Good morning, ladies and gentlemen. My name is Michelle, 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 Pason Systems Inc. Please note the advisories located at the end of the press release issued by Pason 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 Pason Systems, including the risk factors relevant to the company, can be found in its annual information form. At this time, I would like to welcome everyone to the Pason Systems Inc.'s third quarter 2022 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. I would now like to turn the conference over to Celine Boston, Chief Financial Officer. Please go ahead.
Thank you, operator. Good morning, everyone, and thank you for attending Pason's 2022 third 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 third quarter. Jon will then provide a brief perspective on the outlook for the industry and for Pason, and we will then take questions. Our third quarter results reflect a continuation of improved industry conditions, increasing demand for our products and technologies, strong competitive positioning and operating leverage. In comparison to the 2021 comparative periods, both our quarterly and year-to-date results reflect significant improvements. Pason generated consolidated revenue of CAD 92.5 million in the third quarter of 2022, a 60% improvement over the third quarter of 2021.
With this revenue, Pason posted CAD 46.2 million in Adjusted EBITDA, which represented 50% of revenue, a significant increase from the CAD 22.4 million or 39% of revenue generated in the third quarter of 2021 and a continued demonstration of our mostly fixed cost base. Sequentially, our operating results also improved. Quarterly revenue increased by 26% in the third quarter compared to the second, and Adjusted EBITDA increased by 49%. All of the company's business segments contributed to the strong quarterly result. Our North American segment set a new record level for Revenue per Industry Day at CAD 871, beating the previous record of 835 in the first quarter of this year. This result benefited from the strengthening U.S. dollar in the quarter, but also represents maintained leading market share and improved pricing environment.
Resulting North American revenue was CAD 75.2 million in the third quarter, a 63% increase from the third quarter of 2021, and a result that once again outpaced the improvement in underlying industry conditions. Similarly, activity levels and revenue generated per day in our international end market also improved, and revenue generated by the international business unit was CAD 15.8 million in the third quarter, a 52% improvement from the third quarter of 2021. Energy Toolbase, our emerging business in the solar and energy storage market, generated CAD 1.4 million in the third quarter of 2022, which represents a 23% improvement from the level seen in the third quarter of 2021.
Sequentially, reported revenue for this segment was down slightly given the timing of commissioning of control system projects, while the segment continues to grow revenue generated from SaaS subscriptions for its economic modeling software tool. We've spoken in previous calls about how we would be making investments and incurring certain costs in anticipation of future revenue increases. We will continue to see increases in variable elements of our cost structure, but our third quarter gross profit and Adjusted EBITDA results reflect our ability to absorb higher levels of revenue within our primarily fixed cost base. We will continue to be proactive on the repair of our existing fleet and technology, and we will work to manage inflationary effects on certain components of our cost structure, which for us is most impactful around the cost of our people.
These effects, along with changes in foreign exchange and the relative mix of rigs within our end markets, could have an impact on quarterly margins in the coming quarters. That said, our third quarter Adjusted EBITDA result of CAD 46.2 million is the highest level that Pason has seen since the fourth quarter of 2014 when rig counts were significantly higher. Adjusted EBITDA margin of 50% in the third quarter also mirrors levels seen in the 2014 peak activity periods. Net income attributable to Pason for the three months ended September 30th, 2022 was CAD 34.3 million or CAD 0.42 per share, a significant increase from the CAD 13.1 million or CAD 0.16 per share generated in the third quarter of 2021.
Year- to- date, Pason generated CAD 240.6 million of revenue, a 67% increase from CAD 144 million in the corresponding 2021 period. Adjusted EBITDA for the nine months ended September 30th, 2022 was CAD 110.6 million or 46% of revenue, compared to CAD 48.3 million or 34% of revenue for the first nine months of 2021. Accordingly, net income attributable to Pason in the first nine months of 2022 was CAD 71.4 million or CAD 0.87 per share, up from CAD 22.7 million or CAD 0.27 per share. A comparison of year-to-date results continues to highlight the improved industry conditions, higher levels of revenue generated per operating day, and strong operating leverage. Our balance sheet remains strong and incredibly well positioned to make strategic investments within our core business.
We ended the quarter with CAD 206 million in cash and cash equivalents and no interest-bearing debt. It's worth noting that our cash balance at September 30th reflects the strengthening U.S. dollar seen at the end of the quarter. We mentioned last quarter we would be making strategic and proactive investments in inventory levels of components and supplies in an effort to mitigate the impacts of ongoing supply chain challenges. In the third quarter, that included CAD 3 million in inventory investments, and we expect to continue with this strategy in the coming quarters. Further, in the third quarter of 2022, Pason spent CAD 6.9 million in capital expenditures. Resulting free cash flow in the third quarter was CAD 24 million, a 48% improvement from CAD 16.3 million generated in the third quarter of 2021.
We remain committed to shareholder returns and in the third quarter returned CAD 11.7 million to shareholders through dividends and share repurchases. In summary, we are very proud of our 2022 results to date, which reflect our leading market presence, our strong operating leverage through improving activity levels and our pristine balance sheet. We continue to be in a position of excellent competitive and financial strength. I will now turn the call over to Jon for his comments and outlook.
Thank you, Celine. Our third quarter financial results reflect our strong competitive position amid continued steady growth in industry activity. We provide the drilling data and technologies that our customers are increasingly using to deploy automation and analytics to improve their operational performance. Our quarterly revenue and Adjusted EBITDA were at their highest level in more than seven years, despite land rig counts, which remained below pre-2020 levels. Maintaining our leading market share while driving higher product adoption and better price realization allowed us to generate the highest Revenue per Industry Day in the company's history. Meanwhile, we remain focused on maintaining appropriate control over our operating and capital costs, keeping our spending at appropriate levels within the current context, while ensuring our ability to generate continued profitability and growth in the future.
The macro environment continues to become more challenging as central banks move more aggressively to control inflation through interest rate hikes. The world is faced with geopolitical instability, recessionary economic conditions, and a global energy crisis with significant shortages and elevated prices in many countries that is bringing heightened concern as colder winter weather approaches in the northern hemisphere. Despite having retreated closer to $85 per barrel, WTI oil prices remain at a level that can generate strong financial returns for our customers and justify continued drilling activity. Despite growing concerns of economic recession, global demand for oil remains above pre-pandemic levels. While demand may weaken as recessionary conditions persist, supply factors may overwhelm those demand impacts. U.S. storage levels of crude oil and petroleum products, including the Strategic Petroleum Reserve, now sit at levels not seen since 2005.
While the U.S. government has announced it will extend its releases from the Strategic Petroleum Reserve into December, it has also telegraphed its intentions around purchases to replenish the reserve. As releases from the reserve come to an end, markets will need to come into balance through lower demand, increased production, or a combination of the two. Otherwise, commercial crude inventories will decline. The inventory of drilled but uncompleted wells has been drawn down for 27 consecutive months and appears to have plateaued near its minimum sustainable level. As a result, to grow production or even to maintain it at its current level, which remains approximately 8% behind pre-pandemic levels, additional drilling will be required. We expect steady growth in land drilling activity in the coming quarters, albeit at a slower pace of growth than witnessed over the past two years.
The ability to increase the land rig count to increase oil supply will be challenged by the tightening of the high-spec rig market and availability of labor. The largest U.S. land drillers have communicated that they are currently sold out of high-spec rigs, and while they will look to refurbish and upgrade additional rigs, this is unlikely to drive meaningful growth in the available rig fleet over the next year. In short, we see the downside risk to industry activity being limited by the fundamentals of supply and demand, and the growth rate on the upside being constrained by rig availability. Within that context, we expect to generate growth through increased industry activity as well as continued opportunities to realize increases in pricing, product adoption and pricing as we deliver additional benefits for our customers.
In order to deliver those benefits, we will continue to make the necessary investments in our operating costs, including increased investments in technology development, in working capital and capital expenditures to secure our leading competitive position. We continue to expect to spend approximately CAD 30 million in capital expenditures in 2022. Given that we have spent CAD 18 million in the first three quarters, this implies meaningfully higher capital expenditures in the fourth quarter. I would highlight that while supply chain conditions are beginning to show signs of improvement, delivery timelines remain difficult to estimate in many cases, and as such, some capital expenditures could be delayed.
Looking ahead to 2023, we expect to increase our capital spending to CAD 45 million to pursue opportunities to renew and extend the capabilities of important parts of our hosting platform. This will further solidify our leading position and reinforce our foundation for future product development and continued revenue growth. While this level of capital expenditures is higher than we have incurred since 2015, as a rental business, we have benefited from the redeployment of idled assets through industry downturns. Further, the supply chain challenges witnessed over the past two years have resulted in delays in maintenance capital spending on operational equipment such as trucks. We currently expect capital spending to be maintained at approximately CAD 45 million per year for the next couple of years before beginning to trend lower. Our capital intensity remains lower than the company's historical annual capital expenditures.
We continue to position ourselves for future revenue growth through investments in the solar and energy storage business through our majority ownership in Energy Toolbase and in the oil and gas completions market through our minority investment in Intelligent Wellhead Systems. Our balance sheet remains strong and our free cash flow generation continues to improve. We remain committed to returning capital to shareholders through our regular quarterly dividend and through share repurchases. When we took the extraordinary measure of significantly reducing our dividend in the third quarter of 2020, we communicated our intention to establish a more flexible approach to capital allocation. This included establishing the regular dividend at a lower percentage of free cash flow than prior to the pandemic and an increased use of share repurchases to return capital to shareholders. We continue to favor flexibility in our capital allocation.
As we consider the impressive Free Cash Flow generation capabilities of our business, we are able to meaningfully increase the fixed amount of returns to shareholders through the regular dividend while preserving our ability to adjust total shareholder returns over time through share repurchases. As a result, we are increasing our regular quarterly dividend from CAD 0.08 per share to CAD 0.12 per share. At our current share count, the pro forma aggregate annual dividends of CAD 39.2 million compares to Free Cash Flow of CAD 90.8 million over the trailing 12-month period. While the board will continue to regularly consider the appropriate level of regular dividend payments, following this increase, we expect potential future increases to the regular dividend to be more modest over time. In the third quarter, we also returned CAD 5.1 million to shareholders through share repurchases.
The strength of our business allows us to make the required investments to secure our position as a leading provider of drilling data and technologies and to return meaningful capital to shareholders. We remain focused on ensuring that Pason is an innovative, profitable and responsible company. We would now be happy to take any questions.
Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. If you would like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star followed by the number two. One moment please, for your first question. Your first question will come from Michael Robertson of National Bank of Canada. Please go ahead.
Hey, good morning, Celine and Jon. Congrats on another great quarter and thanks for taking my questions. I believe you'd have to go back pretty far in time to find a better quarter for your international segment. Maybe a two-part question here. Part one, has that growth been largely ubiquitous across regions or are there some geographical standouts?
The biggest part of our international business is in South America and specifically in Argentina. While I would say that we have seen strength kind of across the board and in all markets, I would say uniquely in Argentina, we've probably seen some improvements on the pricing side, and there's also been some help from the mix of rigs between drilling and workover rigs.
Got it. I guess as a follow-up to that, you noted the improved product adoption as part of the driver behind that growth. Are there any offerings that are really starting to gain traction in some of those markets, but in terms of market penetration, you still think you have a lot of runway? Just trying to hone in on the growth potential moving forward, you know, both near and longer term.
Michael, I'm interpreting that question to be a little bit to the international market, and if I understood it correctly.
Yes. Yeah.
Okay. I think the answer would be yes. I think when we talk about that mix of drilling rigs and workover rigs, as we start to move towards more drilling rigs, that will drive the adoption of some of the, we'll call it, some of the more sophisticated, if you will, products and as well as some of the data delivery technologies that we talk about quite a bit.
Do you feel that's still sort of in early days at present?
I think there's still probably some significant running room for those ones as that mix continues to evolve. Yes.
Got it. Switching gears, this might be one for Celine. You know, cash balance exited in the quarter back over CAD 200 million and, you know, based on surplus, free cash flow generation likely climbing further in the quarter to come. I appreciate the flexibility that, you know, that provides through the ebbs and flows of the cycle with respect to being able to maintain a dividend or continuous investment in R&D. I was wondering if the significant changes in the current macro environment, be it, you know, inflation or the rise in interest rates, impacts your strategy or thinking in terms of how you go about investing it. You know, maybe the weighting between shorter-term money market securities versus low-risk investments with a longer duration.
Yeah, good question, Mike. I'd say, you know, much like borrowers are likely spending a bunch of time right now trying to be super strategic about reducing borrowing costs, we're spending probably as much time thinking about how to generate the best returns on our cash deposits. You know, to your point, I think balancing flexibility around ability to act on and pursue strategic investments in our core business, especially with kind of some difficulties around when we talk about CapEx programs and we talk about the difficulties in predicting timing on actual deliveries. We wanna make sure we maintain that flexibility in our cash balance and being able to actually execute on opportunities.
Also, you know, maximizing Free Cash Flow generation, which we're now in a position with the cash balance that we have to be able to actually earn interest income on that for the first time in a long time. We're still continuing to evaluate opportunities on how best to approach that.
Do you think you would, you know, maybe shift weighting to longer-term investments trying to, you know, be opportunistic and lock in higher rates for a longer period of time? Or, like, how do you feel about that?
It's not off the table, but I would say flexibility still continues to remain important.
Got it. Okay, well, that's very helpful, caller. Appreciate you taking my questions. Congrats on another solid quarter, and I'll turn it back.
Thanks, Michael.
Ladies and gentlemen, once again, if you would like to ask a question, please press star one at this time. Mr. Faber, there are no further questions, sir.
Terrific. Thanks so much for taking the time to join us for our quarterly conference call this morning. We continue to appreciate the support and interest that you have in Pason. If you have any further questions, certainly don't hesitate to reach out to Celine or myself at your convenience. We'd be happy to take your calls. Have a great day.
Ladies and gentlemen, this does conclude your conference call for this morning. We would like to thank you all for participating, and you may now disconnect your lines.