Enerflex (EFXT) Q2 2025 Earnings Call August 07, 2025 10:00 AM ET Speaker0Good day, and thank you for standing by. Welcome to the Enerflex Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in listen only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone.You'll then hear automated message advising your hand is raised. To withdraw your question, plea ...

Enerflex Ltd. Corporate Presentation All amounts presented in US Dollars unless otherwise stated North America Latin America Eastern Hemisphere Enerflex at a Glance TSX / NYSE EFX / EFXT Annual dividend CAD$0.15/sh Market Cap (2) CAD$1.4 B Dividend Yield (2) 1.3% Operating Years 45 Employees ~4,400 Core Countries (3) 7 BOOM Projects (4) 25 August 2025 Transforming Energy for a Sustainable Future Relative Natural Gas Production Growth Forecast (2020 to 2050) Enerflex Geographies (1) Enerflex Key Offices Ener ...

Enerflex Ltd. Corporate Presentation All amounts presented in US Dollars unless otherwise stated North America Latin America Eastern Hemisphere Enerflex at a Glance TSX / NYSE EFX / EFXT Annual dividend CAD$0.15/sh Market Cap (2) CAD$1.4 B Dividend Yield (2) 1.3% Operating Years 45 Employees ~4,400 Core Countries (3) 7 BOOM Projects (4) 25 Transforming Energy for a Sustainable Future Relative Natural Gas Production Growth Forecast (2020 to 2050) Enerflex Geographies (1) Enerflex Key Offices Enerflex Manufac ...

Interim Condensed Consolidated Financial Statements Interim Condensed Consolidated Statements of Financial Position (unaudited) Interim Condensed Consolidated Statements of Earnings (Loss) and Other Comprehensive Income (Loss) (unaudited) | | | | | Three months ended March 31, | | | --- | --- | --- | --- | --- | --- | | ($ United States millions, except per share amounts) | Notes | | 2025 | | 2024 | | Revenue | 7,9 | $ | 552 | $ | 638 | | Cost of goods sold ("COGS") | 9 | | 424 | | 551 | | Gross margin | | ...

Corporate Governance - The Board of Directors of Enerflex Ltd. intends to initiate a search for a qualified independent director this year, consistent with good corporate governance [1] - The Board is committed to achieving at least 30% gender diversity on or before the Company's 2026 annual meeting [1] Financial Results - Enerflex plans to release its financial results and operating highlights for the three months ended March 31, 2025, prior to market open on May 8, 2025 [2] - The results will be communicated via news release and will be available on the Company's website and under its electronic profile on SEDAR+ and EDGAR [2] Conference Call - A conference call and audio webcast will be held on May 8, 2025, at 8:00 a.m. (MDT) to discuss the Company's results, followed by a question-and-answer period [3] - Participants can register for the call to receive dial-in numbers and a unique PIN [4] Company Overview - Enerflex is a premier integrated global provider of energy infrastructure and energy transition solutions, focusing on natural gas, low-carbon, and treated water solutions [8][9] - The Company employs over 4,600 engineers, manufacturers, technicians, and innovators, united by a vision of transforming energy for a sustainable future [9] - Enerflex remains committed to the future of natural gas and supports sustainability offerings to aid in energy transition and decarbonization efforts [9]

Core Viewpoint - Enerflex Ltd. has received approval from the Toronto Stock Exchange to implement a normal course issuer bid (NCIB) for repurchasing its common shares, which the company believes will be beneficial for its cash resources and shareholders [1][2]. Group 1: NCIB Details - The company is authorized to repurchase up to 6,159,695 common shares, approximately 5% of the public float as of March 18, 2025 [3]. - The NCIB will commence on April 1, 2025, and will terminate no later than March 31, 2026 [4]. - The daily maximum number of shares that can be purchased is 109,475, based on 25% of the average daily trading volume on the TSX [5]. Group 2: Purchase Mechanism - Purchases will be made in accordance with regulatory requirements through various exchanges, and the price will reflect the market price at the time of acquisition [4][5]. - Enerflex has established an automatic share purchase plan (ASPP) with its designated broker, allowing the broker to make purchases at its discretion based on set parameters [6]. Group 3: Company Overview - Enerflex is a global provider of energy infrastructure and energy transition solutions, focusing on natural gas and sustainability [10]. - The company employs over 4,600 professionals dedicated to transforming energy for a sustainable future [10].

Leadership Transition - Marc Rossiter has stepped down as President, CEO, and Director of Enerflex, effective immediately [2][5] - Preet Dhindsa, the current Senior Vice President and CFO, has been appointed as Interim CEO [3][5] - The Board is conducting a comprehensive search for a permanent CEO with the assistance of an executive search firm [4] Company Strategy and Outlook - Enerflex reaffirms its outlook for 2025, expecting steady demand across its business lines and geographic regions [7] - The company aims to enhance profitability, leverage its position in core operating countries, and maximize free cash flow [6] - Approximately 65% of Enerflex's gross margin before depreciation and amortization is generated from its Energy Infrastructure product line and After-Market Services [7][12] Financial Performance and Shareholder Returns - Enerflex plans to increase direct shareholder returns, including a previously announced 50% increase in its quarterly dividend [6] - The company intends to implement a normal course issuer bid, subject to market conditions [6][18] - Total capital expenditures for 2025 are projected to be between $110 million and $130 million, with growth capital spending focused on customer-supported opportunities in the US and Middle East [12][14] Management Background - Preet Dhindsa has over 25 years of experience in the energy and financial services industries and has been with Enerflex since October 2023 [3][9] - Joe Ladouceur, who will serve as Interim CFO, has over 30 years of experience in finance and energy industries [3][10]

Financial Data and Key Metrics Changes - Enerflex reported consolidated revenue of $561 million in Q4 2024, a decrease from $574 million in Q4 2023 and $601 million in Q3 2024 [19] - Gross margin before depreciation and amortization was $174 million or 31% of revenue, compared to $158 million or 28% in Q4 2023 and $176 million or 29% in Q3 2024 [19] - Adjusted EBITDA increased to $121 million from $91 million in Q4 2023 and remained stable compared to $120 million in Q3 2024 [19] - Free cash flow was $76 million, down from $139 million in Q4 2023, which included a working capital recovery of $112 million [21] Business Line Data and Key Metrics Changes - Energy Infrastructure and After-Market Services generated 69% of gross margin before depreciation and amortization in 2024, indicating their importance to profitability [6] - After-Market Services gross margin before depreciation and amortization was 22% in Q4 2024, benefiting from strong customer maintenance programs [20] - Engineered Systems recorded bookings of $301 million, with a total backlog holding steady at $1.3 billion [14][15] Market Data and Key Metrics Changes - The United States accounted for 45% of consolidated revenue in 2024, with Canada and Mexico contributing 10% and 3%, respectively [9] - The U.S. contract compression business showed strong fundamentals, with utilization in the mid-90% range for both the quarter and full year 2024 [11] Company Strategy and Development Direction - Enerflex's priorities for 2025 include enhancing profitability of core operations, leveraging its position to capitalize on expected increases in natural gas and produced water volumes, and maximizing free cash flow [17] - The company aims to maintain a disciplined capital program with total capital expenditures of $110 million to $130 million in 2025 [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the operational performance and the ability to generate sustainable returns, despite geopolitical tensions and potential tariff impacts [8][30] - The company is focused on generating sustainable free cash flow and improving balance sheet health for long-term growth [28] Other Important Information - Enerflex exited Q4 2024 with net debt of $616 million, having redeemed $62.5 million of its 9% notes due October 2027 [22][23] - The company plans to increase dividends starting Q1 2025, reflecting its improved leverage ratio [27] Q&A Session Summary Question: What is preventing a more prescriptive capital allocation strategy now that the debt target range has been hit? - Management acknowledged comfort with operations and emphasized the importance of maintaining flexibility in capital allocation while staying within the committed CapEx range [34][36] Question: Can you elaborate on expectations for Engineered Systems margins and when normalization might occur? - Management indicated that margins are expected to normalize progressively as the backlog is executed, influenced by the mix of compression and processing bookings [51][53] Question: What are the potential impacts of tariffs on the business? - Management stated that tariff impacts are largely a supply chain issue, with proactive measures in place to mitigate potential cost increases [63][70] Question: Is it too soon to discuss further M&A for the company? - Management indicated it is too early for new M&A discussions, expressing satisfaction with current operations and focusing on organic growth [78][80] Question: How is the dynamic between Canada and the U.S. regarding natural gas prices affecting operations? - Management noted steady demand in the U.S. and a cautious approach in Canada due to potential tariff impacts, but expressed confidence in the Canadian operations for 2025 [81][87]

Revenue and Financial Performance - Enerflex's consolidated revenue from the EI product line is expected to generate approximately $1.5 billion during its current terms, accounting for about 65% of gross margin before depreciation and amortization [16]. - The ES product line has a backlog of approximately $1.3 billion as of December 31, 2024, with most expected to convert into revenue over the next 12 months [17]. - Adjusted EBITDA for the three months ended December 31, 2024, was $121 million, compared to a net loss of $95 million for the same period in 2023 [27][30]. - For the twelve months ended December 31, 2024, Enerflex reported an adjusted EBITDA of $432 million, up from $378 million in 2023 [31][33]. - Cash provided by operating activities for Q4 2024 was $113 million, a decrease of 28.5% from $158 million in Q4 2023 [36]. - Free cash flow for the twelve months ended December 31, 2024, was $222 million, significantly up from $95 million in the previous year, representing a 134.7% increase [36]. - The gross margin before depreciation and amortization is expected to remain consistent with the historical long-term average for the ES product line [42]. Capital Expenditures and Investments - Enerflex is targeting total capital expenditures of $110 million to $130 million in 2025, including approximately $70 million for maintenance and PP&E capital expenditures [19]. - Enerflex expects total capital expenditures in 2025 to be between $110 million and $130 million, with approximately $70 million allocated for maintenance and PP&E [42]. Shareholder Returns and Dividends - The company announced a 50% increase in its quarterly dividend, reflecting its commitment to providing meaningful direct shareholder returns [20]. - The dividend payout ratio for Q4 2024 was 2.6%, compared to 1.4% in Q4 2023, indicating an increase in the proportion of earnings distributed as dividends [36]. Business Strategy and Outlook - The company is focused on enhancing profitability and maximizing free cash flow to strengthen its financial position and support selective growth opportunities [14]. - Enerflex anticipates steady demand across its business lines and geographic regions for 2025, supported by strong fundamentals in contract compression in the USA [42]. - The medium-term outlook for Enerflex's ES products and services remains attractive, driven by expected increases in natural gas and produced water volumes [17]. - The company aims to further reduce debt and provide direct shareholder returns while creating long-term value for shareholders [42]. Geographic Revenue Contribution - Enerflex's operations in the USA generated 45% of consolidated revenue in 2024, while Canada and Mexico contributed 10% and 3%, respectively [18]. Debt Management - Enerflex's bank-adjusted net debt-to-EBITDA ratio is calculated to assess compliance with financial covenants related to its debt instruments [38].

Core Viewpoint - Enerflex Ltd. announces the retirement of W. Byron Dunn and Michael A. Weill from its Board of Directors effective January 1, 2025, in accordance with the company's Board Retirement Policy [1][2]. Group 1: Board Changes - The Board expresses gratitude to Byron and Mike for their significant contributions since the company's spinoff from Toromont, highlighting their role in establishing Enerflex as a leading provider of energy infrastructure and transition solutions [2]. - In preparation for the retirements, Joanne Cox has been appointed as Chair of the Human Resources and Compensation Committee, and Tom Tyree as Chair of the Nominating and Corporate Governance Committee [2]. Group 2: Company Overview - Enerflex is described as a premier integrated global provider of energy infrastructure and energy transition solutions, focusing on natural gas, low-carbon, and treated water solutions [3]. - The company employs over 4,600 professionals, including engineers, manufacturers, technicians, and innovators, all working towards the vision of transforming energy for a sustainable future [3]. - Enerflex remains committed to the future of natural gas while emphasizing sustainability and supporting energy transition and decarbonization efforts [3].