 million in the fourth quarter
of 2018. Funds flow from operations was $35.9 million in the first quarter of 2019
compared to $30.7 million in the
fourth quarter of 2018.
The Company recorded net income in the first quarter of 2019 of
$19.0 million ($0.22 per share) compared to net income of
$20.7 million ($0.24 per share) in the fourth quarter of
2018.
Condensed Consolidated Interim Balance Sheets
As
at
|
March 31,
2019
|
December 31,
2018
|
(CDN 000s)
(unaudited)
|
($)
|
($)
|
Assets
|
|
|
Current
|
|
|
Cash and cash
equivalents
|
183,931
|
203,838
|
Trade and other
receivables
|
86,964
|
80,020
|
Income tax recoverable
other
|
15,304
|
15,304
|
Prepaid
expenses
|
3,604
|
3,934
|
Income taxes
recoverable
|
2,483
|
6,203
|
Total current
assets
|
292,286
|
309,299
|
Non-current
|
|
|
Property, plant and
equipment
|
129,318
|
120,417
|
Intangible assets and
goodwill
|
30,462
|
32,000
|
Lease
receivable
|
3,967
|
—
|
Total non-current
assets
|
163,747
|
152,417
|
Total
assets
|
456,033
|
461,716
|
|
|
|
Liabilities and
equity
|
|
|
Current
|
|
|
Trade payables and
accruals
|
25,850
|
34,229
|
Income taxes payable
other
|
—
|
15,304
|
Stock-based
compensation liability
|
4,787
|
3,301
|
Lease
liability
|
3,330
|
312
|
Total current
liabilities
|
33,967
|
53,146
|
Non-current
|
|
|
Deferred tax
liabilities
|
19,003
|
17,060
|
Lease
Liability
|
12,666
|
2,233
|
Stock-based
compensation liability
|
4,364
|
3,200
|
Total non-current
liabilities
|
36,033
|
22,493
|
Equity
|
|
|
Share
capital
|
167,138
|
164,723
|
Share-based benefits
reserve
|
27,986
|
27,287
|
Foreign currency
translation reserve
|
56,839
|
63,574
|
Retained
earnings
|
134,070
|
130,493
|
Total
equity
|
386,033
|
386,077
|
Total liabilities
and equity
|
456,033
|
461,716
|
Condensed Consolidated Interim Statements of
Operations
Three Months Ended
March 31,
|
2019
|
2018
|
(CDN 000s)
(unaudited)
|
($)
|
($)
|
Revenue
|
82,143
|
73,813
|
Operating
expenses
|
|
|
Rental
services
|
26,794
|
26,039
|
Local
administration
|
3,311
|
2,857
|
Depreciation and
amortization
|
10,222
|
9,175
|
|
40,327
|
38,071
|
|
|
|
Gross
profit
|
41,816
|
35,742
|
Other
expenses
|
|
|
Research and
development
|
7,744
|
6,359
|
Corporate
services
|
3,653
|
3,805
|
Stock-based
compensation expense
|
3,824
|
2,534
|
Other
expense
|
158
|
2,533
|
|
15,379
|
15,231
|
|
|
|
Income before
income taxes
|
26,437
|
20,511
|
Income tax
provision
|
7,393
|
8,152
|
Net
income
|
19,044
|
12,359
|
Income per
share
|
|
|
Basic
|
0.22
|
0.15
|
Diluted
|
0.22
|
0.14
|
Condensed Consolidated Interim Statements of Other
Comprehensive Income
Three Months Ended
March 31,
|
2019
|
2018
|
(CDN 000s)
(unaudited)
|
($)
|
($)
|
Net
income
|
19,044
|
12,359
|
Items that may be
reclassified subsequently to net income:
|
|
|
Tax (recovery) expense
on net investment in foreign operations related to
an inter-company financing
|
791
|
(989)
|
Foreign currency
translation adjustment
|
(7,526)
|
9,780
|
Other
comprehensive gain (loss)
|
(6,735)
|
8,791
|
Total
comprehensive income
|
12,309
|
21,150
|
Condensed Consolidated Interim Statements of Cash
Flows
Three Months Ended
March 31,
|
2019
|
2018
|
(CDN 000s)
(unaudited)
|
($)
|
($)
|
Cash from (used
in) operating activities
|
|
|
Net income
|
19,044
|
12,359
|
Adjustment for
non-cash items:
|
|
|
Depreciation and
amortization
|
10,222
|
9,175
|
Stock-based
compensation
|
3,824
|
2,534
|
Deferred income
taxes
|
2,775
|
7,303
|
Unrealized foreign
exchange loss and other
|
34
|
2,587
|
Funds flow from
operations
|
35,899
|
33,958
|
Movements in non-cash
working capital items:
|
|
|
Increase in trade and
other receivables
|
(9,254)
|
(8,897)
|
Decrease in prepaid
expenses
|
279
|
481
|
Decrease in income
taxes
|
3,525
|
65
|
Decrease in trade
payables, accruals and stock-based
compensation liability
|
(6,998)
|
(1,365)
|
Effects of exchange
rate changes
|
(73)
|
234
|
Cash generated
from operating activities
|
23,378
|
24,476
|
Income tax
paid
|
(14,936)
|
(132)
|
Net cash from
operating activities
|
8,442
|
24,344
|
Cash flows from
(used in) financing activities
|
|
|
Proceeds from issuance
of common shares
|
2,013
|
228
|
Payment of
dividends
|
(15,439)
|
(14,480)
|
Repurchase and
cancellation of shares under Normal
Course Issuer Bid
|
(2,022)
|
—
|
Repayment of lease
liability
|
(671)
|
—
|
Net cash used in
financing activities
|
(16,119)
|
(14,252)
|
Cash flows (used
in) from investing activities
|
|
|
Additions to property,
plant and equipment
|
(9,749)
|
(4,811)
|
Development
costs
|
(568)
|
(986)
|
Proceeds on disposal
of investment and property, plant and
equipment
|
110
|
20
|
Changes in non-cash
working capital
|
2,150
|
339
|
Net cash used in
investing activities
|
(8,057)
|
(5,438)
|
Effect of exchange
rate on cash and cash equivalents
|
(4,173)
|
4,059
|
Net increase in
cash and cash equivalents
|
(19,907)
|
8,713
|
Cash and cash
equivalents, beginning of period
|
203,838
|
154,129
|
Cash and cash
equivalents, end of period
|
183,931
|
162,842
|
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, 2019
|
Canada
|
United
States
|
International
|
Total
|
(CDN 000s)
(unaudited)
|
($)
|
($)
|
($)
|
($)
|
Revenue
|
|
|
|
|
Drilling
Data
|
8,092
|
29,176
|
5,985
|
43,253
|
Mud Management and
Safety
|
4,683
|
17,217
|
1,774
|
23,674
|
Communications
|
2,292
|
3,229
|
436
|
5,957
|
Drilling
Intelligence
|
2,490
|
3,152
|
331
|
5,973
|
Analytics and
Other
|
956
|
1,691
|
639
|
3,286
|
Total
Revenue
|
18,513
|
54,465
|
9,165
|
82,143
|
Rental services and
local administration
|
5,709
|
19,090
|
5,306
|
30,105
|
Depreciation and
amortization
|
4,555
|
4,774
|
893
|
10,222
|
Segment gross
profit
|
8,249
|
30,601
|
2,966
|
41,816
|
Research and
development
|
|
|
|
7,744
|
Corporate
services
|
|
|
|
3,653
|
Stock-based
compensation
|
|
|
|
3,824
|
Other
expense
|
|
|
|
158
|
Income tax
expense
|
|
|
|
7,393
|
Net Income
|
|
|
|
19,044
|
Capital
expenditures
|
904
|
8,782
|
631
|
10,317
|
As at March 31,
2019
|
|
|
|
|
Property plant and
equipment
|
42,624
|
71,960
|
14,734
|
129,318
|
Goodwill
|
1,259
|
7,625
|
2,600
|
11,484
|
Intangible
assets
|
18,978
|
—
|
—
|
18,978
|
Segment
assets
|
109,912
|
294,585
|
51,536
|
456,033
|
Segment
liabilities
|
39,725
|
25,285
|
4,990
|
70,000
|
Three Months Ended
March 31, 2018
|
Canada
|
United
States
|
International
|
Total
|
(CDN 000s)
(unaudited)
|
($)
|
($)
|
($)
|
($)
|
Revenue
|
|
|
|
|
Drilling
Data
|
9,920
|
23,698
|
3,677
|
37,295
|
Mud Management and
Safety
|
6,661
|
13,236
|
1,363
|
21,260
|
Communications
|
3,769
|
3,698
|
331
|
7,798
|
Drilling
Intelligence
|
2,118
|
2,144
|
319
|
4,581
|
Analytics and
Other
|
956
|
1,332
|
591
|
2,879
|
Total
Revenue
|
23,424
|
44,108
|
6,281
|
73,813
|
Rental services and
local administration
|
7,328
|
16,885
|
4,683
|
28,896
|
Depreciation and
amortization
|
4,385
|
3,828
|
962
|
9,175
|
Segment gross
profit
|
11,711
|
23,395
|
636
|
35,742
|
Research and
development
|
|
|
|
6,359
|
Corporate
services
|
|
|
|
3,805
|
Stock-based
compensation
|
|
|
|
2,534
|
Other
expense
|
|
|
|
2,533
|
Income tax
expense
|
|
|
|
8,152
|
Net income
|
|
|
|
12,359
|
Capital
expenditures
|
1,963
|
3,263
|
571
|
5,797
|
As at March 31,
2018
|
|
|
|
|
Property plant and
equipment
|
43,086
|
67,724
|
16,285
|
127,095
|
Goodwill
|
1,259
|
7,358
|
2,600
|
11,217
|
Intangible
assets
|
22,210
|
79
|
—
|
22,289
|
Segment
assets
|
123,253
|
243,962
|
46,716
|
413,931
|
Segment
liabilities
|
44,253
|
9,399
|
4,771
|
58,423
|
Other Expense
Three Months Ended
March 31,
|
2019
|
2018
|
(CDN 000s)
(unaudited)
|
($)
|
($)
|
Foreign exchange
loss
|
101
|
2,404
|
Net interest expense
- lease liabilities
|
137
|
—
|
Interest income -
financing lease
|
(185)
|
—
|
Other
|
105
|
129
|
Other
expense
|
158
|
2,533
|
Payment of Withholding Tax
During the first quarter of 2019 the Company paid withholding
tax owing to the Canada Revenue Agency (CRA) of $15,304 as part of the Bilateral Advanced Pricing
Arrangement entered into with the CRA and the Internal Revenue
Service (IRS). The Company will recover this amount from the IRS
when its previous years US tax returns are reassessed.
Events After the Reporting Period
On May 1, 2019, the Company announced a quarterly dividend
of $0.18 per share on the Company's
common shares. The dividend will be paid on June 28, 2019 to shareholders of record at the
close of business on June 14,
2019.
First Quarter Conference Call
Pason will be conducting a conference call for interested
analysts, brokers, investors and media representatives to review
its first quarter 2019 results at 9:00
am (Calgary time) on
Thursday, May 2, 2019. 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 2799989.
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, 2018, is available on SEDAR at
www.sedar.com or on the Company's website at www.pason.com.
Shareholders are also invited to attend the Company's Annual
General on Thursday, May 2, 2019, at
3:30 pm at the offices of Pason
Systems Inc., 6120 Third Street SE, Calgary, Alberta.
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.