Core Insights - Enerflex reported a record adjusted EBITDA of $130 million for Q2/25, an increase from $122 million in Q2/24 and $113 million in Q1/25, driven by higher gross margins and operational efficiencies [4][11][25] - The company generated revenue of $615 million in Q2/25, slightly up from $614 million in Q2/24 and significantly higher than $552 million in Q1/25 [4][11] - Net earnings rose to $60 million or $0.49 per share in Q2/25, compared to $5 million or $0.04 per share in Q2/24 and $24 million or $0.19 per share in Q1/25 [4][11] Financial Performance - Gross margin before depreciation and amortization was $175 million, representing 29% of revenue, compared to $173 million (28%) in Q2/24 and $161 million (29%) in Q1/25 [4][11] - Selling, general and administrative expenses (SG&A) decreased to $61 million, down from $75 million in Q2/24, due to cost-saving initiatives [4][11] - Free cash flow was a use of cash of $39 million in Q2/25, compared to a use of cash of $4 million in Q2/24 and a source of cash of $85 million in Q1/25 [4][11][29] Backlog and Market Position - The Engineered Systems (ES) backlog remained steady at $1.2 billion, providing strong visibility into future revenue [10][15] - The Energy Infrastructure (EI) contract backlog was robust at $1.5 billion, expected to generate approximately $1.5 billion of revenue over their remaining terms [2][15] - Bookings for ES were $365 million in Q2/25, up from $331 million in Q2/24, indicating a healthy demand environment [10][15] Capital Expenditures and Shareholder Returns - Capital expenditures for 2025 are targeted at approximately $120 million, with about $60 million allocated for growth opportunities [2][5][18] - The company returned $18 million to shareholders in Q2/25 through dividends and share repurchases, with a quarterly dividend declared at C$0.0375 per share [19][21][20] Management Commentary and Outlook - Management expressed confidence in the company's ability to generate stable returns, supported by strong fundamentals in energy security and natural gas demand [9][14] - The company aims to enhance profitability, leverage its market position, and maximize free cash flow to strengthen its financial position [14][15]

Financial Performance - Enerflex reported revenue of $552 million for Q1/25, a decrease from $638 million in Q1/24 and $561 million in Q4/24, primarily due to upfront revenue recognized in the previous year [3][5] - Adjusted EBITDA for Q1/25 was $113 million, up from $69 million in Q1/24 and $121 million in Q4/24, attributed to costs recognized in the prior year [3][7] - Free cash flow increased to $85 million in Q1/25 compared to $72 million in Q1/24, driven by lower maintenance capital spending [3][26] Operational Highlights - The company maintained a gross margin before depreciation and amortization of $161 million, representing 29% of revenue, compared to 19% in Q1/24 [3][7] - Enerflex's backlog included $1.5 billion in Energy Infrastructure (EI) contracts and $1.2 billion in Engineered Systems (ES) as of March 31, 2025, providing solid operational visibility [1][10] - The U.S. contract compression business generated $36 million in revenue with a gross margin of 72% during Q1/25, consistent with previous quarters [3][6] Balance Sheet and Liquidity - The company reduced its bank-adjusted net debt-to-EBITDA ratio to 1.3x at the end of Q1/25, down from 2.2x at the end of Q1/24 [1][6] - Enerflex exited Q1/25 with net debt of $564 million, a reduction of $179 million compared to Q1/24 [6][7] - Cash provided by operating activities was $96 million, including a net working capital recovery of $34 million [3][27] Management Commentary - The interim CEO highlighted the strong performance of the EI and After-Market Services (AMS) business lines, emphasizing the company's ability to generate sustainable returns [4] - The interim CFO noted that the company repaid an additional $74 million of debt during Q1/25, reflecting strong operational execution and disciplined capital allocation [4][6] Outlook - Enerflex expects its EI product line and AMS to account for approximately 65% of gross margin before depreciation and amortization during 2025 [10][12] - The company anticipates that the majority of the ES product line backlog will convert into revenue over the next 12 months [11][12] - Capital expenditures for 2025 are targeted between $110 million and $130 million, focusing on customer-supported opportunities primarily in the USA [14][32]