Enerflex(EFXT) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenues increased by $820 million, with a significant portion of gross margin derived from recurring sources [30] - Adjusted EBITDA rose by $90 million, although impacted by foreign currency exposure [30][36] - The company ended 2022 with a net debt balance of approximately $1.1 billion and a bank-adjusted net debt-to-EBITDA ratio of 3.3x [37] Business Line Data and Key Metrics Changes - Engineered Systems bookings grew by nearly $550 million, expanding the backlog to a record $1.5 billion [30][33] - The North American contract compression fleet maintained high utilization rates averaging over 95% in Q4 [31] - The energy transition team secured over $160 million in bookings primarily related to carbon capture projects [28] Market Data and Key Metrics Changes - The company noted that its business in Latin America and the Eastern Hemisphere is heavily leveraged towards recurring revenue sources, particularly in energy infrastructure [9] - The North American Engineered Systems business is less impacted by recent weakness in natural gas prices due to its focus on energy infrastructure [32] Company Strategy and Development Direction - The company aims to maximize cash flow generation to deleverage quickly, with three of four major infrastructure projects now in commercial operation [33] - The integration of Exterran is a strategic priority, with $40 million of the targeted $60 million in synergies already captured [42][49] - The company is focused on providing low-carbon solutions and capitalizing on global opportunities while managing market volatility [41][43] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving debt reduction targets by the end of the year, with a clear line of sight to meeting these goals [34][37] - The company anticipates that demand for energy transition solutions will grow significantly as customers seek to minimize their environmental footprint [29] - Management acknowledged ongoing challenges related to foreign exchange impacts, particularly in Argentina, but remains optimistic about the region's long-term potential [90][92] Other Important Information - The company declared a dividend of $0.025 per share, payable on April 6, 2023 [63] - Adjusted EBITDA for Q4 was reported at $86 million, with foreign exchange losses impacting results [36] Q&A Session Summary Question: Can you provide details on the synergy realizations and backlog expectations? - Management confirmed that the $60 million synergy target remains unchanged, with $40 million realized ahead of schedule [53][54] - The backlog for Engineered Systems is healthier than expected, with strong bookings indicating positive momentum [54] Question: How is the company managing foreign exchange risks, particularly in Argentina? - Management indicated that the $18 million loss from foreign exchange was primarily due to the devaluation of the Argentinian peso, with expectations to manage this more effectively going forward [90][92] Question: What are the expectations for organic CapEx and shareholder returns post-deleveraging? - The focus remains on deleveraging below a 2.5x leverage ratio before considering significant discretionary growth CapEx or shareholder returns [98][111]