Pason Systems Q3 Earnings Call Highlights

Key Points

• Q3 revenue rose 18% to CAD 119.1 million, while adjusted EBITDA increased 17% to CAD 45.1 million and net income climbed 51% to CAD 18.9 million. Stronger drilling activity and higher solar and energy storage deliveries offset weaker completions revenue.
• North American Drilling revenue hit its highest quarterly level since Q1 2015, up 16% to CAD 80 million; Completions revenue fell 6% amid gaps in customer activity, but active jobs topped 30 in October. Pason expects drilling and completions activity to improve through the rest of 2026 and into 2027.
• Pason expects 2026 capital spending near the lower end of its CAD 60–70 million range and forecasts CAD 65–75 million for 2027. It ended September with CAD 76.8 million in cash and no interest-bearing debt, and returned CAD 11.6 million to shareholders in Q3.

Pason Systems TSE: PSI reported higher third-quarter revenue and earnings as North American drilling activity improved and deliveries of solar and energy storage control systems increased, offsetting a slowdown in completions work.

Revenue rose 18% to CAD 119.1 million from CAD 101 million a year earlier, Chief Financial Officer Celine Boston said on the company’s third-quarter 2026 earnings call. Adjusted EBITDA increased 17% to CAD 45.1 million, while net income attributable to Pason rose 51% to CAD 18.9 million, or CAD 0.24 per share.

Adjusted EBITDA was 37.9% of revenue, down slightly from 38.1% a year earlier. Boston said the larger contribution from lower-margin solar and energy storage sales largely explained the change in the company’s revenue mix.

Drilling gains offset completions slowdown

North American Drilling revenue increased 16% to CAD 80 million, its highest quarterly level since the first quarter of 2015, Boston said. Industry drilling activity rose 11% year over year, while Pason’s revenue per industry day reached a quarterly record of CAD 1,125, up 5%.

Boston attributed the per-day increase to greater product adoption and a higher proportion of activity in Canada, where average revenue per industry day is higher than in the United States.

International Drilling revenue rose 3% to CAD 12.8 million. Boston said growth across nearly all operating regions was partly offset by a strong comparison in Brazil. Year-to-date international revenue remained below the prior-year level, primarily because of lower activity in Argentina as a large customer shifts from conventional to unconventional development.

Completions revenue fell 6% to CAD 13.8 million as scheduled gaps in customer activity reduced the average number of active jobs to 25 from 30 a year earlier. Revenue per IWS day rose 11% to CAD 6,010, reflecting a higher proportion of complex operations and the associated technology mix.

President and CEO Jon Faber said the company began to see the benefits of increased activity across a larger completions customer base late in the third quarter and into the fourth. Active IWS jobs exceeded 30 in October, he said.

Solar and Energy Storage revenue rose to CAD 12.4 million from CAD 5.1 million, driven by more control system deliveries. Boston cautioned that quarterly revenue in the segment can fluctuate significantly with project delivery timing.

Spending outlook and shareholder returns

Faber said Pason expects drilling and completions activity to rise through the rest of 2026 and into 2027, supported by reductions in global oil supply and drawdowns in crude and product inventories. He added that geopolitical uncertainty could continue to cause commodity price volatility.

The company expects 2026 capital expenditures near the lower end of its previously announced CAD 60 million to CAD 70 million range after gaps in completions activity. It forecast CAD 65 million to CAD 75 million in spending for 2027, including amounts pushed out of 2026 and investment in next-generation technology for more complex completions operations.

Faber said the company’s medium-term objective remains to double revenue from 2023 levels over five to seven years. Its growth priorities include expanding completions, increasing adoption of drilling products, introducing new technology and deploying more products internationally.

Pason ended September with CAD 76.8 million in cash, CAD 115 million in working capital and no interest-bearing debt. It returned CAD 11.6 million to shareholders during the quarter, including CAD 10.1 million in dividends and CAD 1.5 million in share repurchases.

Faber said Pason continues to see the highest expected returns from organic investment, but would prioritize repurchases over the dividend in the current environment if additional capital becomes available. Boston added that the company is not looking to grow its cash balance from current levels.

Birch Hill board representation

Asked by TD Cowen analyst Aaron MacNeil about Birch Hill’s 19% stake and two board seats, Faber said the shareholder’s interest in joining the board was not a demand. He said Pason and Birch Hill have long shared perspectives on strategy and capital allocation, and that the investor wanted to understand drilling and completions opportunities in greater detail.

About Pason Systems (TSE:PSI)

Pason Systems 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.

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