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  5. PSI: Please comment on the earning reports. [Pason Systems Inc.]
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Q: Please comment on the earning reports. Thanks a million.
Asked by Lai Kuen on March 04, 2024
5i Research Answer:

In Q4, PSI missed EPS expectations of 29c coming in at 11c. Revenue beat expectations of $89.26M coming in at $93.93M but did decrease 1% year-over-year. Industry activity levels in North America, decreased by 19% year over year, while revenue per industry Day increased by 12% in that same period to $998, posting a new record quarterly level. The weaker results on a yearly basis reflects the inflationary effects on the Company's high fixed cost base for its drilling related business units, higher levels of lower margin sales from its solar and energy storage segment, and the inclusion of equity accounted losses related to supporting the rapid growth of Intelligent Wellhead Systems (IWS). Free Cash Flow increased significantly from $3.7M in year prior to $19.3M in the Q4 of 2023 with lower levels of working capital investments and capital expenditures year over year. PSI also increased its dividend 8% in the quarter. PSI continues to face industry related pressures related to lower levels of drilling activity which are hurting earnings and revenue but as these subside the company should perform better. The dividend increase was a good signal that PSI is still generating comfortable cash returns even while demand is slower. 

TOY EPS beat expectations of 9c coming in at 19c for the fourth quarter. Revenue missed expectations of $507.79M, coming in at $502.6M but did increase 8% year-over-year. TOY said that it expects to face a challenging year in 2024 with ongoing economic pressures on shoppers, but could see growth as it integrates its Melissa & Doug acquisition. Revenue by operating segment reflected increases of 76.9% in Entertainment, 7.1% in Digital Games and 2.5% in Toys. Guidance was not great and TOY is starting to feel the pressures from consumer softness. The quarter itself was OK for TOY but growth is starting to slow on what could be a flat year in 2024 while it will be interesting to see how the Melissa & Doug acqusition integrates in with TOY and what synergies can be captured there.