Pason Systems Q2 Earnings Call Highlights

Pason Systems (TSE:PSI) reported higher second-quarter revenue, adjusted EBITDA and net income as improving North American drilling activity and higher product adoption supported its core drilling business, while its completions operation continued to grow revenue despite lower industry frac activity.

For the second quarter of 2026, consolidated revenue rose 5% year over year to C$100.8 million. Adjusted EBITDA increased to C$35.7 million, or 35.4% of revenue, from C$31.6 million, or 32.7% of revenue, a year earlier. Net income attributable to Pason was C$14.1 million, or C$0.18 per share, compared with C$12.6 million, or C$0.16 per share, in the second quarter of 2025.

CFO Celine Boston said the quarter reflected improving drilling and completions conditions, execution in the completions business and the operating leverage of Pason’s North American drilling segment.

North American Drilling Drives Growth

North American Drilling revenue increased 7% to C$67.1 million, despite average industry drilling activity being relatively flat from the prior-year period. Pason generated record quarterly revenue per Industry Day of C$1,078, up 5% from C$1,026 a year earlier.

Boston said improved product adoption and a greater share of Canadian activity contributed to the improvement. Canadian operations generate higher average revenue per day than U.S. operations, according to the company.

Segment operating expenses declined 3% year over year, while gross profit increased 14% to C$38.6 million. CEO Jon Faber highlighted that the segment’s gross profit rose by C$4.6 million on a C$4.6 million increase in revenue.

During the question-and-answer session, Boston said the company has previously characterized North American Drilling’s incremental margin potential as about 75% on an additional C$50 million of revenue. She cautioned that consolidated incremental EBITDA margins will also depend on the mix of revenue among Pason’s segments, including earlier-stage businesses with lower current margins.

Completions Revenue Rises Despite Lower Frac Activity

Pason’s Completions segment generated revenue of C$15.9 million, up 3% from C$15.3 million in the prior-year quarter, even as active U.S. frac spreads declined 4%. The business averaged 31 active jobs during the quarter, down from 33 a year earlier but up from 28 in the first quarter.

Revenue per IWS day rose 11% to C$5,625. Boston attributed the increase to the company’s focus on moving away from lower-value ancillary-only jobs.

Operating expenses rose slightly to C$8.8 million and depreciation and amortization increased to C$7 million, reflecting investments in service infrastructure, technology deployment and the hardware platform. The depreciation figure also included about C$2.2 million in amortization related to intangible assets acquired in the IWS transaction. Boston said that acquisition-related amortization is not indicative of ongoing capital requirements for the segment.

Faber estimated that the company’s roughly 30 active jobs represent approximately 15% of a market he described as being around 200 jobs. He said Pason believes its current participation represents about half of the opportunity presently available in the market, as some customers have not yet adopted this type of technology. He added that more complex completions operations are becoming a larger portion of the market, which could expand the addressable opportunity.

International and Energy Storage Results

International Drilling revenue declined to C$13.1 million from C$13.6 million a year earlier. Activity was below prior-year levels, particularly in Argentina, where Boston said a large customer’s transition from conventional to unconventional development reduced active rig counts during the transition. Operating expenses fell 9% to C$6 million, and segment gross profit was C$6 million, compared with C$6.4 million in the prior-year quarter.

The Solar and Energy Storage segment recorded revenue of C$4.8 million, broadly consistent with the comparative quarter. Boston said quarterly performance in that segment is largely driven by the timing of control-system deliveries and can fluctuate materially between quarters.

Cash Flow, Capital Spending and Outlook

Funds flow from operations rose 27% to C$33.5 million. Cash from operating activities was C$20.5 million, with higher accounts receivable associated with rising revenue through the quarter absorbing some cash generation. Net capital expenditures were C$17.1 million, supporting pressure-control automation technology in completions and ongoing drilling-platform investments. Free cash flow totaled C$3.5 million.

Pason ended the quarter with C$68.3 million in cash, C$107 million in working capital and no interest-bearing debt. The company returned C$11.5 million to shareholders through C$10.1 million in dividends and C$1.4 million in share repurchases. It is maintaining its quarterly dividend at C$0.13 per share.

Faber said Pason continues to target a doubling of revenue from 2023 levels in oil and gas well-construction activities over a five- to seven-year horizon. The company expects 2026 capital expenditures of C$60 million to C$70 million and said it sees its highest expected returns currently coming from organic investment. Its growth priorities include scaling completions, increasing adoption and pricing of drilling products, introducing new technologies such as the Mud Analyzer, expanding internationally and pursuing data-management opportunities in adjacent well-construction activities.

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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