U.S. Markets open in 3 hrs 15 mins

Pason Reports First Quarter 2019 Results

CALGARY , May 1, 2019 /CNW/ - Pason Systems Inc. (PSI.TO) 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.


View original content: http://www.newswire.ca/en/releases/archive/May2019/01/c1577.html