Q1 2025 Enerflex Ltd Earnings Call

May 8, 2025

Presentation, there will be a question and answer session to ask a question. During this session you will need to press star one on your telephone you will then hear an automated message advising you. Your hand is raised 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 speaker today, Jeff Fetterly.

Speaker Change: <unk>, Vice President corporate development and capital markets. Please go ahead.

Jeff Fetterly: Thank you Michelle and good morning, everyone with me today are <unk> interim President and CEO, Joe <unk> interim CFO and Ben Park enter flexes controller during todays call. Our prepared remarks will focus on three key areas continued strong performance of <unk> business and our outlook capital allocation, including.

Speaker Change: Planned spending in direct returns to shareholders.

Jeff Fetterly: Three our progress on near and long term strategic priorities.

Jeff Fetterly: Before I turn it over to Pete I'll remind everyone that today's discussion will include non IR for us and other financial measures as well as forward looking statements regarding <unk> expectations for future performance and business prospects.

Jeff Fetterly: Looking information involves risks and uncertainties and the stated expectations could differ materially from actual results or performance for more 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 plus and Edgar profiles.

Jeff Fetterly: As part of our prepared remarks, we will be referring to slides in our updated investor presentation, which is available through a link on this webcast and on our website under the Investor Relations section I will turn it over to Pete for comments.

Speaker Change: Thanks, Jeff and thank you all for joining us on this morning's call. We are pleased to report another strong quarter of financial and operating results, our energy infrastructure and aftermarket services business lines continue to deliver steady performance and reinforced and reflects the ability to generate sustainable returns across our global platform.

Speaker Change: Energy infrastructure and aftermarket services contributed 70% of our gross margin before depreciation and amortization in the first quarter of 2025, and we expect these business lines will continue to represent the core of interfaces profitability in 2025.

Speaker Change: Our strong operational performance and focus on maximizing free cash flow has resulted in a rapid deleveraging of our balance sheet. We exited the first quarter of 2025 at one three times compared to one five times at the end of Q4 2024.

Speaker Change: And now a few highlights for each of our business lines.

Speaker Change: The energy infrastructure business continues to perform well across our three core regions. The U S Latin America and the Middle East.

Speaker Change: In the U S. The fundamentals for contract compression remains strong led by expected increases in natural gas production, notably in the Permian.

Speaker Change: We're pleased with the operational performance of our U S contract compression business reflected utilization mid 90% range for the quarter and revenue per horsepower per month and profitability showing continued momentum.

Speaker Change: Slides 18, and 19 of our Investor presentation to highlight our fleet composition and the strong relative operating performance at this part of our business.

Speaker Change: Demand for new contract compression equipment in the U S remains strong we added approximately 20000 horsepower during the quarter to exit 448000 horsepower across our fleet.

Speaker Change: To be over 475000 horsepower by the end of this year.

Speaker Change: New units are being deployed under multiyear contracts and core operating regions with a focus on larger horsepower natural gas and electric drive applications.

Speaker Change: Slide 16, and 17 highlighted international energy infrastructure business, which includes approximately $1 2 million horsepower of operating compression in 'twenty four build own operate and maintain our growth projects in the middle East and Latin America.

Speaker Change: Our two produced water projects in Oman continued to perform very well and we are in the process of expanding one of these sites, which we highlight on slide 20.

Speaker Change: Our international energy infrastructure businesses supported by approximately $1 $3 billion of contracted revenue and an average contract term of approximately five years.

Speaker Change: Turning to aftermarket services. This business slide benefited from strong activity levels included customer maintenance activities.

Speaker Change: Especially pleased with the performance of our Ams business in countries, where in our flex also operated assets reflective of differentiated solution and strong competitive position in core countries.

Speaker Change: On the engineered systems side, we recorded bookings of $205 million. During Q1 first quarter bookings were tempered by accelerated customer activity in the latter part of the fourth quarter of 2024, which resulted in select orders being pulled forward and customers pausing some decisions on expenditures due to commodity price volatility.

Speaker Change: All the market conditions.

Speaker Change: We continue to have a strong es backlog exiting Q1, 2005 with approximately $1 2 billion.

The majority of which is expected to convert into revenue over the next 12 months.

Speaker Change: During 2025, Es gross margins are expected to align more closely with historical averages, reflecting both weaker domestic natural gas prices through much of 2024 and a shift in product mix.

Speaker Change: While near term Es revenue is expected to remain steady and reflects continues to closely monitor evolving market market conditions, an increased near term uncertainty, including the impact of tariffs and lower oil prices and we will adjust our business as appropriate.

Speaker Change: The company expects to be partially protected from the direct and indirect impact of tariffs through its diversified operations and ongoing risk management efforts.

Speaker Change: And reflects the operations of the USA, Canada, and Mexico are largely distinct in the client partners and projects they serve.

Speaker Change: States as enter flex is largest operating region generated 45% of consolidated revenue on a trailing 12 month basis by destination of sale and we believe the company is well positioned to benefit from growth in domestic energy production.

Speaker Change: <unk> operations in Canada, and Mexico generated 11% and 3% of consolidated revenue on a trailing 12 month basis, respectively.

Speaker Change: Despite increased near term risks and uncertainty for the Es product line recent domestic natural gas prices have been constructive in the medium term outlook for Es product to services remains attractive supported by an anticipated growth in the natural gas and produced water volumes across enter flex a global footprint.

Speaker Change: I want to reiterate enter flex is priority 2025. These include enhancing the profitably core operations to leverage the company's leading position in core operating countries to capitalize unexpected increases in natural gas and produced water volumes.

Speaker Change: And three maximizing free cash flow to strengthen <unk> financial position provide direct shareholder returns and invest in selective customer supported opportunities for growth.

Speaker Change: Before I turn the call over to Joe I would like to comment briefly on your recently on our recently announced leadership transition.

On March 19, and reflects announced that Marc roster stepped down as president CEO and director.

Speaker Change: Concurrently I assumed the role as interim president and CEO and Joe <unk> as interim CFO.

Speaker Change: The board is undertaking a comprehensive search to identify the company's permanent CEO and has retained a global executive search firm to assist with this process.

Operator: After the speaker's presentation, there will be a question and answer.

Expected increases in natural gas and produced water volumes at.

Operator: To ask a question during this session, you will need to press star 11 on your. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 118.

And three maximizing free cash flow to strengthen <unk> financial position provide direct shareholder returns and invest in selective customer supported opportunities for growth.

Speaker Change: The search process is making good progress, but we will not be commenting further.

Speaker Change: With that I'll turn it over to Joe to speak about the financial side.

Operator: Please be advised that today's conference is being recorded.

Joe: Thank you Bree and good morning, everyone.

Joe: Before I turn the call over to Joe I would like to comment briefly on your recently on our recently announced leadership transition.

Jeffrey Fetterly: I would now like to hand my conference over to your...

Joe: And reflects delivered strong first quarter results and we're particularly pleased with our ongoing progress in efficiently managing working capital lowering net finance costs and reducing the company's leverage ratio.

Jeffrey Fetterly: Fetterly, Vice President, Corporate Development and Capital Markets. Please go ahead.

Joe: On March 19, and reflects announced that Marc roster stepped down as president CEO and director.

Jeffrey Fetterly: Thank you, Michelle, and good morning, everyone.

Preet Dhindsa: With me today are Preet Dhindsa, Interim President and CEO, Joel Adesur, Interim CFO, and Ben Park, Enerflex's controller. During today's call, our prepared remarks will focus on three key areas, continued strong performance of Enerflex's business and our outlook, capital allocation, including planned spending and direct returns to shareholders, and three, our progress on near and long-term strategic priorities.

Speaker Change: Concurrently I assumed the role as interim president and CEO and Joe <unk> as interim CFO.

Joe: I'll start with highlights from the first quarter.

Joe: We recorded consolidated revenues of $552 million compared to $638 million in Q1, 'twenty four and $561 million in Q4 2024.

Speaker Change: The board is undertaking a comprehensive search to identify the company's permanent CEO and has retained a global executive search firm to assist with this process.

Speaker Change: The search process and making good progress, but we will not be commenting further.

Joe: Gross margin before depreciation and amortization was $161 million or 29% of revenue compared to $119 million or 19% of revenue in Q1, 2024, and $174 million or <unk>, 31% of revenue during Q4 2024.

Speaker Change: With that I'll turn it over to Joe to speak about the financial side.

Preet Dhindsa: Before I turn it over to Preet, 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.

Joe: Thank you Bree and good morning, everyone.

Speaker Change: Yes, gross margin before depreciation and amortization decreased compared to Q4 due to product mix.

Joe: I'll start with highlights from the first quarter.

Joe: We recorded consolidated revenues of $552 million compared to $638 million in Q1, 'twenty four and $561 million in Q4 2024.

Pete: As Pete referenced.

Pete: In Ams product lines generated 70% of consolidated gross margin before depreciation and amortization during Q1 2025, and we continue to expect approximately 65% for the full year of 2025.

Preet Dhindsa: 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. As part of our prepared remarks, we will be referring to slides in our updated investor presentation, which is available through a link on this webcast and on our website under the Investor Relations section.

Joe: Gross margin before depreciation and amortization was $161 million or 29% of revenue compared to $119 million or 19% of revenue in Q1, 2024, and $174 million or 31% of revenue during Q4 2024.

Pete: Adjusted EBITDA was $113 million compared to $69 million in Q4 dollars 24.

$120 million during Q4 2024.

Preet Dhindsa: I'll turn it over to Preet for comments. Thanks, Jeff, and thank you all for joining us on this morning's call. We are pleased to report another strong quarter of financial and operating results. Our energy infrastructure and aftermarket services business lines continue to deliver steady performance and reinforce Enerflex's ability to generate sustainable returns across our global platform. Energy infrastructure and aftermarket services contributed 70% of our gross margin before depreciation amortization in the first quarter of 2025, and we expect these business lines will continue to represent the core of Enerflex's profitability in 2025. Our strong operational performance and focus on maximizing free cash flow has resulted in a rapid deleveraging of our balance sheet.

Pete: The year over year increase in adjusted EBITDA was primarily due to costs recognized related to an international project in Q1 2024.

Speaker Change: Yes, gross margin before depreciation and amortization decreased compared to Q4 due to product mix.

Pete: As Pete referenced.

Pete: Energy infrastructure performance continued to be strong with gross margin before D&A of $86 million compared to $80 million in Q1, 'twenty four and $86 million in Q4 24.

Pete: In Ams product lines generated 70% of consolidated gross margin before depreciation and amortization during Q1 2025, and we continue to expect approximately 65% for the full year of 2025.

Pete: Aftermarket services gross margin before D&A was 22% in the quarter benefiting from strong customer maintenance programs.

Pete: Adjusted EBITDA was $113 million compared to $69 million in Q4 of 24.

Pete: And it reflects as SG&A of $57 million was $21 million lower year over year and down $35 million on a sequential basis, mainly due to decreased share based compensation and lower depreciation and amortization expense.

Pete: And $120 million during Q4 2024.

Pete: The year over year increase in adjusted EBITDA was primarily due to costs recognized related to an international Es project in Q1 2024.

Preet Dhindsa: We exited the first quarter of 2025 at 1.3 times compared to 1.5 times at the end of Q4 2024.

Pete: Cash provided by operating activities was $96 million in Q1, 25, which included a working capital recovery of $34 million.

Pete: Energy infrastructure performance continued to be strong with gross margin before D&A of $86 million compared to $80 million in Q1, 'twenty four and $86 million in Q4 24.

Preet Dhindsa: And now, a few highlights for each purpose. The energy infrastructure business continues to perform well across our three core regions, the U.S., Latin America, and the Middle East. In the U.S., the fundamentals for contract compression remain strong, led by expected increases in natural gas production, notably in the Permian. We are pleased with the operational performance of our U.S. contract compression business, reflecting utilization at the mid-90% range for the quarter, and revenue per horsepower per month, and profitability showing continued momentum. Slide 18 and 19 of our investor presentation highlight our fleet composition and the strong relative operating performance of this part of our business.

Pete: We are pleased with our ongoing global efforts to efficiently manage working capital.

Pete: Aftermarket services gross margin before D&A was 22% in the quarter.

Pete: Free cash flow increased to $85 million in Q1, 25 compared to $72 million during Q1, 2024 and $76 million. During Q4, 2024, primarily due to lower maintenance capital spending.

Pete: Benefiting from strong customer maintenance programs.

Pete: Now I'd like to touch on our balance sheet and deleveraging.

Pete: We exited the quarter with net debt of 564 million, which included $75 million of cash and available liquidity of $672 million compared to $614 million in Q4.

Pete: Cash provided by operating activities was $96 million in Q1, 25, which included a working capital recovery of $34 million.

Pete: We are pleased with our ongoing global efforts to efficiently manage working capital.

Pete: As a result of our continued focus on financial discipline and operational execution, we have repaid $433 million of debt since the beginning of 2023.

Preet Dhindsa: Demand for new contract compression equipment in the U.S. remains strong. We added approximately 20,000 horsepower during the quarter to exit at 448,000 horsepower across our fleet. We expect to be over 475,000 horsepower by the end of this year. New units are being deployed under multi-year contracts in core operating regions with a focus on larger horsepower, natural gas and electric drive applications. Slide 16 and 17 highlight our international energy infrastructure business, which includes approximately 1.2 million horsepower of operating compression and 24 build, own, operate, and maintain, or groom, projects in the Middle East and Latin America.

Pete: Free cash flow increased to $85 million in Q1 dollars 25 compared to $72 million during Q1, 2024 and $76 million. During Q4, 2024, primarily due to lower maintenance capital spending.

Pete: Our leverage ratio was one three times at the end of Q1.

Pete: Further details are included on slide 13 of our Investor presentation.

Pete: Now I'd like to touch on our balance sheet and deleveraging.

Pete: Let me shift now to capital allocation.

Pete: We exited the quarter with net debt of 564 million, which included $75 million of cash and available liquidity of $672 million compared to $614 million in Q4.

Pete: First on our Capex plans.

Pete: We invested $33 million in the business during the quarter consisting of $14 million in capital expenditures, primarily for maintenance and 19 million for expansion of an AI project and the eastern hemisphere that will be accounted for as a finance lease.

Pete: As a result of our continued focus on financial discipline and operational execution.

Pete: And reflects is targeting a disciplined capital program in 2025 with total capital expenditure guidance of $110 million to $130 million and that is unchanged.

Pete: We have repaid $433 million of debt since the beginning of 2023.

Preet Dhindsa: Our two produced water projects in Oman continue to perform very well, and we are in the process of expanding one of these sites, which we highlight on slide 20. Our international energy infrastructure business is supported by approximately $1.3 billion of contracted revenue and an average contract term of approximately five years.

Pete: Our leverage ratio was one three times at the end of Q1.

Pete: Further details are included on slide 13 of our Investor presentation.

Pete: This includes $40 million to $60 million for growth capital expenditures.

Pete: Similar to 2020 for disciplined capital spending will be focused on customer supported opportunities with the majority of our growth focused on expanding our U S contract compression fleet.

Pete: Let me shift now to capital allocation.

Pete: First on our Capex plans.

Pete: We invested $33 million in the business during the quarter consisting of $14 million in capital expenditures, primarily for maintenance and 19 million for expansion of an AI project in the eastern hemisphere that will be accounted for as a finance lease.

Preet Dhindsa: Turning to aftermarket services, this business line benefited from strong activity levels, including customer maintenance activity. We are especially pleased with the performance of our AMS business in countries where Enerflex also operates EI assets, reflective of a differentiated solution and strong competitive position in core countries. On the Injury Systems side, we recorded bookings of $205 million during Q1. First quarter bookings were tempered by accelerated customer activity in the latter part of the fourth quarter of 2024, which resulted in select orders being pulled forward and customers pausing some decisions on expenditures due to commodity price volatility and evolving market conditions.

Pete: We expect to grow our fleet to over 475000 horsepower by the end of 2025.

Pete: With new units deployed under multi year contracts and core operating regions.

Pete: And reflects is targeting a disciplined capital program in 2025 with total capital expenditure guidance of $110 million to $130 million and that is unchanged.

Pete: And now to direct shareholder returns.

Pete: Enter flex returned $6 million to shareholders through dividends in Q1 our.

Pete: Our NCI E commenced on April one and authorize the company to repurchase up to approximately $6 2 million shares through the end of March 2026 during.

This includes $40 million to $60 million for growth capital expenditures.

Pete: Similar to 2020 for disciplined capital spending will be focused on customer supported opportunities with the majority of our growth focused on expanding our U S contract compression fleet.

Pete: During the month of April 2025, and reflects has repurchased 600 9500 common shares at an average price of Canadian $10 15 per share.

Pete: We expect to grow our fleet to over 475000 horsepower by the end of 2025.

Preet Dhindsa: We continue to have a strong ES backlog, exiting Q1 2025 with approximately $1.2 billion, the majority of which is expected to convert into revenue over the next 12 months. During 2025, ES gross margins are expected to align more closely with historical averages, reflecting both weaker domestic natural gas prices through much of 2024 and a shift in product make. While near-term ES revenues expect to remain steady, Enerflex continues to closely monitor evolving market conditions and increase near-term uncertainty, including the impact of tariffs and lower oil prices. And we will adjust our business as appropriate. The company expects to be partially protected from the direct and indirect impact of tariffs through its diversified operations and ongoing risk management efforts.

Pete: Going forward capital allocation decisions will be based on delivering value to <unk> shareholders and measured against an <unk> ability to maintain balance sheet strength, given the evolving market conditions.

Pete: With new units deployed under multi year contracts and core operating regions.

Pete: And now to direct shareholder returns.

Pete: In our flex returned $6 million to shareholders through dividends in Q1 our.

Pete: In addition to increases in the Companys dividend share repurchases and disciplined growth capital spending.

Pete: Our NCI E commenced on April one and authorized the company to repurchase up to approximately $6 2 million shares through the end of March 2026 during.

Pete: Flex will also consider further debt reduction to strengthen its balance sheet and lower net finance costs.

Pete: During the month of April 2025, and reflects has repurchased 600 9500 common shares at an average price of Canadian $10 15 per share.

Pete: Welcome greater financial flexibility positions the company to respond to evolving market conditions.

Pete: And capitalize opportunities to optimize its debt stack.

Pete: Finally, I want to thank <unk> employees for their efforts in delivering continued strong operational and financial results.

Pete: Our focus remains on generating sustainable free cash flow further improving balance sheet health and positioning the company for long term growth and value creation.

Preet Dhindsa: Enerflex's operations in the USA, Canada, and Mexico are largely distinct in the client partners and projects they serve. The United States is Enerflex's largest operating region, generating 45% of consolidated revenue on a trailing 12-month basis by destination of sale, and we believe the company is well-positioned to benefit from growth in domestic energy production. Enerflex's operations in Canada and Mexico generate 11% and 3% of consolidated revenue on a trailing 12-month basis, respectively. Despite increased near-term risk and uncertainty for the ES product line, recent domestic natural gas prices have been constructive, and the medium-term outlook for ES products and services remains attractive, supported by anticipated growth in the natural gas-produced water volumes across Enerflex's global footprint.

Pete: In addition to increases in the Companys dividends share repurchases and disciplined growth capital spending.

Speaker Change: With that I will turn the call back to <unk> for his closing remarks.

Pete: Enter flex will also consider further debt reduction to strengthen its balance sheet and lower net finance costs.

Speaker Change: Thanks, Joe we've made significant operational financial and strategic strides in the recent quarters.

Pete: Unlocking greater financial flexibility positions the company to respond to evolving market conditions.

Speaker Change: Despite increasing near term risks and uncertainty the fundamental drivers behind our business remain intact.

Pete: And capitalize opportunities to optimize its debt stack.

Speaker Change: Global energy security and the shift towards low emissions natural gas each of our business lines are delivering solid results that we believe are all well positioned to benefit from these fundamental drivers.

Pete: Finally, I want to thank <unk> employees for their efforts in delivering continued strong operational and financial results.

Pete: Our focus remains on generating sustainable free cash flow.

Speaker Change: Moving forward, we're sharpening our focus on boosting profitability and strengthening resilience of our core operations, ensuring NSX generate sustained attractive returns for shareholders over the long term.

Pete: Further improving balance sheet health and positioning the company for long term growth and value creation.

Speaker Change: With that I will turn the call back to <unk> for his closing remarks.

Speaker Change: I look forward to building on our progress.

Speaker Change: Thanks, Joe we've made significant operational financial and strategic strides in the recent quarters.

Speaker Change: And we will now turn the call back over to the operator for questions.

Preet Dhindsa: I want to reiterate Enerflex's priorities in 2025. These include enhancing the profitability of core operations, to leveraging the company's leading position in core operating countries to capitalize on expected increases in natural gas and produced water volumes, And three, maximizing free cash flow to strengthen Enerflex's financial position, provide direct shareholder returns, and invest in selective customer-supported opportunities for growth.

Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, one moment for our first question.

Speaker Change: Despite increasing near term risks and uncertainty the fundamental drivers behind our business remain intact.

Speaker Change: Energy security and the shift towards low emissions natural gas.

Speaker Change: Each of our business lines are delivering solid results that we believe are all well positioned to benefit from these fundamental drivers move.

Speaker Change: Our first question is going to come from the line of Michael <unk> with Raymond James Your line is open. Please go ahead.

Michael: Hey, good morning, and thanks for taking my question I was just wondering if you can comment on bookings trajectory into the second quarter like are you seeing a rebound from first quarter.

Preet Dhindsa: Before I turn the call over to Joe, I would like to comment briefly on our recently announced leadership transition. On March 19, Enerflex announced that Marc Rossiter stepped down as President, CEO, and Director. Concurrently, I assume the role as Interim President and CEO, and Joe Ladser as Interim CFO.

Speaker Change: I look forward to building on our progress.

Speaker Change: <unk>.

Speaker Change: Or is there.

Speaker Change: And we will now turn the call back over to the operator for questions.

Speaker Change: Sort of more deferrals.

Speaker Change: Yeah. Thanks, Michael So bookings as we know Q1 was a little bit light at $205 million.

Preet Dhindsa: The board is undertaking a comprehensive search to identify the company's permanent CEO and has retained a global executive search group to assist with this process. The search process is making good progress, but we will not be commenting further.

Speaker Change: As noted some of the activity was pulled into Q4, which is quite constructive and what we're seeing in Q1 and Q2 some of our customers and their end customers temporary some of the decisions, especially in Q1 backlog is good at $1 2 billion.

Speaker Change: Our first question is going to come from the line of Michael <unk> with Raymond James Your line is open. Please go ahead.

Joe Ladser: With that, I'll turn it over to Joe to speak about the financial... Thank you, Preet, and good morning, everyone. Enerflex delivered strong first quarter results and we are particularly pleased with our ongoing progress in efficiently managing working capital, lowering net finance costs, and reducing the company's leverage ratio.

Speaker Change: And then what we're seeing now is just continued depth and opportunities in the market both processing and compression question B the timing when do these hits, but we feel we continue to feel good and we felt that Q1 was a little light relative to Q4, but a good backlog and we see good opportunities going forward.

Speaker Change: <unk>.

Speaker Change: Or is there.

Speaker Change: Sort of more deferrals.

Speaker Change: Yeah. Thanks, Michael So bookings as we know Q1 was a little bit light at $205 million.

Joe Ladser: I'll start with highlights from the first quarter. We recorded consolidated revenues of $552 million compared to $638 million in Q1 2024 and $561 million in Q4 2024. Gross margin before depreciation and amortization was $161,000,000 or 29% of revenue compared to $119,000,000 or 19% of revenue in Q1 2024 and $174,000,000 or 31% of revenue during Q4 2024. PS gross margin before depreciation and amortization decreased compared to Q4 due to product mix. As Preet referenced, the EI and AMS product lines generated 70% of consolidated gross margin before depreciation and amortization during Q1 2025, and we continue to expect approximately 65% for the full year of 2025.

Speaker Change: Great. Thanks, I'll turn it back.

Speaker Change: Thank you and one for our next question.

Speaker Change: Our next question is going to be from the line of Aaron Macneil with TD Cowen. Your line is open. Please go ahead.

Aaron MacNeil: Morning, all thanks for taking my questions.

Speaker Change: A bit of a broader question for you and I can appreciate that your role as interim CEO somewhat limiting in terms of your ability to set the strategic direction of the company.

Speaker Change: Processing and compression question would be the timing when do these hedged, but we feel we continue to feel good and we felt that Q1 was a little light relative to Q4, but a good backlog and we see good opportunities going forward.

Aaron MacNeil: <unk> noted the comments on strategic priorities for the year.

Aaron MacNeil: You're in the role today I'm just wondering if you could give us any insights.

Aaron MacNeil: Being in the role of anything that you think should be changed or improved across the platform going forward.

Speaker Change: Great. Thanks, I'll turn it back.

Speaker Change: Thank you and one for our next question.

Speaker Change: Our next question is going to be from the line of Aaron Macneil with TD Cowen. Your line is open. Please go ahead.

Aaron MacNeil: Aaron Thanks for the question.

Speaker Change: When I took the role about seven weeks ago, we determined that still best to continue to move the business forward.

Aaron MacNeil: Morning, all thanks for taking my questions.

Joe Ladser: Adjusted EBITDA was $113 million compared to $69 million in Q4'24. and $120 million during Q4 2020. The year-over-year increase in adjusted EBITDA was primarily due to costs recognized related to an international ES project in Q1 2024. Energy infrastructure performance continued to be strong, with gross margin before DNA of $86 million compared to $80 million in Q1'24 and $86 million in Q4'24. Aftermarket services gross margin before D&A was 22% in the quarter, benefiting from strong customer maintenance programs. Enerflex's SG&A of $57 million was $21 million lower year-over-year and down $35 million on a sequential basis, mainly due to decreased share-based compensation and lower depreciation and amortization expense.

Speaker Change: A bit of a broader question for you and I can appreciate that.

Speaker Change: Have some prudent given what's going on geopolitically tariffs oil prices et cetera, working on our debt stack and free cash flow refinancing Joe from getting to that if we need to in a few moments, but we've got a good footprint that will continue to refine that global footprint cost savings is another important element.

Speaker Change: At your role as interim CEO somewhat limiting in terms of your ability to strengthen the strategic.

Speaker Change: <unk> of the company.

Speaker Change: Also noted the comments on strategic priorities for the year.

Speaker Change: You're in the role today I'm just wondering if you could give us any insights.

Speaker Change: Post integration as we simplify optimize our business globally interest and taxes is another area that improved free cash flow. We are focused on that for quite some time.

Speaker Change: Being in the role if anything that you think should.

Speaker Change: It should be changed or improved across the platform going forward.

Aaron: Aaron Thanks for the question.

Aaron: When I took the role about seven weeks ago, we determined that still best to continue to move the business forward.

Speaker Change: But overall capital allocation priorities growth capital in the U S fleet 2025 very important.

Aaron: Have some prudent given what's going on geopolitically tariffs oil prices et cetera, working on our debt stack and free cash flow refinancing Joe from getting to that if we need to in a few moments, but we've got a good footprint that will continue to refine that global footprint cost savings is another important element.

Speaker Change: Watch the market carefully and if we need to refine or adjust our trajectory for the year. We will we have a few levers we can do it but we are committed to growing our business organically largely in the U S.

Speaker Change: Using precision managing maintenance capital, where we have uncommitted opportunities, we may temper back, but still say state range bound, but overall I'm very pleased with the operations. We've got extra leadership in all the regions strong financing corporate functions. So I feel good about what we've accomplished and during this interim period, Joe what I with our colleagues throughout the <unk>.

Joe Ladser: Cash provided by operating activities was $96 million in Q125, which included a working capital recovery of $34 million. We are pleased with our ongoing global efforts to efficiently manage working capital. Pre-cash flow increased to $85 million in Q1 2025 compared to $72 million during Q1 2024 and $76 million during Q4 2024, primarily due to lower maintenance capital spend.

Aaron: Post integration as we simplify optimize our business globally interest and taxes is another area that improved free cash flow. We are focused on that for quite some time.

Aaron: But overall capital allocation priorities growth capital in the U S fleet 2025 very important.

Speaker Change: Mobile continued to advance the business.

Joe: Makes sense.

Speaker Change: I know this is challenging given given the uncertainty as well.

Aaron: Watch the market carefully and if we need to refine or adjust our trajectory for the year. We will we have a few levers we can do it but we are committed to growing our business organically largely in the U S.

Speaker Change: Lots of good free cash flow in the quarter working capital release of credit to Joe to be sure but based.

Joe Ladser: Now I'd like to touch on our balance sheet and deleveraging. We exited the quarter with net debt of $564 million, which included $75 million of cash and available liquidity of $672 million, compared to $614 million in Q4. As a result of our continued focus on financial discipline and operational execution, we have repaid $433 million of debt since the beginning of 2023. Our leverage ratio was 1.3 times at the end of Q1.

Speaker Change: Based on what you can see today, how would you.

Aaron: Using precision managing maintenance capital, where we have uncommitted opportunities, we may temper back, but still safe stay range bound, but overall I'm very pleased with the operations. We've got exited leadership in all the regions strong financing corporate functions. So I feel good about what we accomplished during this interim period, Joe what I with our colleagues around the <unk>.

Speaker Change: Rank the various capital allocation priorities between the ones you mentioned in the prepared remarks.

Speaker Change: It's a capital allocation, we've been consistent in stating the various levers that we have direct shareholder returns Q3 last year, a 50% dividend bump we initiated share buybacks. We've been active effective April one and that Joe has talked about those amounts we have we have a year to buy up to five.

Aaron: Mobile continued to advance the business.

Aaron: Makes sense.

Aaron: I know this is challenging given given the uncertainty as well.

Joe Ladser: Further details are included on slide 13 of our investor presentation.

Speaker Change: 5% of public float as noted growth capital earmarked for the U S and we've a range bound growth at $40 million to $60 million Macy's at $70 million and once again, we feel really good about the economics of the U S fleet utilization increased horsepower, we're putting into the market.

Aaron: Lots of good free cash flow in the quarter working capital release of credit to Joe to be sure, but based on what you can see today how would you.

Joe Ladser: Let me shift now to capital allocation. first on our CapEx plans. We invested $33 million in the business during the quarter, consisting of $14 million in capital expenditures, primarily for maintenance, and $19 million for expansion of an EI project in the Eastern Hemisphere that will be accounted for as a finance lease.

Aaron: Rank the various capital allocation priorities between the ones you mentioned in the prepared remarks.

Aaron: It's a capital allocation, we've been consistent in stating the various levers that we have direct shareholder returns Q3 last year, a 50% dividend bump we initiated share buybacks. We've been active effective April one and Joe has talked about those amounts we have we have a year to buy up to.

Speaker Change: We will do further further horsepower increases by the end of this year.

Joe Ladser: Enerflex is targeting a disciplined capital program in 2025 with total capital expenditure guidance of $110 million to $130 million and that is unchanged. This includes $40 to $60 million for growth capital expenditures. Similar to 2024, disciplined capital spending will be focused on customer-supported opportunities, with the majority of our growth focused on expanding our U.S. contract compression. We expect to grow our fleet to over 475,000 horsepower by the end of 2025. with new units deployed under multi-year contracts in core operating regions.

Speaker Change: And the revenue per horsepower per month is still quite constructive a little over 22008 and $29.

Speaker Change: We feel good about the economics on the U S fleet and as Joe noted debt reduction Prudence in today's environment. We feel is still out relevant. So we will continue to focus on free cash flow effective working capital management globally that you've referenced and debt reduction and then as we go to the market to refinance the debt we look for.

Aaron: 5% of public float as noted growth capital earmarked for the U S and we've a range bound growth at $40 million to $60 million Macy's at $70 million.

Aaron: And once again, we feel really good about the economics of the U S fleet utilization increased horsepower, we're putting into the market and we will do further further horsepower increases by the end of this year and the revenue per horsepower per month is still quite constructive a little over 22008 to $29.

Speaker Change: Even more.

Speaker Change: More constructive terms.

Speaker Change: Thanks, everyone I'll turn it back.

Speaker Change: Thank you and one moment for our next question.

Speaker Change: Our next question is can be from the line of Keith <unk> with RBC capital markets. Your line is open. Please go ahead.

Joe Ladser: And now, to direct shareholder returns. Enerflex returns $6 million to shareholders through dividends in Q1.

Aaron: So we feel good about the economics in the U S fleet and as Joe noted debt reduction Prudence in today's environment. We feel is still out relevant. So we will continue to focus on free cash flow.

Speaker Change: Hey, good morning, Thanks for taking my questions just wanted to go back to the bookings.

Joe Ladser: Our NCIB commenced on April 1st and authorized the company to repurchase up to approximately 6.2 million shares through the end of March 2026. During the month of April 2025, Enerflex has repurchased 690,500 common shares at an average price of Canadian $10.15 per share.

Speaker Change: <unk>.

Speaker Change: Obviously last quarter last cycle bookings got fairly low.

Speaker Change: For a number of quarters.

Aaron: <unk> working capital management globally that you've referenced and debt reduction and then as we go to the market to refinance the debt we look for even more.

Speaker Change: Do you think we're headed into that type of environment again, and can you just talk about what youre seeing in the market as far as where the weakness is and where the strength might be I E. If the current gas strip holds.

Aaron: More constructive terms.

Joe Ladser: Going forward, capital allocation decisions will be based on delivering value to Enerflex shareholders and measured against Enerflex's ability to maintain balance sheet strength given evolving market conditions. In addition to increases in the company's dividend, share repurchases, and disciplined growth capital spending, Enerflex will also consider further debt reduction to strengthen its balance sheet and lower net finance costs. Unlocking greater financial flexibility positions the company to respond to evolving market conditions and capitalize opportunities to optimize its debt stack.

Aaron: Thanks, everyone I'll turn it back.

Aaron: Thank you and one moment for our next question.

Speaker Change: Do you think that there could be some pickup in gas year basis, just some more commentary on the bookings would be helpful.

Speaker Change: Our next question is can be from the line of Keith <unk> with RBC capital markets. Your line is open. Please go ahead.

Speaker Change: Okay.

Speaker Change: Hey, good morning, Thanks for taking my questions just wanted to go back to the bookings topic.

Jeff Fetterly: As Jeff.

Jeff Fetterly: Referenced in his remarks, we continue to see good depth of opportunities, especially in the U S and those touch on both the processing side on the compression side and then obviously just given the weighting of activity the Permian figures prominently into that number as well as we referenced in the release some results. So in the prepared remarks.

Speaker Change: Obviously last quarter last cycle bookings got fairly low.

Speaker Change: A number of quarters do you think we're headed into that type of environment again.

Speaker Change: And can you just talk about what youre seeing in the market as far as where the weakness is and where the strength might be I E. If the current gas strip holds.

Joe Ladser: Finally, I want to thank Enerflex's employees for their efforts in delivering continued strong operational and financial results. Our focus remains on generating sustainable free cash flow, further improving balance sheet health, and positioning the company for long-term growth and value creation.

Jeff Fetterly: There is some constructive this on the gas side, but at this point I think we view it more as optionality not necessarily a core driver of demand.

Speaker Change: Do you think that there could be some pickup in gas year basis, just some more commentary on the bookings would be helpful.

Jeff Fetterly: But as you referenced there is precedent in our business for significant weakness in es bookings in previous downturns, but where we see it today the market continues to be fairly fairly strong in terms of opportunities. The question is just going to be at what point do the operators execute on those opportunities and what conviction will they have.

Jeff: It's Jeff <unk>.

Preet Dhindsa: With that, I will turn the call back to Preet for his closing remarks. Thanks, Joe. We've made significant operational, financial, and strategic strides in the recent quarter. Despite increasing near-term risk and uncertainty, the fundamental drivers behind our business remain intact. Global Energy Security and the shift towards low-emissions natural gas. Each of our business lines are delivering solid results that we believe are all well positioned to benefit from these fundamental drivers.

Speaker Change: Referenced in his remarks, we continue to see good depth of opportunities, especially in the U S and those touch on both the processing side on the compression side and then obviously just given the weighting of activity the Permian figures prominently into that number as well as we referenced in the release some results. So in the prepared remarks.

Jeff Fetterly: On that as well and Thats, something Thats still I'd say evolving and that we're trying to assess as quickly as possible.

Jeff Fetterly: Got it Okay. That's helpful and just on the contract compression side.

Speaker Change: There is some constructive this on the gas side, but at this point I think we view it more as optionality not necessarily a core driver of demand.

Jeff Fetterly: There have been some announcements for rig count reductions in the Permian can.

Preet Dhindsa: Moving forward, we're sharpening our focus on boosting profitability and strengthening resilience of our core operations, ensuring Enerflex generates sustained, attractive returns for shareholders over the long term. I look forward to building on our progress.

Speaker Change: But as you as you referenced there is precedent in our business for significant weakness in es bookings in previous downturns, but where we see it today the market continues to be fairly fairly strong in terms of opportunities. The question is just going to be at what point do the operators execute on those opportunities and what conviction will they have.

Jeff Fetterly: Can you just talk about the visibility you have into the potential impact that decreased oil drilling might have on the demand for contract compression in the Permian.

Jeff Fetterly: Are you still comfortable putting out the incremental horsepower that you have planned and what type of contract visibility do you have do you have on the new stuff, but also some some equipment that may have expiries upcoming.

Operator: And we'll now turn the call back over to the operator for questions. Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Speaker Change: On it as well and Thats, something Thats still I'd say evolving and that we're trying to assess as quickly as possible.

Michael Barth: One moment for our first question. Our first question is going to come from the line of Michael Barth with Raymond James. Your line is open. Please go ahead. Hey, good morning and thanks for taking my question. I was just wondering if you can comment on Booking's trajectory into the second quarter, like, are you seeing a rebound from first quarter, just pace, or is there sort of more deferral?

Speaker Change: Got it Okay. That's helpful and just on the contract compression side, certainly there have been some announcements for rig count reductions in the Permian.

Jeff Fetterly: So from a demand standpoint, you've seen sort of our utilization in our commentary when you look at the other public companies that compete in that space. Their commentary in recent days has also been very constructive on the market.

Speaker Change: Can you just talk about the visibility you have into the potential impact that decreased oil drilling might have on the demand for contract compression in the Permian.

Jeff Fetterly: And we continue to see.

Speaker Change: Are you still comfortable putting out the incremental horsepower that you have planned and what type of contract visibility do you have do you have on the new stuff, but also some some equipment that may have expiries upcoming.

Jeff Fetterly: Good fundamentals at play that we expect will continue as you said, there's been some indications from the operators are pulling back activity and capital spending, but it's still unclear what derivative impact that could have into the contract compression side specifically.

Preet Dhindsa: Thanks, Michael. So bookings, as we know, Q1 was a little bit light at $205 million. As noted, some of the activity was pulled into Q4, which was quite constructive. And what we're seeing in Q1 and Q2, some of our customers and their end customers tempering some of the decisions, especially in Q1, backlog was good at $1.2 billion. And then what we're seeing now is there's continued depth and opportunities in the market, both processing and compression.

Jeff Fetterly: As we previously talked about we are signing multiyear contracts.

Speaker Change: So from a demand standpoint, you've seen our utilization in our commentary when you look at the other public companies that compete in that space. Their commentary in recent days has also been very constructive on the market.

Jeff Fetterly: To support these new assets that we're putting in and we remain committed to the capital program guidance that we've talked about for 2025 and Thats the side of the business that we continue to see good returns and we believe is an attractive area for us to grow our business.

Michael Barth: Question be the timing, when do these hit? But we feel we continue to feel good. And we felt that Q1 was a little light relative to Q4, but good backlog and we see good opportunities going forward.

Speaker Change: And we continue to see.

Speaker Change: Good fundamentals at play that we expect will continue as you said, there's been some indications from the operators are pulling back activity and capital spending, but it's still unclear what derivative impact that could have into the contract compression side specifically.

Jeff Fetterly: Okay. Thanks, very much that's it for me.

Speaker Change: Thank you and as a reminder to ask a question. Please press star one on your telephone. Our next question is going to come from the line of Tien Monticello with <unk>.

Operator: Great. Thanks.

Operator: We'll call you back.

Aaron MacNeil: Thank you and one moment for our next question. Our next question is going to be from the line of Aaron MacNeil with TD Cal, and your line is open. Please go ahead. Aaron, thanks for the question.

Speaker Change: As we've previously talked about we are signing multiyear contracts to support these new assets that we're putting in and we remain committed to the capital program guidance that we've talked about for 2025 and that's the side of the business that we continue to see good returns and we believe is an attractive area for.

Speaker Change: <unk> capital markets. Your line is open. Please go ahead.

Tien Monticello: Hey, good morning, everyone.

Speaker Change: Yes.

Speaker Change: I wanted to ask a little bit more on the demand front maybe.

Speaker Change: I have a better ideas.

Speaker Change: I guess.

Speaker Change: The sources of demand and what they are levered to.

Speaker Change: Obviously, you've got some capital.

Speaker Change: For us to grow our business.

Speaker Change: Pulled back by E&ps.

Speaker Change: Okay. Thanks, very much that's it for me.

Speaker Change: With the crude coming down, but then you've also got approval of LNG export capacity coming online doubling of North American LNG export.

Speaker Change: Thank you and as a reminder to ask a question. Please press star one on your telephone. Our next question is going to come from the line of Tien Monticello with <unk>.

Speaker Change: Capacity through 2028.

Speaker Change: So when you look across your customer base can you talk a little bit about.

<unk> capital markets. Your line is open. Please go ahead.

Tien Monticello: Hey, good morning, everyone.

Preet Dhindsa: You know, when I took the role about seven weeks ago, we determined that it's still best to continue to move the business forward, have some prudence given what's going on geopolitically, tariffs, oil prices, etc. Working on our debt stack and free cash flow, refinancing, Joe can get into that if we need to in a few moments. But we've got a good footprint and we'll continue to refine that global footprint. Cost savings is another important element of post-integration as we simplify, optimize our business globally. Interest in tax is another area that improves free cash flow. We've been focused on that for quite some time.

Speaker Change: I guess the mix of customers that might be.

Speaker Change: Yes.

Speaker Change: I wanted to ask a little bit more on the demand front maybe.

Speaker Change: Building capacity and infrastructure related to longer term.

Speaker Change: I have a better ideas.

Speaker Change: Strategic.

Speaker Change: I guess.

Speaker Change: Growth and ones that are more impacted by near term.

Speaker Change: The sources of demand and what they are levered to.

Speaker Change: Obviously, you've got some capital.

Speaker Change: Commodity prices.

Speaker Change: Backed by E&ps.

Speaker Change: With the crude coming down, but then you've also got approval of LNG export capacity coming online.

Tim: Tim It's Jeff.

Tim: As we've talked about in previous conference calls.

Speaker Change: Doubling of North American LNG export.

Tim: Our customer base.

Speaker Change: Capacity through 2028.

Tim: Is biased and weighted towards larger operators, especially in the Permian.

Speaker Change: When you look across your customer base can you talk a little bit about.

Tim: Operators that have on average been the consolidators during the recent phase.

Speaker Change: I guess the mix of customers that might be.

Preet Dhindsa: But overall, capital allocations, work priorities, growth capital in the U.S. fleet, 2025, very important. We'll watch the markets carefully, and if we need to refine or adjust our trajectory for the year, we will. We have a few levers we can do it, but we are committed to growing our business organically, largely in the U.S., using precision managing maintenance capital where we have uncommitted opportunities. We may temper back, but still stay range-bound. But overall, I'm very pleased with the operations. We've got excellent leadership in all the regions, strong finance and corporate functions. So I feel good about what we've accomplished.

Speaker Change: Building capacity and infrastructure related to longer term.

Tim: Our expectation is with those relationships, so not waiting of our customer base towards those type of operators and midstream entities. We expect that that will see more stability in their plans and that those customers are focused on the latter of those two aspects that you referenced in terms of the medium and longer term outlook.

Speaker Change: Strategic.

Speaker Change: Growth and ones that are more impacted by near term.

Speaker Change: Commodity prices.

Jeff: Tim It's Jeff.

Speaker Change: As we've talked about in previous conference calls.

Tim: For LNG and LNG export in the U S and growing gas demand overall in the U S market as well there is obviously some uncertainty in the near term and some increased risk as Joe referenced in their remarks, but we continue to focus on the medium and long term fundamentals of the business, which we believe remain attractive.

Speaker Change: Our customer base.

Speaker Change: Is biased and weighted towards larger operators, especially in the Permian operators that have on average been the consolidators during the recent phase.

Preet Dhindsa: And during this interim period, Joe and I with our colleagues around the globe will continue to advance the business.

Preet Dhindsa: Scotty, that was fascinating. It does make sense. The capital allocation, we've been consistent in stating the various levers that we have. Correct shareholder returns, Q3 last year, a 50% dividend bump, we initiated. Shared buybacks, we've been active effective April 1, and Joe has talked about those amounts. We have a year to buy up to 5% of public floats, as noted. Growth capital, earmarked for the U.S., and we've range-bound growth at $40-$60M, maintenance at $70M. Once again, we feel really good about the economics of the U.S. fleet, the utilization, increased horsepower we're putting into the market, and we'll do further horsepower increases by the end of this year.

Speaker Change: Our expectation is with those relationships, so not waiting of our customer base towards those type of operators and midstream entities. We expect that that will see more stability in their plans and that those customers are focused on the latter of those two aspects that you referenced in terms of the medium and longer term outlook.

Tim: Okay.

Tim: Just given the fact that let's call the uncertainty part.

Tim: Flat quarter over quarter, but you had some stuff into Q4 and Q1 do you think Q2 bookings and up higher lower than Q1.

Speaker Change: For LNG.

Speaker Change: LNG export in the U S and growing gas demand overall in the U S market as well.

Speaker Change: Tim it's hard to hard to get too deep into that right now, but as I mentioned, we see good opportunities to the market and the question is when when do they hit what quarter do they hit and a successful as our team in winning the work, but we feel good the market is quite constructive and we're very active in that space.

Speaker Change: There's obviously some uncertainty in the near term and some increased risk as Joe referenced in their remarks, but we continue to focus on the medium and long term fundamentals of the business, which we believe remain attractive.

Tim: Okay fair enough.

Speaker Change: Okay.

Tim: I want to talk a little bit about the.

Speaker Change: <unk>.

Speaker Change: Just given the fact that let's call the uncertainty part.

Tim: Free cash has done a really good job of managing working capital over the last sort of.

Flat quarter over quarter, but you had some stockpile into Q4 and Q1 do you think Q2 bookings and up higher lower than Q1.

Tim: 18 months.

Tim: What are your expectations for.

Tim: Free cash maybe you can't give.

Tim: Guidance on that.

Tim: But should we expect to see more working capital release through the year or how should we thinking about that.

Speaker Change: Tim it's hard to hard to get too deep into that right now, but as I mentioned, we see good opportunities to market and the question is when when do they hit what quarter do they hit.

Tim: As we've talked about previously our expectation is that.

Preet Dhindsa: The revenue per horsepower per month is still quite constructive, a little over $28-$29. We feel good about the economics of the U.S. fleet.

Speaker Change: As successful as our team in and winning the work, but we feel good that the market is quite constructive and we're very active in that space.

Tim: Just to have a more stable or neutral working capital position in 2025.

Preet Dhindsa: As Joe noted, debt reduction, prudence in today's environment, we feel is still relevant. We'll continue to focus on free cash flow, effective working capital management globally that you've referenced, and debt reduction.

Speaker Change: Okay fair enough.

Tim: So obviously with the working capital of recovery, we're very happy with the working capital recovery in the first quarter, but we do expect to see a modest build of working capital through the remaining quarters of 2025.

Speaker Change: I want to talk a little bit about the free cash you guys have done a really good job of managing working capital over the last 18.

Speaker Change: 18 months, what are your expectations for.

Operator: Then as we go to the market to refinance the debt, we look for even more constructive terms. Thank you, and one moment for our next.

Tim: But the fundamental view that we have in terms of trying to maintain a fairly neutral working capital profile in 2025 remain remained intact.

Speaker Change: Free cash and I know you can't give guidance on that.

Speaker Change: But should we expect to see more working capital release through the year or how should we take note of that.

Tim: Okay.

Tim: And then last one for me just talking about improving profitability and you've touched on.

Speaker Change: As we've talked about previously Tim.

Keith Mackey: Our next question is going to be from the line of Keith MacKey with RBC Capital Markets.

Tim: Optimizing the tax impact.

Speaker Change: Our expectation is that it.

Speaker Change: It has to have a more stable or neutral working capital position in 2025.

Tim: <unk>.

Keith Mackey: Your line is open. Please go ahead. Hey, good morning. Thanks for taking my questions.

Tim: <unk>.

Tim: Seeing some improved interest expense.

Keith Mackey: Just wanted to go back to the bookings topic. Obviously, last cycle bookings got fairly low for a number of quarters. Do you think we're headed into that type of environment again, and can you just talk about what you're seeing in the market as far as where the weakness is and where the strength might be, i.e. if the current gas strip holds?

Speaker Change: Finance the stack is there anything more operational that youre doing.

Speaker Change: So obviously with the working capital of recovery, we're very happy with the working capital recovery in the first quarter, but we do expect to see a modest build of working capital through the remaining quarters of 2025.

Tim: I guess on a segment basis that we should be thinking.

Tim: Are there as well.

Tim: Tim what I would say is on the operational side Youll see our cost structure has come down quarter over quarter as I've mentioned in earlier calls the first 18 months.

Speaker Change: But the fundamental view that we have in terms of trying to maintain a fairly neutral working capital profile in 2025 remaining remain intact.

Tim: A bit was integration focus fairly heavy SG&A.

Speaker Change: Okay.

Speaker Change: And then last one from me just talking about improving profitability and you've touched on.

Tim: But now we're in a stage of continuing to simplify and optimize our geographic footprint, but also how how we invest in our people our process our systems post integration and Thats, a little bit of a longer exercise, but take a look at our cost structure. We're heavily focused on SG&A. So that's another area that youll see a little.

Speaker Change: Optimizing the tax impact.

Speaker Change: <unk>.

Jeffrey Fetterly: Hey Keith, it's Jeff. As Preet referenced in his remarks, we continue to see good depth of opportunities, especially in the U.S., and those touch on both the processing side and the compression side. And obviously, just given the weighting of activity, the Permian figures prominently into that number as well. As we referenced in the release and was also in the prepared remarks, there is some constructiveness on the gas side, but at this point, I think we view it more as optionality than necessarily a core driver of demand. But as you referenced, there's precedent in our business for significant weakness in ES bookings in previous downturns.

Speaker Change: Seeing some improved interest expense when we refinanced the stack is there anything more operational that youre doing.

Speaker Change: I guess on a segment basis that we should be thinking of that as well.

Tim: More improvement that improved profitability and free cash flow and then obviously below the line interest and taxes, we've alluded to that a fair bit too.

Speaker Change: Tim what I would say is on the operational side Youll see our cost structure has come down quarter over quarter as I've mentioned in earlier calls out the first 18 months plus.

Speaker Change: Okay I really appreciate the commentary I'll turn it back thanks guys.

Speaker Change: Plus a bit was integration focus fairly heavy SG&A.

Speaker Change: Thank you and I would now like to hand, the conference back over to <unk> for closing remarks.

Speaker Change: But now we're in a stage of continuing to simplify and optimize our geographic footprint, but also how how we invest in our people our processes our systems post integration and Thats, a little bit of a longer exercise, but take a look at our cost structure. We are heavily focused on SG&A. So that's another area that youll see a little.

Speaker Change: Since there are no further questions. Thank you for joining today's call and we look forward to providing you with our second quarter financial results in August.

Jeffrey Fetterly: But where we see it today, the market continues to be fairly strong in terms of opportunities. The question is just going to be, at what point do the operators execute on those opportunities and what conviction will they have on it as well? And that's something that's still, I'd say, evolving and that we're trying to assess as quickly as possible.

Speaker Change: Okay.

Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.

Speaker Change: A bit more improvement that will improve profitability and free cash flow and then obviously below the line interest and taxes, we've alluded to that a fair bit too.

Speaker Change: Okay I really appreciate the commentary I'll turn it back thanks guys.

Keith Mackey: Got it. Okay.

Jeffrey Fetterly: On the contract compression side, there have been some announcements for recount reductions in the Permian. Can you talk about the visibility you have into the potential impact that decreased oil drilling might have on the demand for contract compression in the Permian? Are you still comfortable putting out the incremental horsepower that you have planned? What type of contract visibility do you have on the new stuff, but also some equipment that may have expiries upcoming? So, from a demand standpoint, you've seen sort of our utilization and our commentary. When you look at the other public companies that compete in that space, their commentary in recent days has also been very constructive on the market.

Speaker Change: Thank you and I would now like to hand, the conference back over to Linda for closing remarks.

Linda: Since there are no further questions. Thank you for joining today's call and we look forward to providing you with our second quarter financial results in August.

Speaker Change: Yeah.

Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Hum.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Hum.

Speaker Change: Okay.

Jeffrey Fetterly: And we continue to see good fundamentals at play that we expect will continue. As you said, there's been some indications from the operators of pulling back activity in capital spending, but it's still unclear what derivative impact that could have into the contract compression side specifically.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Yeah.

Jeffrey Fetterly: As we've previously talked about, we are signing multi-year contracts to support these new assets that we're putting in, and we remain committed to the capital program guidance that we've talked about for 2025. And that's the side of the business that we continue to see good returns in, and we believe is an attractive area for us to grow our business.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Keith Mackey: Thanks very much.

Speaker Change: Okay.

Speaker Change: [music].

Operator: Thank you and as a reminder to ask a question please press star 11 on your telephone.

Speaker Change: Yes.

Tim Monachello: Our next question is going to come from the line of Tim Monachello with ATB Capital Markets. Your line is open please go ahead. Hey, good morning, everyone. I wanted to ask a little bit more on the demand front, maybe. have a better idea. I guess the sources of demand and what they're levered to. Obviously, you've got some capital being pulled back by EMTs, so. Preet Dhindsa, Enerflex Ltd., Tim Monachello, Keith MacKey, Preet Dhindsa, Enerflex Ltd., Capacity through 2028. So, when you look across your customer base, can you talk a little bit about. I guess the mix of customers that might be.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Jeffrey Fetterly: Tim, it's Jeff. As we've talked about in previous conference calls, Our customer base is biased and weighted towards larger operators, especially in the Permian, and operators that have, on average, been the consolidators during the recent phase. Our expectation is with those relationships and that weighting of our customer base towards those type of operators and midstream entities, we expect that we'll see more stability in their plans and that those customers are focused on the latter of those two aspects that you referenced in terms of the medium and longer term outlook for LNG and LNG export in the U.S.

Jeffrey Fetterly: and growing gas demand overall in the U.S. market as well. There's obviously some uncertainty in the near and some increased risk as Preet referenced in their remarks, but we continue to focus on the medium and long-term fundamentals of the business, which we believe remain attractive.

Jeffrey Fetterly: Given the fact that, let's call the uncertainty part sort of flat quarter over quarter, but you had some stuff pulled into Q4 and Q1, do you think Q2 bookings end up higher or lower than Tim, it's hard to get too deep into that right now, but as I mentioned, we see good opportunities in the market and the question is when do they hit? What quarter do they hit? And how successful is our team in winning the work? But we feel good that the market is quite constructive and we're very active in that space.

Preet Dhindsa: I want to talk a little bit about the free cash. What are your expectations for Preet Dhindsa, Enerflex Ltd. As we've talked about previously, Tim, our expectation is to have a more stable or neutral working capital position in 2025. And so obviously with the working capital recovery, we're very happy with the working capital recovery in the first quarter, but we do expect to see a modest build of working capital through the remaining quarters of 2025. But the fundamental view that we have in terms of trying to maintain a fairly neutral working capital profile in 2025 remain intact.

Preet Dhindsa: And then last one for me, I'm just talking about improving profitability and you've touched on optimizing. You know, seeing some improved interest expense when refinancing the stack. Is there anything more operational that you're doing, I guess, on a segment basis that we should be thinking about as well? Tim, what I would say is on the operational side, you'll see our cost structures come down quarter over quarter. As I mentioned on earlier calls, the first 18 months plus a bit was integration-focused, fairly heavy SG&A. But now we're in a stage of continuing to simplify and optimize our geographic footprint, but also how we invest in our people, our process, our systems post-integration.

Preet Dhindsa: And that's a little bit of a longer exercise, but take a look at our cost structure. We're heavily focused on SG&A, so that's another area that you'll see a little bit more improvement that'll improve profitability and free cash flow. And then obviously below the line interest in taxes, we've alluded to that a fair bit too.

Preet Dhindsa: Thank you, and I would now like to hand the conference back over to Preet Dhindsa for closing remarks. Since there are no further questions, thank you for joining today's call and we look forward to providing you with our second quarter financial results in August.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

Operator: Everyone have a great day.

Q1 2025 Enerflex Ltd Earnings Call

Request a DemoDemo

EFX

Enerflex

Earnings