Q4 2023 Enerflex Ltd Earnings Call

Operator: Good day, and thank you for standing by. Welcome to the Enerflex fourth quarter 2023 earnings conference call. At this time, all participants are in a listen only mode.

Good day, and thank you for standing by and welcome to the inter Flex fourth quarter 2023 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone you will then hear him.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star one on your telephone. You will then hear an automated message advising that your hand is raised.

<unk> made it message advising your hands raised.

Operator: To withdraw your question, please press star 11 again. Please be advised that today's conference is over. I would now like to hand the conference over to your first speaker today, Jeff Fetterly, Vice President of Corporate Development and Investor Relations. Please go ahead.

To withdraw your question. Please press star one again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your first speaker today, just federally vice president of corporate and Investor.

Development and Investor Relations. Please go ahead Sir.

Jeffrey Eric Fetterly: Thank you and good morning, everyone. Welcome to our fourth quarter and year-end 2023 earnings call. With me today are Marc Rossiter, President and CEO, Preet Dhindsa, Interim CFO, and Ben Park, Vice President, Corporate Controller. During today's call, we'll speak to our fourth quarter and year-end results, outlook for 2024, and provide an update on how we are progressing on our near and long-term strategic priorities. Before I turn it over to Marc, I'll remind everyone that today's discussion will include non-IFRS and other financial measures, as well as forward-looking statements regarding Enerflex's expectations for future performance and business prospects. Forward-looking information involves risks and uncertainties, and the stated expectations could differ materially from actual results or performance. For more information, refer to the advisory statements within our news release, MD&A, and other regulatory filings, all available on our website and under our CDAR Plus and EDGAR profiles. All dollar amounts discussed today are in Canadian dollars unless otherwise stated.

Thank you and good morning, everyone welcome to our fourth quarter and year end 2023 earnings call with me today are Mark <unk>, President and CEO pre Kinder interim CFO and Ben Park, Vice President corporate controller.

During today's call will speak to our fourth quarter and year end results outlook for 2024 and provide an update on how we're progressing on our near and long term strategic priorities before I turn it over to Marc I'll remind everyone that today's discussion will include non IRS and other financial measures as well as forward looking statements regarding enter flex.

Its expectations for future performance and business prospects.

Forward looking information involve risks and uncertainties and the stated expectations could differ materially from actual results or performance for more information refer to the advisory statements within our news release MD&A and other regulatory filings all available on our website and under our SEDAR and Edgar profiles all dollar amounts.

Discussed today are in Canadian dollars, unless otherwise stated I'll now turn it over to our president and CEO Marc Rossiter.

Marc Edward Rossiter: I'll now turn it over to our President and CEO, Marc Rossiter. Thanks, Jeff, and thank you all for joining us on this morning's call. Yesterday, Enerflex reported its fourth quarter and year-end 2023 results, which reflect a strong finish to the year and solid operating results across our geography. Our energy infrastructure and aftermarket services business lines demonstrated steady performance in 2023 and are positioned to continue driving stable, sustainable returns thanks to Enerflex's diversified global footprint. Approximately two-thirds of Enerflex's gross margin before depreciation and amortization, both for Q4 and full year 2023, was generated from recurring sources, and markets outside North America contributed approximately 50% of our total gross margin during this period. Our engineered systems product line achieved record annual revenue during 2023 and successfully navigated a volatile supply chain environment to deliver solid margins.

Thanks, Jeff and thank you all for joining us on this morning's call yesterday and reflects reported its fourth quarter and year end 2023 results, which reflect a strong finish to the year and solid operating results across our geographies.

Our energy infrastructure and aftermarket services business lines demonstrated steady performance in 2023 and are positioned to continue driving stable sustainable returns. Thanks to enter flex a diversified global footprint.

Proximately two thirds of <unk> gross margin before depreciation and amortization both for Q4 and full year 2023 was generated from recurring sources and markets outside North America contributed approximately 50% of our total gross margin during this period.

Our engineered systems product line achieved record annual revenue during 2023 and successfully navigated a volatile supply chain environment to deliver solid margins.

Marc Edward Rossiter: Touching briefly on the quarter, Enerflex delivered adjusted EBITDA of $126 million and free cash flow of $185 million, demonstrating the strength and continued momentum from our existing businesses, as well as the engineered systems product line. Energy infrastructure is generating stable results, and we continue to evaluate opportunities to maximize performance across our geographic platform. Our U.S. contract compression asset is operating at high utilization rates, averaging 93% in the fourth quarter.

Touching briefly on the quarter and reflects delivered adjusted EBITDA of $126 million and free cash flow of $185 million.

Trading the strength and continued momentum from our recurring businesses as well as the engineered systems product line.

Energy infrastructure is generating stable results and we continue to evaluate opportunities to maximize performance across our geographic platform.

Our U S contract compression asset is operating at high utilization rates, averaging 93% in the fourth quarter.

Marc Edward Rossiter: The aftermarket services business is benefiting from increased activity levels, price adjustments, and continued strong demand for spare parts and services. We recorded Engineered Systems bookings of $327 million in the quarter and $1.7 billion for the year, reflecting demand across three continents and solid client activity levels. However, bookings during the fourth quarter reflect a CCUS project that was cancelled after our client was unable to secure required pipeline approval.

The aftermarket services business is benefiting from increased activity levels.

Adjustments and continued strong demand for spare parts and services.

We recorded engineered systems bookings of $327 million in the quarter and $1 7 billion for the year, reflecting demand across three continents and solid client activity levels.

However, bookings during the fourth quarter reflect a <unk> project that was canceled after our client was unable to secure required pipeline approvals.

Marc Edward Rossiter: The project was originally booked for 2022. Despite the cancellation, Enerflex continues to see strong client activity across the regions, including the United States. We are especially pleased with the success of our cryogenic natural gas processing business line, with Enerflex receiving orders for five large-scale facilities in 2023 and an additional facility award in early 2024. This is a reflection of our expanded product offerings stemming from the Xperian transaction. As we enter 2024, visibility across our business is strong, supported by contract coverage across our energy infrastructure assets, the recurring nature of aftermarket service, and a $1.5 billion engineering systems backlog. Shifting to the integration of Xterran, we are in the homestretch with efforts focused on final systems integration.

Project was originally booked in 2022, despite the cancellation and reflects continues to see strong client activity across our regions, including the United States, We were especially pleased with the success of our cryogenic natural gas processing business line with enter flex receiving orders for five large scale facilities during 2023.

And additional facility award in early 2024. This is a reflection of our expanded product offerings stemming from the external transaction.

As we enter 2020 for visibility across their business is strong supported by contract coverage across our energy infrastructure assets. The recurring nature of aftermarket service and a $1 5 billion engineered systems backlog.

Shifting to the integration of Exterran, we're in the homestretch with efforts focused on final systems integration.

Marc Edward Rossiter: We have updated our synergy guidance to reflect annual run rate synergies, having exceeded our previous target of $60 million U.S. Recent achievements include the streamlining of our global manufacturing footprint, exiting several non-core geographies, and monetization of non-core assets. We expect these actions, coupled with their focus on further enhancing the profitability of our core operations, to enable continued debt reduction throughout 2024 and enhance Enerflex's ability to deliver shareholder returns in the mid to long term. We remain committed to enhancing our financial position, repaying $167 million of long-term debt in the quarter and reducing our leverage ratio to 2.3 at the end of December, consistent with our guidance. Our focus remains on strengthening the balance sheet and enhancing the company's financial flexibility. We were pleased to recently announce the appointment of Preet Dhindsa as Senior Vice President and CFO, effective March 1st.

We have updated our synergy guidance to reflect annual run rate synergies, having exceeded our previous target of $60 million U S.

Recent achievements include the streamlining of our global manufacturing footprint exiting several noncore geographies and monetization of non core assets we.

We expect these actions coupled with their focus on further enhancing the profitability of our core operations to enable continued debt reduction throughout 2024, and enhanced <unk> ability to deliver shareholder returns in the mid to long term.

We remain committed to enhancing our financial position repaying $167 million of long term debt in the quarter and reduced our leverage ratio to two three at the end of December consistent with our guidance our focus remains on strengthening the balance sheet and enhancing the company's financial flexibility.

We were pleased to recently announced the appointment of pre Pinza as senior Vice President and CFO effective March one.

Marc Edward Rossiter: Preet has provided solid leadership and financial stewardship since joining Enerflex in October, and I'm excited to welcome him as our CFO at this important time for our company. We look forward to his continued leadership of Enerflex's strong global financial organization as we continue to unlock the benefits of the Xeron acquisition and position our company for long-term growth and value creation. Before I turn the call over to Preet, I want to emphasize that the underlying macro drivers for our business are strong, with the ongoing focus on global energy security and the growing need for low-emission natural gas resulting in strong demand for Enerflex's energy infrastructure and energy transition solutions. With that, I'll turn it over to Preet to speak to the financial highlights of the quarter and provide an update on Enerflex's outlook for 2024 Thanks, Marc, and good morning, everyone.

<unk> has provided solid leadership and financial stewardship since joining enter flex in October and I'm excited to welcome him as our CFO at this important time for our company.

We look forward to his continued leadership of enter flexes strong global Finance organization as we continue to unlock the benefits of the Exterran acquisition and position our company for long term growth and value creation.

Before I turn the call over to Pete I want to emphasize that the underlying macro drivers for our business are strong.

With the ongoing focus on global energy security and the growing need for low emissions natural gas, resulting in strong demand for <unk> energy infrastructure and energy transition solutions.

With that I'll turn it over to Pete to speak to the financial highlights of the quarter and provide an update on <unk> outlook for 2024.

Thanks, Mark and good morning, everyone I'm pleased to continue my work at annual Flex and help unlock the business its full potential so that benefit our shareholders customers employees and other stakeholders.

Preet Dhindsa: I'm pleased to continue my work at Enerflex and help unlock the business' full potential for the benefit of our shareholders, customers, employees, and other stakeholders. My efforts will be focused on supporting the execution of our global strategy, improving the profitability and resiliency of the business, generating sustainable free cash flow, and strengthening our financial position. Turning to our financial results, Enerflex met or exceeded all of its full year 2023 financial guidance metrics, as last provided with our third quarter results in November. During the fourth quarter, consolidated revenue of $782 million was largely consistent with third quarter levels and driven by continued strong performance from Enerflex's recurring business.

Our efforts will be focused on supporting the execution of our global strategy, improving the profitability and resiliency of the business generating sustainable free cash flow and strengthening our financial position.

Turning to our financial results and reflects met or exceeded all of its full year 2023 financial guidance metrics as last provided with our third quarter results in November.

During the fourth quarter consolidated revenue of $782 million was largely consistent with third quarter levels and driven by continued strong performance from men reflects recurring businesses.

Preet Dhindsa: Gross margin before depreciation and amortization, or DNA, increased to $216 million, or 28% of revenue, compared to $201 million, or 26% of revenue in Q3 2023. Energy infrastructure and aftermarket services product lines generated 67% of consolidated gross margin before D&A during the fourth quarter of 2023, which is comparable with the third quarter. Energy infrastructure gross margin before DNA of $104 million was relatively consistent with the previous quarters in the

Gross margin before depreciation and amortization or DNA increased to $216 million or 28% of revenue compared to $201 million or 26% of revenue in Q3 2023.

Energy infrastructure aftermarket services product lines generated 67% of consolidated gross margin before D&A during the fourth quarter 2023, which is comparable with the third quarter.

Energy infrastructure gross margin before D&A of $104 million was relatively consistent with the previous quarters in the year.

In engineered systems, our gross margin before G&A improved to 18% as we execute on higher margin backlog.

Preet Dhindsa: In engineered systems, our gross margin before DNA improved to 18% as we executed on a higher-margin backlog. And our aftermarket services gross margin before D&A was 22% in the quarter, the highest level in over two years, and reflected in increased activity levels, inflationary price adjustments, and continued strong demand for spare parts. Enerflex's SG&A of $102 million declined $13 million from the third quarter, which was largely driven by lower compensation costs.

And our aftermarket services gross margin before D&A was 22% in the quarter the highest level in over two years and reflected by the increased activity levels inflationary price adjustments and continued strong demand for spare parts.

And flex is SG&A of 102000 $102 million declined $13 million from the third quarter, which was largely driven by lower compensation costs.

Foreign exchange losses, which were previously included in SG&A are now presented as a separate line item on our income statement.

Transaction restructuring integration costs were $25 million in Q4 compared to $6 million in Q3, as we incurred costs right to consolidate our operations and integrating systems.

Preet Dhindsa: Foreign exchange losses, which were previously included in the SG&A, are now presented as a separate line item on our income statement. Transaction restructuring integration costs were $25 million in Q4 compared to $6 million in Q3, as we incurred costs related to consolidating our operations and integrating systems. We expect to incur approximately $30 million in restructuring and integration costs during 2024. As Marc mentioned, we're in the homestretch of completing the integration, with efforts focused on final systems integration. Our adjusted EBITDA was $126 million in the fourth quarter, compared to $122 million in Q3. However, adjusted EBITDA was reduced this quarter by $39 million, resulting from losses related to foreign exchange and associated instruments, principally in Argentina.

We expect to incur approximately $30 million of restructuring and integration costs. During 2004 as Mark mentioned, we're in the homestretch of completed the integration with efforts focused on final system integration.

Our adjusted EBITDA was $126 million in the fourth quarter compared to $122 million in Q3.

Adjusted EBITDA was reduced this quarter by $39 million, resulting from losses related to foreign exchange and associated instruments, principally in Argentina.

We generated $4 million and offsetting interest income that is reported in net finance costs and excluded from adjusted EBITDA.

And in Flex continues to manage foreign exchange volatility and are implementing measures to reduce exposure to the Argentine peso.

Excluding the impact of foreign exchange, our business in Argentina continues to perform well and generate strong operating cash flow for the business.

Cash provided by operating activities was $209 million.

Which included in working capital recovery of $144 million in the third quarter, we generated $71 million of cash from operations, including $15 million from the recovery of working capital.

Preet Dhindsa: We generate $4 million in offsetting interest income that is reported in net finance costs and excluded from adjusted evidence. Enerflex continues to manage foreign exchange volatility and is implementing measures to reduce exposure to the Argentine peso. Excluding the impact of foreign exchange, our business in Argentina continues to perform well and generate strong operating cash flow for the business. Cash provided by operating activities was $209 million, which included a working capital recovery of $144 million. In the third quarter, we generated $71 million of cash from operations, including $15 million from the recovery of working capital. We are pleased with our ongoing global efforts to more efficiently manage working capital and target further progress in 2024, although we do not expect that the magnitude of the recovery realized during Q4 will be repeated. We've also introduced free cash flow as a key performance measure for our company. Free Cash Flow helps readers assess the level of free cash available to fund other non-operating activities such as growth and capital expenditures.

We are pleased with our ongoing global efforts to more efficiently manage working capital and target further progress at 2024, although we do not expect that the magnitude of the recovery realized during Q4 will be repeated.

We've also introduced free cash flow as a key performance measure for our company.

Free cash flow helps readers assessed the level of free cash available to fund other nonoperating activities such as growth capital expenditures.

Discretionary debt repayments.

Share repurchases and or incremental dividends.

During the fourth quarter and reflects generated $185 million of free cash flow compared to a use of cash of $46 million and.

In the comparable quarter of 2022.

Including free cash flow for the fourth quarter as the benefit of $52 million related to unrealized changes in foreign exchange and short term investments.

While we do not experience an outflow of cash associated with these unrealized losses the impact cash available to fund other nonoperating activities.

We invested $24 million in the business during the fourth quarter, including $6 million of growth investments and returned $3 million to shareholders through dividends.

Preet Dhindsa: Discretionary debt repayment, share repurchases, and or incremental dividends. During the fourth quarter, Enerflex generated $185 million of free cash flow compared to a use of cash of $46 million in the comparable quarter of 2022. Also, including free cash flow for the fourth quarter is the benefit of $52 million related to unrealized changes in foreign exchange and short-term investments.

As Mark mentioned, our focus remains on strengthening the balance sheet and enhancing the company's financial flexibility.

We reduced net debt by $151 million during the quarter exiting the year at $1 1 billion and reduced our bank adjusted net debt to EBITDA reached two three times from two seven times at the end of Q3 and three three times at the end of 2022.

Preet Dhindsa: While we do not experience an outflow of cash associated with these unrealized losses, they impact cash available to fund other non-operating activities. We invested $24 million in the business during the fourth quarter, including $6 million of growth investments, and returned $3 million to shareholders through dividends. As Marc mentioned, our focus remains on strengthening the balance sheet and enhancing the company's financial flexibility. We reduced net debt by $151 million during the quarter, exiting the year at $1.1 billion, and we reduced our bank-adjusted net debt to EBITDA ratios 2.3 times, from 2.7 times at the end of Q3 and 3.3 times at the end of 2022.

<unk> will continue to focus on debt reduction global cash management, and lowering net finance costs in 2024, which will improve our ability to provide shareholder returns over the medium and long term.

We continue to evaluate our target long term capital structure and capital allocation parameters and expect to provide more clarity in the coming months.

Let me shift to our outlook for 2024.

Operating results will be underpinned by the highly contracted energy infrastructure product line and the recurring nature of aftermarket services, which together are expected to account for 55% to 65% of gross margin before depreciation and amortization.

Complementing enter flex as recurring revenue businesses in the engineered systems project product line, which carried a backlog of $1 5 billion at December 31 2023.

Preet Dhindsa: Enerflex will continue to focus on debt reduction, global cash management, and lowering net finance costs in 2024, which will improve our ability to provide shareholder returns over the medium and long term. We continue to evaluate our target long-term capital structure and capital allocation parameters and expect to provide more clarity in the coming weeks. Let me shift to our outlook for 2024. Operating results will be underpinned by the highly contracted energy infrastructure product line and the recurring nature of aftermarket services, which together are expected to account for 55 to 65% of gross margin before depreciation and amortization. Complementing Enerflex's recurring revenue businesses is the Engineered Systems product line, which carried a backlog of $1.5 billion as of December 31, 2020. The company expects the majority of its backlog to convert into revenue over the next 12 months.

The company expects the majority of its backlog to convert into revenue over the next 12 months.

And reflects a targeting a disciplined capital program in 2024 with total capital expenditures expenditures that U S $90 million to $110 million.

This includes a total of approximately 70 million for maintenance in <unk> capital expenditures.

Investing to expand our energy infrastructure business in 2024 is discretionary and will be allocated to customers supported opportunities that are expected to generate attractive returns and deliver value to <unk> shareholders.

Finally, and reflects is committed to delivering a sustainable dividend to shareholders with our board declared a quarterly dividend of $2.05 per share.

The dividend is payable on May one 2024 to shareholders of record March 13 2024.

I'll conclude by saying that with the Florida and reflects strong global leadership team and talented employees, we are proving that profitability and resiliency of our overall business with the objective to generate sustainable free cash flow I.

Preet Dhindsa: Enerflex is targeting a disciplined capital program in 2024 with total capital expenditures of U.S. $90 to $110 million. This includes a total of approximately $70 million for maintenance and PP&E capital expenditures. Investing to expand our energy infrastructure business in 2024 is discretionary and will be allocated to customer-supported opportunities that are expected to generate attractive returns and deliver value to Enerflex shareholders. Finally, Enerflex is committed to delivering a sustainable dividend to shareholders, with our board declaring a quarterly dividend of two and a half cents per share. The dividend is payable on May 1, 2024 to shareholders of record on March 13, 2024.

I am pleased to continue by work it reflects and help unlock the businesses to full potential for the benefit of our shareholders customers employees and other stakeholders with that over to Mark for closing remarks.

Quick questions first thing.

Okay.

Thank you.

As a reminder to ask a question you will need to press star one on your telephone to withdraw your question. Please press star one again, please wait for your name to be announced please standby, while we compile the Q&A roster one moment for your first question. Please.

And our first question will come from the line of Aaron Macneil with TD Cowen. Your line is now open.

Good morning, Thanks for taking my questions. Mark you mentioned you hit the cost synergy target on the homestretch on integration activities.

Marc Edward Rossiter: I'll conclude by saying that with the help of Enerflex's strong global leadership team and talented employees, we're improving the profitability and resiliency of our overall business with an objective to generate sustainable free cash. I'm pleased to continue my work at Enerflex and help unlock the business's full potential for the benefit of our shareholders, customers, employees, and other stakeholders. With that, over to you, Marc, for closing remarks. Big questions, per thing. Thank you. As a reminder, to ask a question, you'll need to press star 1-1 on your telephone. To withdraw your question, please press star 1-1 again. Please wait for your name to be announced.

Activities.

I guess it sort of begs the question of how Youre thinking about the market position of the combined business going forward and maybe more specifically are there new end market opportunities to exploit that either standalone enter flex or exterran wouldn't have been as good of a position to capture and I.

I guess, how would you assess your competitive position across the various end markets and geographies today.

Aaron in the Eastern Hemisphere, and Latin America, specifically the transaction has allowed us to become.

<unk>.

The largest market share in our particular product line in those geographies. So that's that's good and those businesses are highly focused on an energy infrastructure and like I said in my prepared remarks, our biggest focus right now is improving the operational effectiveness of that energy infrastructure.

Operator: Please stand by while we compile the Q&A roster. One moment for our first question, and our first question will come from the line of Aaron MacNeil with TD Cowan. Your line is now.

Marc Edward Rossiter: Morning, and thanks for taking my question. Marc, you mentioned you hit the cost interview target, you're on the home stretch, www. EnerflexLtd.com. I guess it sort of begs the question of how you're thinking about the market, combined business going forward? And maybe more specifically, are there any www.

So our increased scale.

It should allow us to save some money in operations and supply chain and also for the last number of years and reflects an external customers had been coming to us with increasingly large projects increasingly complicated projects and the combined team is much more well set up right now to co invest with our client partners in those large.

Marc Edward Rossiter: Enerflex.com wouldn't have been in as good of a position to capture and I guess, how would you assess your competitors? www.kenhub.com, Aaron, in the Eastern Hemisphere, in Latin America specifically, the transaction has allowed us to become... to have the largest market share in our particular product line in those geographies. So that's good.

More complicated projects down the road.

For now and throughout 2024 and into 2025, our focus really is on doing our best to improve gross margins and Oliver product lines, but the enhanced scale, especially in eastern Hemisphere, and Latin America will be a real catalyst for that activity in engineered systems.

Marc Edward Rossiter: And those businesses are highly focused on energy infrastructure. And like I said in my prepared remarks, our biggest focus right now is improving the operational effectiveness of that energy infrastructure. So our increased scale should allow us to save some money in operations and the supply chain. You know, also, for the last number of years, Enerflex and Xterra's customers have been coming to us with increasingly large projects, increasingly complicated projects, and the combined team is much better set up right now to co-invest with our client partners in those larger, more complicated projects down the road. You know, for now and throughout 2024 and into 2025, our focus really is on doing our best to improve gross margins in all of our product lines, but the enhanced scale, especially in the Eastern Hemisphere and Latin America, will be a real catalyst for that activity. In engineered systems, we were really quite happy to mention that we booked five cryogenic plants in 2023. More than half of those plants are destined for international destinations on an ex-work basis from our North American shops.

We were really quite happy to mention that we booked five cryo plants in 2023.

More than half of those plants are destined for international destinations on an export basis from our north American shops, so neither enter flex nor exterran would've been able on their own to do that volume of work in one year and indeed, it's the combined efforts of our Tulsa shop, and our Houston shop, and our Calgary shop in that.

<unk> effort, that's allowing us to address such a high volume of international and domestic demand for gas processing and compression. So I think it is good I mean, it was a consolidation play to realize synergies by once the synergies are realized which they are focus of management has to go towards leveraging the increased scale and size to <unk>.

<unk> gross margins and that's our that's our focus going forward.

Total SaaS on a similar vein.

Should we expect further dispositions beyond.

The manufacturing footprint announcements that you've done already.

If so what would you sort of characterize as core and noncore in the combined business.

We regularly review opportunities to optimize our geographic footprint and the business platform to ensure we are appropriately positioned in the market.

Marc Edward Rossiter: So neither Enerflex nor Xterra would have been able on their own to do that volume of work in one year. And indeed, it's the combined efforts of our Tulsa shop and our Houston shop and our Calgary shop and that concerted effort that's allowing us to address such a high volume of international and domestic demand for gas processing and compression. So I think it's good.

For now the best possible growth in gross margins and in revenue.

We operate in.

Several countries, where we have high.

High amounts of investment we've made over the past decade, some of those countries, especially for energy infrastructure specifically.

Marc Edward Rossiter: I mean, it was a consolidation play to realize synergies, but once the synergies are realized, which they are, the focus of management has to go towards leveraging the increased scale and size to improve gross margins. And that's our focus going forward. It makes total sense on a similar vein. We expect further dispositions beyond, you know, the manufacturing footprint done already. If so, what would you sort of characterize as core?

Added states Brazil.

Oman, Mexico, Bahrain and those are what I would call from an interest energy infrastructure point of view those are core countries.

We are not actively looking to sell assets in non core countries, but if we have people that approach us and people that have.

<unk> of those assets that would allow us to increase and reflects shareholder value in the short medium and long term than we would engage in those discussions.

Marc Edward Rossiter: We regularly review opportunities to optimize our geographic footprint and the business platform to ensure we're appropriately positioned in the market for, you know, to achieve the best possible growth and gross margins and revenue. And, you know, we operate in several countries where we have high levels of..., high amounts of investment we've made over the past decade. Some of those countries, especially for energy infrastructure, specifically, the United States, Brazil, Oman, Mexico, Bahrain, and those are what I would call, from an energy infrastructure point of view; those are core countries.

Okay.

It makes sense I guess.

More specifically on the water business like PUC, yes.

Core or non core how should we think about some of those in pieces I view it as quite core I mean, it represents over 10% of our EBITDA right. Now we've got two very successful projects that we completed in 2023 with core customers and a core country in the middle East Oman, and so I do believe their core.

On the customers of core in the geographies core and the technology is working really well and those assets I mean, they are infrastructure.

Marc Edward Rossiter: We are not actively looking to sell assets in non-core countries, but if we have people that approach us and people that have a valuation of those assets that would allow us to increase Enerflex shareholder value in the short, medium, and long term, then we would engage in those discussions. I guess, more specifically on the water business. Transcribed by https://otter.ai, [inaudible] I view it as quite core.

And this this transaction the strategic rationale was all about leaning into the infrastructure first strategy to provide that sustainable level of cash flow for our investors long term in the water business is very core to that message.

Understood. Thanks, Mark I'll turn it over.

Thank you. Thank you one moment for our next question. Please.

Our next question comes from the line of Carl <unk> with Stifel. Your line is now open.

Marc Edward Rossiter: I mean, it represents over 10% of ArribaDA right now. We've got two very successful projects that we completed in 2023 with core customers in a core country in the Middle East, Oman. And so I do believe they're core when the customers are core, and the geography is core, and the technology is working really well. And those assets, I mean, they are infrastructure.

Hi, good morning, all.

<unk> exited the year below your leverage target.

On a site to keep reducing debt.

Do you think about.

The level of leverage that this business can support over the longer term.

<unk> freight.

As you've noted we've done a fairly good job in a disciplined manner getting too under around two three times at the end of last year, we're going to continue paying down debt as our primary use of our use of capital there above and beyond any other maintenance capex was already called out.

Marc Edward Rossiter: And this transaction, the strategic rationale was all about leaning into the infrastructure first strategy to provide that sustainable level of cash flow for our investors over the long term, and the water business is very core to that message. Thanks, Marc.

And right now we are still working on determining our final our optimal capital structure and capital allocation parameters and over the coming months, we'll likely have points of view on that but right. Now we are heavily focused on reducing gross debt minimizing cash in the region. Therefore, net debt will start coming down and still focused on that.

Operator: Thank you. Thank you. One moment for our next question. Our next question comes from the line of Cole Pereira. The line is now. [inaudible] Unknown Executive, Nick Corcoran, Andrew Bradford, Ben Park, Rodney Gray, Stefan Ali, Cole Pereira, level of leverage. Well, hi, Preet.

Preet Dhindsa: As you noted, we've done a fairly good job in a disciplined manner of getting to under or around 2.3 times EBITDA as at the end of last year. We're going to continue paying down debt as our primary use of capital there above and beyond any other maintenance capex we've already called out. And right now, we are still working on determining our final or optimal capital structure and capital allocation parameters.

Key leverage metric so that's what we'll be doing over the next several months and then we will report back on where we think we need to be optimally in the coming months.

Got you that makes sense and then.

Maybe thinking about in tandem with that a longer term capital allocation update.

Can you guys just provide kind of a ranking on how you kind of think about maybe additional growth capex and dividends share buybacks, etc.

Preet Dhindsa: And over the coming months, we'll likely have points of view on that. But right now, we are heavily focused on reducing growth debt and minimizing cash in the region. Therefore, net debt will start coming down and still be focused on the key leverage metric. So that's what we'll be doing over the next several months. And then we will report back on where we think we need to be optimally in the coming. Thinking about it, www.

We.

We're going to reiterate a little pedantic on this front reducing debt this year as the priority.

Once we get into our target debt range.

We believe we will be in the 2025 timeframe, we will have the ability to.

Choose amongst those levers you mentioned in a way that we think can choose the best long term success for inter flex and create long term value for our shareholders.

Preet Dhindsa: EnerflexLtd.com. We, you know, Cole, we're going to reiterate, be a little pedantic on this front. Reducing debt this year is the priority. Once we get into our target debt range, which we believe will be in the 2025 timeframe, we'll have the ability to choose amongst those levers you mentioned in a way that we think ensures the best long-term success for Enerflex and creates long-term value for shareholders. One moment for our next.

Got you that makes sense, that's all for me Thanks, I'll turn it back.

Thank you one moment for our next question.

Our next question comes from the line of Tim Monticello with HEB capital markets. Your line is now open.

Hey, good morning, Amit.

First question just wanted to touch on Sandy congrats on getting over that line.

Preet Dhindsa: Our next question comes from the line of Tim Monachello with ATB Capital Markets. The first question I just wanted to touch on, Sanjay, congrats on getting over that line, but with still, I think, said pre 20 to 30 million of integration costs left in 2024. We've already realized that. Thank you.

But with still I think.

Said $20 million to $30 million of integration costs left in 2024 already.

Already realized 2 million U S of synergies.

Just a question of where does that synergy number ultimately land.

Sure.

Any comment on that would be helpful. Thanks.

Yes, we we note a little over 60, where we're landing on synergies and as you noted integration costs call it $30 million Canadian split.

Preet Dhindsa: Transcribed by https://otter.ai, number, http://TheBusinessProfessor.com, Comment on that would be: Yes, we know a little over 60 where we're landing on synergies. And as you noted, integration costs, call it 30 million Canadian split, probably evenly over the next three quarters of 2024. And my view generally is integration will be ending around 15-18 months after deal close, which is upon us in the next few months. And then less about integration synergies and integration costs, more about continuing to optimize and refine the business. That's what we're going to be focused on. And then we are integrated, we've got the two companies together, and we're operating as efficiently as possible and continuing to look for opportunities to refine our business. Okay, so it's safe to assume that you're most of the way there. Yes, we are most of the way there. The final leg of integration is largely systems-related, and we feel good about how we're going to transition the former Xterra onto our platform. And Tim, this is Marc.

Probably evenly over the next three quarters of 2024.

And it might be generally as integration will be ending around 15 to 18 months after deal close which is upon us in next few months and then less about integration synergies and integration costs more about continuing to optimize the refined business. That's what we're going to be focused and then we are integrated we have got the two companies together.

We are operating as efficiently as possible and continue to look for opportunities to refine our businesses.

Okay, so safe to assume that year, yes.

The way they are on synergies.

Yes, we are most of the way there the final leg of integration is largely systems related and we feel good about how we're going to transition former exterran onto our platform.

And Tim this is mark.

We're never done looking at cost efficiencies.

No. Good companies are ever done looking at ways to save costs and improve margins I think youll see us shift our discussions.

Marc Edward Rossiter: We're never done looking at cost efficiencies. You know, no good companies are ever done looking at ways to save costs and improve margins. I think you'll see us shift our discussions away from deal synergies and more on to how we make this a more effective, more profitable business over the long term. So we're not done looking for ways to reduce overheads and improve gross margins by a long shot. But I think you'll see us sort of moving off the synergy conversation and moving more on to being the most effective organization we can be long term. I'm glad you mentioned that because that touched on my next line of questioning.

<unk> from deal synergies and more onto how we make this a more effective more profitable business long term.

So we're not done looking for ways.

To reduce overheads and improve gross margins by a long shot but.

But I think youll see us sort of moving off the synergy conversation are moving more on to being the most effective organization, we can be long term.

I'm glad you mentioned that you touched on my next line of question. One is kind of mentioned Mark that margin improvement will be one of your top counter top priorities alongside debt reduction in 2024, and you talked about.

I guess, the low hanging fruit darrin.

Marc Edward Rossiter: You kind of mentioned, Marc, that margin improvement would be one of your top priorities alongside debt reduction. We talked about it. I guess there is a little hanging fruit there. I think you can do it.

You think you can do in terms of quantifying.

How much do you think margins can move.

Well sure I mean first of all I'd like to just point out.

Our financials have reported a pretty significant gross margin increase year over year I'd like to call. It our aftermarket services business put two points of margin year over year in their business. In addition to about 47% increase in topline our engineered systems business had a good year, we increased gross margins there almost by three points.

Marc Edward Rossiter: Bye. Well, sure. I mean, first of all, I'd like to just point out that our financials have reported a pretty significant gross margin increase year over year. I'd like to call it our aftermarket services business put, you know, two points of margin year over year in their business in addition to about a 47% increase in top line. Our engineered systems business, you know, had a good year. We increased gross margins there almost by three points.

So we've been executing and higher levels of gross margin as the market has been supportive of that.

It's a continued focus of ours to improve gross margins on energy infrastructure, our eastern Hemisphere business is underpinned by long term take or pay contracts. The best way to improve gross margins. There is by really doing their very best on Opex.

Marc Edward Rossiter: So we've been executing at higher levels of gross margin as the market has been supportive of that. It's a continued focus of ours to improve gross margins on energy infrastructure. Our eastern hemisphere business is underpinned by long-term take or pay contracts. The best way to improve gross margins there is by really doing our very best on OPEX, trying to be the premier operator that we know we are and continue to get better at that.

Trying to be the premier operator that no we are and continue to get better at that.

In Latin America, and our U S contract compression asset those are a little bit lower tenure terms and we have been benefiting from realizing higher market driven rates throughout 2023, and we see that that trend continuing in 2024. So it's really a combination of making sure that we're getting.

Marc Edward Rossiter: In Latin America, in our U.S. contract compression asset, those are a little bit lower tenor terms, and we have been benefiting from realizing higher market-driven rates throughout 2023, and we see that trend continuing in 2024. So it's really a combination of making sure that we're getting fairly paid for the talents and services that we bring to the table but also making sure that the new Enerflex is paying as close attention as possible to operating expenses. So, I mean, the operating expense side, I would imagine that features most heavily in the energy infrastructure part of the business, where you, I think that there are, you know, in any of the business lines, every point of cost reduction will have a significant impact on our free cash flow. And so we're trying to apply pressure to all of our staff and all of our business lines to get that increased margin. And then around CapEx for 2024, a significant amount of that is discretionary and seems like it's unallocated. So 70 million US is, That does not mean that.

Fairly paid for the talent and services that we bring to the table, but also making sure that the new enter flex is paying as close attention as possible to operating expenses.

So I mean, the operating expense side I would imagine that features most heavily in the energy infrastructure part of the business is that where you think you can see the gross margin improvement.

I think that there is in any of the business lines.

Every point of cost reduction will have a significant impact on our free cash flow and so we're trying to apply attention to all of our staff in all of our business lines to get that increased margin.

Okay.

And then around Capex for 2024.

It can amount of that is discretionary and simply on allocate so.

70 million U S sort of sustaining 99 bottom end of the range does that mean that $20 million already allocated.

That does not mean that.

Marc Edward Rossiter: I would say that roughly. We've got $30 million of growth capital earmarked, and we have allocated very little of that.

I would say that roughly.

We've got $30 million of growth capital earmarked and we have allocated very little of that.

Marc Edward Rossiter: So yeah, it hasn't been spent yet. Okay. And then

So yes, it hasnt been spent yet.

Okay and then.

You mentioned that there's been a lot of demand and probably one of the thrust of the.

Marc Edward Rossiter: You mentioned that there's a lot of demand and probably a rush of the Transcribed by https://otter.ai, https://www.kenhub.com, but you're focusing on de-leveraging. So does that mean you're focusing mostly on opportunities that are smaller in scale? And I would imagine, Are you talking about energy infrastructure specifically or any sort of growth opportunities? Yes, sorry, Caput.

The acquisition merger with Nextera was to be able to service larger projects, but.

<unk>.

Are you focusing on deleveraging in the near term. So does that mean, you're focusing mostly on the opportunities that are smaller in scale.

That those are mostly in the North American space.

Are you talking about energy infrastructure, specifically or any sort of growth opportunities, yes, sorry capex.

Marc Edward Rossiter: Oh, yeah, okay. We know that there is a very clear, easy to understand return for shareholders through debt reduction. So when we think about spending those discretionary dollars, the returns have to be significantly above the return realized if we reduce that. And they also would have to be quite strategic.

Energy Okay.

We know that Theres, a very clear easy to understand return for our shareholders by a debt reduction.

So when we think about spending those discretionary dollars the returns have to be significantly above the return realized if we reduce debt.

They also would have to be quite strategic so when I say strategic I would think core customers.

Operator: So when I say strategic, I would think of core customers and poor assets. In the US, they would have to play into an electrification or decarbonization strategy for our customers, which has been one of our most successful themes over the last three years in our contract compression asset class. In the Middle East, they would have to have, you know, very high rates of return, and they would have to be with core customers and core product lines. So we will be picky with where we spend the money, and it will have to provide a significant short and long-term attractive return for our shareholders, or we will hold the money and reduce debt. All right, I'll jump back. Thank you. As a reminder, to ask a question, you'll need to press star 1-1 on your phone.

Core assets.

In the U S. It would have to play into and electrification are decarbonising strategy for our customers, which has been one of our most successful.

Themes over the last three years and our contract compression asset class.

In the middle East it would have to be very high rates of return.

And it would have to be a core customers and core product lines.

So we will be picky, with where we spend the money and it will have to provide a significant short and long term attractive return for our shareholders or we will we will hold the money and reduce debt.

Got it alright ill jump back in the queue. Thanks, guys.

Thank you.

As a reminder to ask a question you will need to press star one one from your telephone.

Operator: One moment for our next question. Our next question comes from the line of John Gibson with BMO Capital Markets. Morning, all. There are obviously some one-time-ish numbers in there. Wondering what a more normalized number would look like absent this asset sale. Some of the prepayments on the, http://TheBusinessProfessor.com, I can talk to that still.

One moment for our next question. Our next question comes from the line of John Gibson with BMO capital markets. Your line is now open.

Good morning, all.

Nice to see the big free cash flow number this quarter. There were obviously, some one time ish numbers in there.

I'm wondering what a more normalized number would look like absent the asset sale in some some of the prepayments on the engineered systems side.

Preet Dhindsa: Thanks for the question. So, as we noted here, a couple things. One is Q4 versus Q3.

I can talk to that.

Thanks for the question so as we as we noted here a couple of things one is Q4 versus Q3.

Preet Dhindsa: Funds from operations before the working capital, pretty consistent, and obviously the working capital is the big driver, $144 million. We've got AR, we've got contract assets, deferred revenue, deferred revenue came up quite a bit, QOVQ. Inventories come down as well as one-time asset sales, LATAM. We signaled in Q3 about $40 million of asset sales coming up in Q4, and that one asset sale, the majority of that, so that's another non-recurring item there. So we clearly expect that this will not be repeatable at these levels.

Funds from operations before working capital pretty consistent and obviously the working capital is a big driver $144 million.

We've got we've got contract assets deferred revenue deferred revenue came up quite a bit Q over Q inventories come down as well as onetime asset sale Latam, we signaled in Q3 about $40 million.

Asset sales coming out of Q4 and that one asset sale. The majority of that so thats. Another nonrecurring item. There. So we expect clearly that this will not be repeatable at these levels. So we expect some sort of an unwind deferred revenue will start to unwind of course.

Preet Dhindsa: So we expect some sort of an unwind; deferred revenue will start to unwind, of course. But I would say somewhere, take a little bit off of this and take away the deferred revenue and the one-time sale. I think that's probably where we're going to end up. However, nowhere near the build-up in the first half of last year, nothing like that.

I would say somewhere take a little bit off of this and that takeaway that deferred revenue and.

The onetime sale I think that's probably where we're going to end up however, nowhere near the buildup in the first half of last year nothing like that so just modest use of working capital over the next couple of quarters, but we will be managing it extremely well on a global basis.

Preet Dhindsa: So just modest use of working capital over the next couple of quarters, but we will be managing it extremely well on a global basis. Great. I guess along the same lines, what gives you confidence or what levers can you pull, or I guess what has changed in your business this year.

Okay, Great and then I guess, along the same lines, what gives you confidence or what levers can you pull or I guess what has changed in your business. This year.

Preet Dhindsa: Transcripts provided by Transcription Outsourcing, LLC. I'd say a little bit more rigor and discipline and that regional connectivity with the folks in our major regions, how we are getting cash repatriated back, how we're focused on receivables, getting cash in the door, and then we're using that free cash to pay down debt. As you can see, year-over-year, our cash balance has also come down, so a little bit more dialogue with our regions and a little bit more connectivity to keep everybody focused on working capital. I feel good about where we're at on that, and we're going to continue the rigor and discipline throughout this year. John, I'd like to add something to that. The single biggest driver for working capital bills in the first half of 2023 was the fact that engineering systems and AMS almost doubled in one year, and whenever those businesses, If you are a business that has experienced that level of growth, they will be a consumer of working capital. This year we are predicting a much more steady pace, and so when it is a steady pace, if you have the commercial discipline that our people have, you really should not see significant consumption or release of working capital from those businesses specifically. That is the biggest difference between the two years.

Last year that should see working capital normalize a little bit in 'twenty four.

It's a little bit more rigor and discipline that in that regional connectivity with the folks in.

Major regions.

We are getting cash repatriated back how we're focused on receivables getting cash in the door and then we're using that free cash to pay down debt as you can see year over year. Our cash balance has also come down so a little bit more dialogue with our regions that a little bit more connectivity to bring everybody focused on working capital, which.

Which I feel good about where we're at on that and we're going to continue the rigor and discipline throughout this year John.

John I would like to add to that.

Single biggest driver for working capital build in the first half of 'twenty. Three was the fact that engineered systems and Ams almost doubled in one year and whenever those businesses experienced that level of growth they will be a consumer of working capital.

This year, we're predicting a much more steady pace and so when it's a steady pace if you've got the commercial discipline that our people have you really shouldnt see significant consumption or release of working capital from those businesses specifically, that's the biggest difference between the two years.

Preet Dhindsa: Great. I appreciate the responses. I'll turn it back.

Great I appreciate the responses I'll turn it back.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Keith MacKey with RBC about Market to Market, a production of Iowa Public Television. Keith, I'm sorry.

Thank you.

Our next question please.

Our next question comes from the line of Keith <unk> with RBC capital markets. Your line is now open Mackey Im sorry, Keith Mackey.

Keith MacKey: All right, thank you very much. Just a question on engineered system bookings. Marc, you did mention just now that business is expected to be more stable this year. Can you just talk about what you're seeing in terms of the bookings environment? Looking ahead, I know there is some concern about weak natural gas prices in North America causing some issues for services and service demand, which could potentially impact your business as well. But can you just talk about your exposure to that in your general, Sure, Keith. I'd like to start by answering the question with the fact that of the five cryoplants we sold in 2023, not a single one is going to a dry gas base in the United States.

Alright. Thank you very much just a question on engineered systems bookings Mark you did mentioned just now that you expected that business to be more stable. This year can you just talk about what youre seeing in terms of the bookings environment. Looking ahead I know there is some concern about weak natural gas prices in North America.

Causing some issues for services, which are service demand, which could potentially impact your <unk>.

This as well, but can you just talk to your exposure to that in your general outlook for bookings for 2024.

Yeah sure Keith I'd like to start by answering the question with the fact that the five cryo plants. We sold in 2023 not a single one is going to dry gas basin in the United States.

Marc Edward Rossiter: They're going to international markets, which are all about flare gas recovery, continued decarbonization of electricity grids, etc., and North American sales are largely going to oil plays or associated gas plays at the very least. That being said, there's no doubt that activity in the Permian Basin and the Montaney Shale are big drivers of our North American Engineered Systems business, and we pay very close attention to any markers of potential slowdowns in those businesses.

Theyre going to international markets, which are all about flare gas recovery continued de carbonization of electricity grids et cetera, and the North American sales are largely going to oil plays or associated gas plays at the very least.

That being said there is no doubt that activity in the Permian basin and the Montney shale are big drivers of our North American engineered systems business, and we pay very close attention to any markers of potential slowdowns in those businesses.

Marc Edward Rossiter: So we will watch it. Right now, our client partner conversations have been constructive and positive, and so we will continue to keep a close eye on that. And we really focus on oil economics and liquids economics when we think about our future.

So we will watch it right now our client partner conversations have been constructive and positive and so we will continue to keep a close eye on that and we really focus on oil economics liquids economics, when we think about our future on top of the fact that over half of our business is really global.

Keith MacKey: On top of the fact that, you know, over half of our business is really global on engineered systems, and a ton of the infrastructure revenue comes from global operations, which aren't really impacted at all by Henry Hubb price or rig counts in the US. Thank you. That's all I had.

On engineered systems.

Ton of the infrastructure revenue comes from from global operations, which aren't really impacted at all by Henry hub price our rig counts in the U S.

Okay.

Thank you that's all I had I'll turn it back.

Operator: Thank you. Please take a moment for our next question. And I have a follow-up from Tim Monachello with ATB Capital Markets, your line is now, I'm just given, to leverage the free cash flow on that Kurdistan project. I'm wondering if you can give an update on that or, So that's the PEARL project we're executing in the Middle East, the CRIO project. That's what you're asking about, Tim, just to make sure I heard you correctly. Yeah. Okay, good. Yeah, we were active in completing that project. We've got a lot of people on the ground, a lot of Enerflex management. We're working to bring that project to a conclusion, and we're quite confident that it'll happen in the second half of 2024.

Thank you one moment for our next question.

And I have a follow up from Tim Monticello with HEB capital markets. Your line is now open.

Hey, Thanks for taking my question again, you guys.

Just given.

<unk>.

Deleverage to free cash flow and that courtesy in projects I'm wondering if I'm, making given ops update on that or timing update when you think that'll be commission, if anything's changed there.

So thats the Pearl project, we're executing in the Middle East the Cryo project.

Yeah, that's correct, that's what you're asking about Tim just to make sure I heard it properly.

Yes.

Okay. Good yes, we.

We were active in completing that project, we've got a lot of people on the ground a lot of <unk> management.

We are working to bring that project to a conclusion and we are quite confident that will happen in the second half of 2024.

Okay.

Marc Edward Rossiter: Appreciate that. And then I just wanted to clarify one comment in your opening remarks just around Argentina. I think you said that. Entering a strong operating cash flow is that. Inclusive of the FX losses or, Unknown Speaker 0, I think if you back out the FX noise, whether it's the cash, money market instruments, the bond fund, it was profitable before the FX downturn. And then do you think that the instruments that you have in place now...

I appreciate that and then I just wanted to clarify one comment.

Pre opening remarks, just around the Argentina business. Thank.

Thank you said that it was generating strong operating cash flow is that <unk>.

Inclusive of the FX losses or.

Is it.

Is that sort of a cash negative business after the FX losses.

That would take you back out the FX FX noise, whether it's the the cash money market instruments. The Bon ton is profitable pre FX downturn.

And then do you think that the instruments that you have in place now are sufficient to mitigate the losses in 'twenty four.

Preet Dhindsa: Thank you. Thank you. The Lost.

Jeffrey Eric Fetterly: Tim is Jeff, as Preet mentioned in his prepared remarks. You know, our approach has shifted to minimizing our exposure to the Argentinian peso. So there was tremendous volatility and depreciation in the peso in 2023. There is a range of potential outcomes and expectations this year. But our focus is minimizing our exposure to the Argentinian peso and then continuing to protect the cash that we do have in the country that's generated from our operation. So, can you help put that in context on maybe a year over year basis?

Tim It's Jeff.

<unk> mentioned in his prepared remarks.

Our approach has shifted to minimizing our exposure to the Argentinean peso. So there was tremendous volatility and depreciation in the peso in 2023, there is a range of potential outcomes and expectations. This year, but our focus is minimizing our exposure to the argentinean peso and then continuing.

To protect the cash that we do have in country thats generated from our operations.

So like came to help put that in context, maybe a year over year basis.

Preet Dhindsa: put in some actions here. That is, the net impact will be lower. Depending on what the assumption is for currency volatility, obviously 2023 was exceptionally high and almost unprecedented, but from a 2024 sense, our expectation is that we will see less FX noise and impact in the year relative to 2023.

You've put in some actions here through 'twenty three to try to mitigate that.

Vacation that the net impact will be lower in 2023.

Depending on what the assumption is for currency volatility, obviously 2023 was exceptionally high and almost unprecedented but from a 2024 since our expectation is that we will see less FX noise and impact in the year relative to 'twenty three.

Yes.

Okay Fantastic. Thanks, guys I appreciate it all.

Preet Dhindsa: Thank you, and this concludes our Q&A portion. I would now like to turn the call back over to Mr. Marc Rossiter for closing remarks. Thanks, operator. Listen, it's my distinct honor to deliver the solid fourth quarter financial and operating results on behalf of my 4,800 teammates at Enerflex. These results highlight our continued ability to successfully execute against our strategy across our three core businesses around the world. Our commitment to our key priorities remains steadfast as we work to further enhance the profitability of core operations, simplify our operational and geographic footprint, maximize cash flow generation to strengthen our financial position, realize the benefits and synergies from the transaction, and continue to offer best-in-class natural gas, treated water, and energy transition solutions. I look forward to building on our progress to create significant value and optionality across these geographies, customers, and product lines.

Thank you and this concludes our Q&A portion I would now like to turn the call back over to Mr. Marc Rossiter for closing remarks.

Okay.

Well, thanks, operator listen it's my distinct honor to deliver these solid fourth quarter financial and operating results on behalf of my 4800 teammates at <unk>. These results highlight our continued ability to successfully execute against our strategy across our three core businesses around the world are committed.

Two of our key priorities remains steadfast as we work to further enhance the profitability of core operations simplify our operational and geographic footprint Max maximize cash flow generation to strengthen our financial position and realize the benefits of synergies from the transaction and continue to offer best in class natural gas treated water and energy.

<unk> solutions.

I look forward to building on our progress to create significant value and optionality across these geographies customers and product lines.

Marc Edward Rossiter: Happy Leap Year Day. Thanks for your attention. Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day. John Gibson, Nick Corcoran, Aaron MacNeil, Andrew Bradford, Ben Park, Rodney Gray, Stefan Hickory, Nick Corcoran, Ben Park, Rodney Gray, Stefan Hickory, Ben Park, Rodney Gray,

The leap year day, thanks for your attention.

Thank you. This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.

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