Enerflex(US:EFXT)2023-11-09 22:00Financial Data and Key Metrics Changes - Consolidated third quarter revenues reached CAD 778 million, driven by strong performance from recurring businesses and the North American Engineered Systems product line [9] - Adjusted EBITDA for the third quarter was CAD 122 million, impacted by foreign exchange losses of CAD 17 million related to the Argentine peso [20][22] - Cash provided by operating activities was CAD 71 million, reflecting a positive swing of CAD 75 million compared to the previous quarter [14] - The bank adjusted net debt-to-EBITDA ratio improved to 2.7x at the end of Q3 from 3.3x at the end of 2022, with a target of under 2.5x by year-end 2023 [11][12] Business Line Data and Key Metrics Changes - Energy Infrastructure contributed approximately 40% of gross margin during the quarter, with stable results and high utilization rates of 93% for the U.S. contract compression fleet [31] - Engineered Systems bookings totaled CAD 560 million in the quarter, bringing the year-to-date total to CAD 1.4 billion, an increase of approximately CAD 500 million year-over-year [29] - After-market Services gross margin was 17% in Q3 2023, down from 20% in the prior quarter, due to a higher proportion of part sales [18] Market Data and Key Metrics Changes - Approximately 60% of Enerflex's gross margin was generated from recurring sources during the first nine months of 2023, with markets outside North America contributing 43% of total gross margin [26] - Strong customer activity levels were noted across three continents, particularly in North America for cryogenic and low-carbon solutions [30] Company Strategy and Development Direction - The company is focused on integrating Exterran and strengthening its financial position, with a disciplined capital program planned for 2024 [10][22] - Enerflex aims to optimize its geographic footprint and business platform, consolidating global manufacturing facilities from five to three [28] - The company is committed to debt reduction, synergy realization, and operational efficiency, with a target of achieving CAD 60 million in annual run rate synergies from the Exterran acquisition [27][22] Management's Comments on Operating Environment and Future Outlook - Management emphasized robust macro drivers for the business, including global energy security and the need for low-emissions natural gas [6] - The company expects performance in 2024 to be supported by recurring Energy Infrastructure and After-market Services product lines, along with a strong Engineered Systems backlog [22] - Management acknowledged the impact of foreign exchange volatility, particularly related to the Argentine peso, but noted strong operating cash flow from the Argentine business [21] Other Important Information - The company repaid CAD 41 million of long-term debt during the quarter, although reported long-term debt declined by only CAD 5 million due to currency effects [3][11] - A quarterly dividend of CAD 0.025 per share was declared, payable on January 10 to shareholders of record on November 21 [32] Q&A Session Summary Question: Can you provide insights on working capital and cash flow for Q4? - Management confirmed guidance and indicated that specific cash flow details for Q4 would be provided later [50][51] Question: What are the strengths and areas for optimization within the organization? - The new CFO highlighted a strong executive team and a focus on integration as key priorities [55] Question: How do you expect bookings in Canada to change in 2024? - Management anticipates more robust bookings in Canada due to macro drivers such as the Blueberry First Nations agreement and LNG Canada [60] Question: What is the expected direction of long-term debt from September 30 to year-end? - Management indicated a focus on debt repayment, expecting a similar paydown in Q4 as seen in Q3 [93] Question: Can you elaborate on the noncore asset sales? - The company sold noncore assets for approximately CAD 40 million, reinforcing its debt reduction priority [86][93]