Pason Systems Q1 2026 Earnings Report

Pason Systems EPS Results

• Actual EPS: C$0.17
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Pason Systems Revenue Results

• Actual Revenue: $102.44 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Pason Systems Announcement Details

• Quarter: Q1 2026
• Date: 5/7/2026
• Time: After Market Closes
• Conference Call Date: Friday, May 8, 2026
• Conference Call Time: 11:00AM ET

Pason Systems (TSE:PSI) Inc is an oilfield specialist with fully integrated drilling data solutions. A host of products allow customers to collect, manage, report, and analyze drilling data for performance optimization and cost control. The electronic drilling recorder is the company's primary product, and provides a complete system of drilling data acquisition, data networking, drilling management tools, and reports at both the wellsite and customer office. Other product offerings include wellbore detection solutions, wellsite communications and bandwidth, wellbore gas analyzers, and software for data management. The company operates in three geographic segments: Canada, the United States, and International (Latin America, Offshore, the Eastern Hemisphere, and the Middle East).

Pason Systems Q1 2026 Earnings Call Transcript

Key Takeaways

• Negative Sentiment: Consolidated results weakened — revenue fell 9% YoY to CAD 102.4M, adjusted EBITDA was CAD 38.2M (37.3% margin), net income dropped to CAD 13M (CAD 0.17/share), and free cash flow declined to CAD 8.5M, driven by lower activity and FX headwinds.
• Negative Sentiment: North American drilling softness — industry drilling days were down ~6% YoY, North American Drilling revenue fell 8% to CAD 69.8M and gross profit declined as lower activity hit a largely fixed cost base.
• Positive Sentiment: Completions outperformance and tech adoption — completions revenue declined only 6% despite a 21% drop in U.S. frac spreads, IWS utilization improved vs Q4 and revenue per IWS day rose 7% as customers adopt more complex technologies.
• Positive Sentiment: Strong balance sheet and shareholder returns — CAD 73.5M cash, no interest-bearing debt, CAD 97.9M working capital, returned CAD 13.5M (dividends and buybacks), and management maintained the CAD 0.13 quarterly dividend.
• Negative Sentiment: Ongoing risks and investments weigh near-term results — FX headwinds, geopolitical and supply-chain risks, and higher depreciation/amortization from strategic tech investments (including IWS intangibles) are pressuring near-term cash and earnings, though management targets medium-term revenue growth from completions, Mud Analyzer rollout, international expansion and data services.

Presentation

[Celine Boston, CFO at Pason]

Thank you, Kelsey. Good morning, everyone. Thank you for attending Pason's 2026 first quarter conference call. I'm joined on today's call by Jon Faber, our President and CEO. I'll start today's call with an overview of our financial performance in the first quarter. Jon will then provide a brief perspective on the outlook for the industry and for Pason. We'll then take questions. Pason generated consolidated revenue of CAD 102.4 million in the first quarter of 2026, a 9% decrease from CAD 113.2 million in the first quarter of 2025. The year-over-year decline reflects lower drilling and completions industry activity in North America, along with negative impact of a weaker U.S. dollar relative to the Canadian dollar on our U.S. dollar source revenue.

[Celine Boston, CFO at Pason]

On this revenue, we generated CAD 38.2 million in adjusted EBITDA, or 37.3% of revenue. I'll now walk through each of our four reporting segments, starting with North American Drilling. Industry conditions in North America were more challenging in comparison to a year ago. As a reminder, industry rig counts fell after meaningful tariff announcements out of the U.S. administration on April 2, 2025. Since that decline, rig counts have remained relatively stable through the last four quarters. However, when comparing Q1 2026 results with Q1 2025 results, rig counts in both the U.S. and Canada were below prior year levels, and industry drilling days were down 6% year-over-year.

[Celine Boston, CFO at Pason]

Against that backdrop, our North American Drilling segment generated revenue of CAD 69.8 million, an 8% decline from CAD 75.8 million in the first quarter of 2025. Revenue per Industry Day was CAD 1,046 compared to CAD 1,067 in the prior year quarter. A 2% decrease driven primarily by foreign exchange. While operating expenses declined slightly year-over-year with strong discipline around cost, segment gross profit was CAD 41.7 million compared to CAD 46.8 million a year ago as a result of the more challenging industry conditions over the segment's mostly fixed cost base. International Drilling generated CAD 11.7 million of revenue in the first quarter, compared to CAD 14 million in the same period of last year. The decline reflects two factors.

[Celine Boston, CFO at Pason]

Our largest customer in Argentina shifted focus from conventional to unconventional drilling, which has reduced the active rigs during that transition and foreign exchange headwinds on U.S. dollar-linked revenue. Operating expenses fell 22% to CAD 5.7 million on lower activity. Segment gross profit was CAD 5 million compared to CAD 5.8 million the prior year. Our completion segment generated CAD 15 million of revenue, a 6% decline from CAD 16 million in the prior year. Achieved against a 21% decline in active U.S. frac spreads, which represents meaningful outperformance relative to industry activity. IWS averaged 28 active jobs in the quarter compared to 32 in Q1 of 2025 and up from 23 in Q4 of 2025.

[Celine Boston, CFO at Pason]

Revenue per IWS day was CAD 5,883, a 7% increase year-over-year despite the negative effect of foreign exchange, reflecting a more complex technology mix being adopted by our customers. We continue to invest in the technology platform for completion, which, in a daily rental business model, shows up in advance of revenue. As such, gross profit or loss for the segment includes depreciation and amortization expense of CAD 7.5 million on this continued investment, which includes CAD 2.2 million of amortization on intangibles acquired in the IWS transaction. Our Solar and Energy Storage segment generated CAD 5.9 million of revenue, a 21% decrease from CAD 7.4 million in Q1 of 2025. As we've noted in the past, revenue in this segment will continue to fluctuate with the timing of control system deliveries.

[Celine Boston, CFO at Pason]

For context, Q4 of 2025 was a record quarter for the segment with CAD 16.2 million of revenue. Pason continued to demonstrate strong cost discipline in the first quarter, with many fixed cash operating costs declining slightly year-over-year. Notably, SG&A was CAD 10.1 million, down 6% year-over-year, resulting adjusted EBITDA of CAD 38.2 million compared to CAD 45.2 million generated in the first quarter of 2025, with lower revenue generated from the company's drilling and completions segments over the company's mostly fixed cost base. Net income attributable to Pason was CAD 13 million, or CAD 0.17 per share, compared to CAD 20 million or CAD 0.25 per share in the prior year period and was impacted by lower adjusted EBITDA, along with higher levels of depreciation and amortization expense with ongoing investments in the company's technology offering.

[Celine Boston, CFO at Pason]

Cash from operating activities was CAD 20.9 million compared to CAD 39.9 million in the prior year, reflecting that lower adjusted EBITDA and higher cash taxes paid for amounts owing under the renewed advanced pricing arrangement finalized in Q4 of 2025. Net capital expenditures were CAD 12.4 million, down from CAD 16.7 million in Q1 of 2025 due to timing on purchases. Resulting free cash flow was CAD 8.5 million compared to CAD 23.2 million in Q1 of 2025. We returned CAD 13.5 million to shareholders during the quarter, CAD 10.1 million to our quarterly dividends of CAD 0.13 per share and CAD 3.4 million through share repurchases.

[Celine Boston, CFO at Pason]

We ended the quarter with CAD 73.5 million in total cash, CAD 97.9 million in working capital, and no interest-bearing debt. In summary, our Q1 results reflect a more challenging industry environment. Our business continues to demonstrate the durability that comes from a leading market position, a largely fixed cost base, and a strong balance sheet. We remain well-positioned to support continued growth across our segments and to return meaningful capital to shareholders. With that, I'll turn the call over to Jon for his comments on our outlook.

[Jon Faber, President and CEO at Pason]

Thank you, Celine. Let me turn to how we see the operating environment and where we're headed. The U.S. land rig count has stayed in a fairly tight band between 525 and 535 rigs since mid-2025. As we have said before, we believe that Pason can grow revenue and earnings in a meaningful way without needing a step up in North American land drilling activity. Our medium-term goal has not changed. We are targeting a doubling of revenue from 2023 levels from our oil and gas well construction activities over a five to seven-year horizon. That growth is expected to come from five places. First, scaling our completions business. Second, increasing adoption, improving price realization of our established drilling products and services. Third, bringing compelling new technologies to the drilling and completions markets, with the Mud Analyzer being the most current example.

[Jon Faber, President and CEO at Pason]

Fourth, expanding our international revenue, particularly as more work shifts towards unconventional drilling and completions. Fifth, addressing data management opportunities in adjacent well construction activities that we believe the industry has underserved. We are pleased with the progress that we are making in each of these areas. In completions, slowing activity from some of our existing customers has been offset by new customer wins and deploying technologies aimed at more complex jobs. The data demands that come from the rapid spread of artificial intelligence are a tailwind, both for our core drilling products and for new product opportunities in completions. Uptake of the Mud Analyzer continues to build, and we are working on additional mud analysis products that broaden the set of drilling operations that we can serve.

[Jon Faber, President and CEO at Pason]

Internationally, as customers move toward more unconventional development, we see a path to wider product adoption across more of our product portfolio over the medium term. We are also building a presence within certain service rig operations and are tailoring our products and support to fit the unique requirements of that market. Yesterday, at our annual general meeting, I took a few minutes to speak to some of the foundational principles of Pason. I spoke of the power of simplicity, the importance of discipline, and the benefits of compounding. Technology deployed simply. That has been our slogan and our operating philosophy for many years. The technologies that ultimately get the broadest use in the market are the ones that take complex problems and solve them with products that are intuitive and simple in the hands of the user. Simplicity also shapes how we think about scaling the business.

[Jon Faber, President and CEO at Pason]

We are investing to streamline and simplify our product and service offerings so that the operating and capital cost per job comes down over time. Simplifying our business also means staying focused on areas where we have a distinctive and durable competitive advantage. We play the long game by concentrating where our unique capabilities can generate significant free cash flow and attractive returns over time. We are disciplined in our operating and capital costs. The benefits of operating leverage are greatest when we carefully manage our fixed cost base. Our capital expenditures are increasing as we invest in building out our completions business, but we only do so with high expected returns on capital on additional investments. We expect 2026 capital expenditures to be between CAD 60 million and CAD 70 million.

[Jon Faber, President and CEO at Pason]

We currently anticipate full-year spending to come in near the lower end of that range, and we will continue to monitor our plans as industry conditions and our competitive position evolve. In completions in particular, we are adding new customers at an accelerating rate. Average job size is moving up, and more customer activity is shifting toward the complex jobs that utilize our newest technologies. Any M&A activities that surface have to compete against the expected returns from reinvesting in our own business or buying back our own shares. Today, the highest expected returns we see continue to come from organic investment in our business. Focusing on generating valuable products and service for our customers in areas where we have a unique and distinctive advantage and being disciplined on our costs allows us to outpace underlying North American land drilling activity.

[Jon Faber, President and CEO at Pason]

Continued outperformance over time leads to strong financial performance through the benefits of compounding. We continue to build our business with a focus on ensuring that we have the foundation for continued growth and compounding over the medium and longer term. As we generate additional free cash flow, we look to allocate capital responsibly between shareholder returns and growth-oriented investments. On capital allocation, our framework is unchanged. We balance the discipline and predictability of our regular quarterly dividend, which we are maintaining at CAD 0.13 per share, with the flexibility to invest organically and to repurchase shares, both of which we evaluate through the lens of expected returns on capital. We are also mindful of potential supply chain disruptions and inflationary pressures tied to ongoing U.S. trade dynamics as well as tensions in the Middle East.

[Jon Faber, President and CEO at Pason]

The effect of closing of the Strait of Hormuz has materially tightened global oil and LNG supply. Concerns of an oil glut from earlier in the year have faded. As the long end of the oil futures curve has strengthened, we are starting to see producers accelerate capital programs and contract incremental rigs. We are well-positioned to respond as activity picks up. The benefits of our leading market share and high operating leverage tend to be most pronounced when activity is rising. Uncertainty is likely to stay with us for a while. Our focus is on delivering exceptional performance in the areas within our control, extending our service and technology advantages, investing in growth opportunities that are not directly available to shareholders, keeping a strong balance sheet, and returning capital to shareholders in a disciplined way.

[Jon Faber, President and CEO at Pason]

Simplicity, discipline, and compounding have shaped Pason for decades, and we believe they continue to position us well for the opportunities ahead. With that, we would be happy to take your questions.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, while we pile up your questions. At this moment, there are no further questions. I would like to turn the call back over to Mr. Jon Faber. You may continue.

[Jon Faber, President and CEO at Pason]

Thank you very much for taking the time to join us this morning. We appreciate your continued interest and your support, and we'll look forward to speaking with you again following our second quarter results after our August release. If you have any further questions in the meantime, Celine and I will always welcome your calls, and we look forward to talking. Thank you very much, and have a great day.

[Operator]

Ladies and gentlemen, this does conclude your conference call for today. We thank you very much for your participation, and you may now disconnect. Have a great day, everyone.

Participants

Analysts

• Celine Boston, CFO at Pason
• Jon Faber, President and CEO at Pason