Pason Systems Inc.

Good morning. My name is Jenny, and I will be your conference operator today. The contents of today's call are protected by copyright and may not be reproduced without the prior written consent of Pace and Systems, Inc. Please note the advisories located at the end of the press release issued by Pace and Systems yesterday, which describe forward-looking information. Certain information about the company that is discussed on today's call may constitute forward-looking information. Additional information about PaySIM Systems, including the risk factors relevant to the company, can be found in its annual information form. Thank you. At this time, I would like to welcome everyone to the PaySIM Systems Inc's first quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star, then the number two. Thank you. Celine Boston, CFL, you may begin your conference.

Thank you, Jenny. Good morning, everyone.

Thank you for attending PAYSON's 2025 First Quarter Conference Call. I'm joined on today's call by John Faber, our President and CEO. I'll start today's call with an overview of our financial performance in the first quarter, and then John will provide a brief perspective on the outlook for the industry and for Payson, and we'll be happy to take questions. I'm pleased to report on Payson's first quarter 2025 results, which demonstrates the resilience in our business through challenging industry conditions with continued growth in most segments and significant outperformance of industry conditions. Payson generated consolidated revenue of $113.2 million in the first quarter of 2025, an 8% increase from the $104.8 million in the first quarter of 2024. With this revenue, Payson generated $45.2 million in adjusted EBITDA, or 39.9% of revenue, up 7% from the $42.4 million generated in the first quarter of 2024. I'll now provide an overview of the first quarter by business unit. While U.S. drilling activity has remained relatively flat in recent months, compared to the first quarter of 2024, average rig counts in North America were down 3% year over year. During this time, though, Paysan's North American Drilling Business Unit grew revenue per industry day by 7% to $1,067 in the first quarter of 2025, compared to $1,000 in the first quarter of 2024. As a result, outpacing the 3% reduction in industry drilling activity, the North American drilling segment generated revenue of $75.8 million in the first quarter of 2025, which was 3% higher than the first quarter of 2024. The segment's cost base remains mostly fixed in nature and saw lower repair expenses in the first quarter, while depreciation and amortization expenses grew year-over-year with increased capital expenditures recently. Further, strength in the U.S. dollar versus the Canadian dollar in the first quarter of 2025 impacted U.S. dollar sourced revenue and expenses for the segment. Resulting segment gross profit of $46.8 million in the first quarter of 2025 was 5% higher than the $44.4 million generated in the first quarter of last year, highlighting the segment's operating leverage. Our international drilling segment faced headwinds in the first quarter, with a larger customer in Argentina reducing activity levels through a pending shift in operational focus away from conventional wells towards more unconventional drilling. The segment generated $14 million in quarterly revenue and $5.8 million in segment gross profit in the first quarter. Operating expenses for the segment are mostly fixed and were impacted by inflationary effects and changes in foreign exchange year over year. In our completion segment, IWS had 32 active jobs, up from 26 in the fourth quarter and 28 in the first quarter of 2024, while industry activity levels fell during those times. Further, revenue per IWS day of $5,486 in the first quarter of 2025 grew by 9% from the level seen in the first quarter of 2024. I'll remind listeners that revenue per IWS day will fluctuate depending on the mix of technology adopted amongst existing customers, and further will be impacted by foreign exchange fluctuations with the US and Canadian dollar. Reported revenue for the segment was $16 million, up from $12.8 million in the first quarter of 2024, and a new quarterly record for the segment. Gross profit for the segment of $1.6 million represents operating expense investments made for the segment's current stage of growth, along with $5.6 million in depreciation and amortization expense, associated with the property and equipment and intangible assets acquired on January 1st, 2024. Energy Toolbase, which is reported within our solar and energy storage segment, generated $7.4 million in quarterly revenue, also a new quarterly record, and an increase of 98% from the 2024 comparative period, with the timing on deliveries of control system sales driving the difference year over year. The segment's revenue will continue to fluctuate with timing of these deliveries going forward. Sequentially, Payson benefited from strong Canadian winter drilling activity in its North American drilling segment and also saw growth in the company's completions and solar and energy storage segments. Revenue grew by 5% quarter-over-quarter as a result. Adjusted EBITDA of $45.2 million in the first quarter also grew from $42.1 million in the prior quarter, demonstrating the business's mostly fixed cost base and the resulting operating leverage. Net income attributable to Payson for the first quarter of 2025 was $20 million, or 25 cents per share, down from $69.5 million and 87 cents per share in the first quarter of 2024, which included a $50.8 million non-cash and non-recurring accounting gain related to the acquisition of IWS. Our balance sheet remains strong and coupled with our free cash flow generation allows us to make growth-related investments while returning meaningful levels of cash to shareholders. continuing through periods of uncertainty. In the first quarter of 2025, net capital expenditures were $16.7 million, which includes investments in building out our valve management and automation technology offering within completions, and the ongoing investments in our drilling-related technology platform. Free cash flow in the first quarter of 2025 was $23.2 million, compared to $11.7 million in the first quarter of 2024, with lower capital expenditures and working capital investments year over year. With this free cash flow, we returned $16.3 million to shareholders, $10.3 million through our quarterly dividend, and $6 million through our share repurchase program, ending the quarter with total cash, including short-term investments, of $87.4 million and no interest-bearing debt. In summary, we remain very well positioned to not only navigate ongoing uncertainties within geopolitical and industry conditions, but to continue to support further growth in all segments of the business while returning meaningful capital to shareholders. I will now turn the call over to John for his comments on our outlook.