Pason Systems Inc (PSYTF) Q4 2024 Earnings Call Highlights: Strong Revenue Growth Amidst Margin ...

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Sat, Mar 1, 2025, 12:11 AM 4 min read

Consolidated Revenue (2024): $414 million, a 12% increase from 2023.
North American Drilling Revenue (2024): $283 million, 2% lower than 2023.
Completion Segment Revenue (2024): $52.6 million, a 15% increase from 2023.
Adjusted EBITDA (2024): $161.8 million, 39.1% of revenue, compared to $171.5 million or 46.4% in 2023.
Net Income (2024): $121.5 million or $1.53 per share, including a $50.8 million non-cash accounting gain.
Fourth Quarter Revenue (2024): $107.6 million, compared to $93.3 million in Q4 2023.
Fourth Quarter Adjusted EBITDA (2024): $42.1 million, 39.1% of revenue.
North American Drilling Revenue per Industry Day (Q4 2024): $1,046, a 5% increase from Q4 2023.
International Drilling Revenue (Q4 2024): $15 million.
Completion Segment Revenue (Q4 2024): $13.6 million, up from $12.5 million in Q3 2024.
Energy Toolbase Revenue (Q4 2024): $7.2 million, a 49% increase from Q4 2023.
Net Income (Q4 2024): $16.9 million or $0.21 per share, compared to $8.5 million or $0.11 per share in Q4 2023.
Free Cash Flow (2024): $54.1 million, compared to $97 million in 2023.
Cash and Short-term Investments (End of 2024): $81 million, with no interest-bearing debt.

Warning! GuruFocus has detected 5 Warning Signs with XSGO:ENELAM.

Release Date: February 28, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Pason Systems Inc (PSYTF) reported a 12% increase in consolidated revenue for 2024, reaching $414 million compared to 2023.
The North American drilling segment showed resilience with only a 2% revenue decline despite a 10% decrease in industry activity.
The newly acquired completion segment generated $52.6 million in revenue, marking a 15% increase from the previous year.
Energy Toolbase, part of the solar and energy storage segment, achieved a new quarterly revenue record with a 49% increase from the previous year.
Pason Systems Inc (PSYTF) maintained a strong balance sheet with $81 million in cash and no interest-bearing debt, allowing for growth investments and shareholder returns.

Negative Points

Adjusted EBITDA margin decreased from 46.4% in 2023 to 39.1% in 2024, due to lower margin contributions from newer segments.
The international drilling segment experienced a 6% revenue decline in 2024, partly due to inflationary and foreign exchange factors.
Free cash flow decreased from $97 million in 2023 to $54.1 million in 2024, reflecting higher capital expenditures.
The completion segment is still in early stages of market adoption, requiring further investment before achieving drilling-like margins.
Depreciation and amortization expenses increased significantly, impacting overall profitability.

Q & A Highlights

Q: Can you discuss the rollout of the completion IWS business and what needs to happen for margin improvement? A: Jon Faber, President and CEO, explained that the completion segment is still in early stages, with about 25% to 30% market penetration. The company holds the largest share of this market segment. For margins to improve, the business needs to scale, and more customers need to adopt the technology across their operations. Celine Boston, CFO, added that investments are being made ahead of revenue growth, and margins are expected to reach drilling-like levels once the business is fully scaled.

Q: How is the $65 million capital program for 2025 allocated between maintenance and growth? A: Celine Boston, CFO, stated that approximately $40 million will be allocated to the drilling segment, including maintenance and technology refresh. The remaining $25 million will be directed towards the completion segment, focusing on valve management and automation technology.

Q: What is the pace of customer acquisition at IWS, and how is it impacting growth? A: Jon Faber, President and CEO, noted that new customer acquisition has exceeded expectations, even though existing customers have slowed their activity. The company is adding new customers, which is encouraging for future growth, despite the timing challenges between acquiring new customers and existing customers reducing their operations.

Q: How is the mud analyzer performing, and what is the customer response? A: Jon Faber, President and CEO, reported that the mud analyzer is performing well and meeting expectations. The technology partner is using it across all fleets, and other customers are moving from initial trials to broader adoption. The company is optimistic about expanding its use among more customers.

Q: Are there any firm targets for capital allocation towards share buybacks in 2025? A: Celine Boston, CFO, emphasized the importance of disciplined continuous repurchasing, favoring buybacks over dividends in the current uncertain market environment. However, no specific target numbers for buybacks were disclosed.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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