Q2 2026 Enerflex Ltd Earnings Call

August 6, 2026

Operator: Good day. Thank you for standing by. Welcome to the Enerflex Second Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star one 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, Jeff Fetterly, Vice President of Corporate Development and Capital Markets. Please go ahead.

Operator: Good day. Thank you for standing by. Welcome to the Enerflex Q2 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star one 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, Jeff Fetterly, Vice President of Corporate Development and Capital Markets. Please go ahead.

Speaker #1: your hand is raised. To withdraw your question, please press *11 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, Jeff Fetterly, Vice President of Corporate Development and Capital Markets.

Speaker #1: Please go ahead.

Speaker #2: Thank you, Shannon, and good morning, everyone. With me today are Paul Mahoney, Enerflex's President and CEO; Preet Dhindsa, Senior Vice President and Chief Financial Officer; and Ben Park, Enerflex's Controller.

Jeff Fetterly: Thank you, Shannon. Good morning, everyone. With me today are Paul Mahoney, Enerflex's President and Chief Executive Officer, Preet Dhindsa, Senior Vice President and Chief Financial Officer, and Ben Park, Enerflex's Controller. Before I turn it over to Paul, I will 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. 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. 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.

Speaker #2: Before I turn it over to Paul, 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.

Speaker #2: Forward-looking information involves risks and uncertainties in the stated expectations could differ materially from actual results or performance. For more information, refer to the advisory statements within our news release and DNA and other regulatory filings all available on our website and under our CDAR+ and EDGAR profiles.

Speaker #2: 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.

Speaker #2: I'll now turn it over to Paul.

Jeff Fetterly: I will now turn it over to Paul.

Speaker #3: Thanks, Jeff. And thank you all for joining us on this morning's call. During the second quarter, Enerflex delivered solid operational performance, reflecting disciplined execution and our focus on operational excellence.

Paul Mahoney: Thanks, Jeff. Thank you all for joining us on this morning's call. During Q2, Enerflex delivered solid operational performance, reflecting disciplined execution and our focus on operational excellence. Results continue to be underpinned by our Energy Infrastructure and After-Market Services business lines, while the Engineered Systems business maintained strong commercial momentum. As we highlighted during our investor update in May, Enerflex is focused on competing intentionally in the markets where we can win, improving relentlessly through operational excellence, and delivering disciplined growth for our shareholders. We are moving with urgency to execute on these priorities, including initiatives to enhance collaboration, leverage our scale, improve operational efficiency, and strengthen our capabilities across the business. Let me speak in more detail about near-term performance. Starting with Engineered Systems, bookings remained very strong during Q2 at CAD 488 million, compared to a trailing eight-quarter average of CAD 363 million.

Paul Mahoney: Thanks, Jeff. Thank you all for joining us on this morning's call. During Q2, Enerflex delivered solid operational performance, reflecting disciplined execution and our focus on operational excellence. Results continue to be underpinned by our Energy Infrastructure and After-Market Services business lines, while the Engineered Systems business maintained strong commercial momentum. As we highlighted during our investor update in May, Enerflex is focused on competing intentionally in the markets where we can win, improving relentlessly through operational excellence, and delivering disciplined growth for our shareholders. We are moving with urgency to execute on these priorities, including initiatives to enhance collaboration, leverage our scale, improve operational efficiency, and strengthen our capabilities across the business. Let me speak in more detail about near-term performance. Starting with Engineered Systems, bookings remained very strong during the quarter at $488 million, compared to a trailing eight-quarter average of $363 million.

Speaker #3: Results continue to be underpinned by our energy infrastructure, and aftermarket services business lines. While the engineered systems business maintains strong commercial momentum, as we highlighted during our investor update in May, Enerflex has focused on competing intentionally in the markets where we can win.

Speaker #3: Improving relentlessly through operational excellence and delivering disciplined growth for our shareholders. We are moving with urgency to execute on these priorities including initiatives to enhance collaboration, leverage our scale, improve operational efficiency, and strengthen our capabilities across the business.

Speaker #3: Let me speak in more detail about near-term performance. Starting with engineered systems, bookings remained very strong during the quarter, at 488 million dollars compared to a trailing 8-quarter average of 363.

Speaker #3: The year is off to a strong start with first half bookings approaching 1 billion dollars, or approximately 75% of our full-year bookings during 2025.

Paul Mahoney: The year is off to a strong start, with H1 bookings approaching CAD 1 billion, or approximately 75% of our full-year bookings during 2025. Strong bookings has translated into increasing visibility for our Engineered Systems business. With a book-to-bill ratio of 1.5 times during H1 2026, and our forward visibility for Engineered Systems revenue increasing to CAD 1.5 billion, the highest level in Enerflex's history. Engineered Systems bookings during Q2 reflect a broad mix of end markets, including cryogenic gas processing, refrigeration for LNG exports, large compression stations, and power generation. The outlook for our Engineered Systems business remains strong, supported by healthy demand for compression and processing equipment across our key markets, together with increasing natural gas, associated liquids, and electric power generation activity.

Paul Mahoney: The year is off to a strong start, with H1 bookings approaching $1 billion, or approximately 75% of our full-year bookings during 2025. Strong bookings has translated into increasing visibility for our Engineered Systems business. With a book-to-bill ratio of 1.5x during H1 2026, and our forward visibility for Engineered Systems revenue increasing to CAD 1.5 billion, the highest level in Enerflex's history. Engineered Systems bookings during Q2 reflect a broad mix of end markets, including cryogenic gas processing, refrigeration for LNG exports, large compression stations, and power generation. The outlook for our Engineered Systems business remains strong, supported by healthy demand for compression and processing equipment across our key markets, together with increasing natural gas, associated liquids, and electric power generation activity.

Speaker #3: Strong bookings has translated into increasing visibility for our ES business. With a book-to-bill ratio of 1.5 times during the first half of 2026, and our forward visibility for ES revenue increasing to 1.5 billion dollars.

Speaker #3: The highest level in Enerflex's history. ES bookings during the second quarter reflect a broad mix of end markets, including cryogenic gas processing, refrigeration for LNG export, large compression stations, and power generation.

Speaker #3: The outlook for our engineered systems business remains strong. Supported by healthy demand for compression and processing equipment across our key markets. Together with increasing natural gas, associated liquids, and electric power generation activity.

Speaker #3: Interested distributed power solutions also continues to build. With our pipeline of opportunities now exceeding 7 gigawatts across data center and other power generation applications.

Paul Mahoney: Interest in distributed power solutions also continues to build, with our pipeline of opportunities now exceeding 7 gigawatts across data center and other power generation applications. Turning to After-Market Services, results improved during Q2 after a slower start to the year in North America. Performance reflected steady customer maintenance spending, particularly in regions where we also operate Energy Infrastructure assets, highlighting the strength of our integrated platform and competitive positioning across our core markets. As highlighted during our investor update, our core priorities for the After-Market Services business include: 1. growing profitable services, notably in our retrofit segment; 2. optimizing costs through basin focus and pooling of resources across After-Market Services and U.S. Contract Compression business lines; and 3. capturing opportunities for installation and O&M services associated with power generation.

Speaker #3: Turning to aftermarket services. Results improved during the second quarter after a slower start to the year in North America. Performance reflected steady customer maintenance spending, particularly in regions where we also operate energy infrastructure assets.

Speaker #3: Highlighting the strength of our integrated platform and competitive positioning across our core markets. As highlighted during our investor update, our core priorities for the AMS business include: (1) growing profitable services notably in our retrofit segment; (2) optimizing costs through base-in-focus and pooling of resources across AMS and contract compression business lines; and (3) capturing opportunities for installation and O&M services associated with power generation.

Speaker #3: The energy infrastructure business continues to deliver solid performance, supported by approximately 1.2 billion of contracted revenue over the remaining terms of our customer contracts.

Paul Mahoney: The Energy Infrastructure business continues to deliver solid performance, supported by approximately CAD 1.2 billion of contracted revenue over the remaining terms of our customer contracts. Within this segment, Enerflex's U.S. Contract Compression business continues to perform well, led by increasing natural gas production in the Permian Basin. Utilization was strong at 93% across a fleet of approximately 496,000 horsepower. Additional operating KPIs for the business are available on slides 33 and 34 of our investor presentation. We continue to target customer-supported fleet growth of 10% to 15% during 2026, with the majority of additions in H2 of the year. We are also securing long lead time components to support fleet growth in 2027, 2028, and 2029. Turning to our international Energy Infrastructure operations, which are outlined on slides 31 and 36.

Speaker #3: Within this segment, Enerflex's US contract compression business continues to perform well. Led by increasing natural gas production in the Permian Basin. Utilization was strong at 93% across a fleet of approximately 496,000 horsepower.

Speaker #3: Additional operating KPIs for the business are available on slides 33 and 34 of our investor presentation. We continue to target customer-supported fleet growth of 10 to 15 percent during 2026, with the majority of additions in the second half of the year.

Speaker #3: We are also securing long lead-time components to support fleet growth in 2027, 2028, and 2029. Turning to our International Energy Infrastructure operations, which are outlined on slides 31 and 36.

Speaker #3: This portfolio continues to be supported by a strong contract position with a weighted average remaining term of approximately 5 years, providing durable and predictable cash flows that we expect will continue to support Enerflex's financial performance for years to come.

Paul Mahoney: This portfolio continues to be supported by a strong contract position with a weighted average remaining term of approximately 5 years, providing durable and predictable cash flows that we expect will continue to support Enerflex's financial performance for years to come. I'd also like to touch briefly on our operations in the Middle East. While we continue to closely monitor the situation in the region, our operations have remained uninterrupted to date. The safety of our people remains our highest priority, and our local teams continue to execute established response processes and contingency plans while maintaining reliable operations for our customers. Today, Enerflex's operations in Bahrain and Oman comprise of 17 projects, supported by an installed fleet of approximately 350,000 horsepower across compression and power generation applications. We remain focused on supporting our customers while continuing to execute safely and reliably across the region.

Speaker #3: I'd also like to touch briefly on our operations in the Middle East. While we continue to closely monitor the situation in the region, our operations have remained uninterrupted to date.

Speaker #3: The safety of our people remains our highest priority, and our local teams continue to execute established response processes and contingency plans while maintaining reliable operations for our customers.

Speaker #3: Today, Enerflex's operations in Bahrain and Oman comprise of 17 projects, supported by an installed fleet of approximately 350,000 horsepower across compression and power generation applications.

Speaker #3: We remain focused on supporting our customers while continuing to execute safely and reliably across the region. Let me now speak about progress we are making on the strategic priorities outlined during our investor update in May.

Paul Mahoney: Let me now speak about progress we are making on the strategic priorities outlined during our investor update in May. We continue to advance a disciplined, enterprise-wide approach to operational excellence. We are also progressing the professionalization of our CAD 1.9 billion per year enterprise-wide supply chain, driving productivity improvements and modernizing IT and automation systems. We expect each of these initiatives to be meaningful contributors in achieving our financial objectives. Preet will provide additional detail on the financial impact and targets associated with these priorities during his prepared remarks. We've developed five specific work streams with meaningful projects underway in each region and across key partner functions. One example is the recent alignment of our Canadian and US operations under a unified North American framework. This change is designed to unlock greater collaboration, leverage our scale, drive standardization, improve operational efficiency, and strengthen customer service.

Speaker #3: We continue to advance a disciplined enterprise-wide approach to operational excellence. We are also progressing the professionalization of our 1.9 billion per year enterprise-wide supply chain, driving productivity improvements and modernizing IT and automation systems.

Speaker #3: We expect each of these initiatives to be meaningful contributors in achieving our financial objectives. Preet will provide additional detail on the financial impact and targets associated with these priorities during his prepared remarks.

Speaker #3: We've developed five specific workstreams. With meaningful projects underway in each region and across key partner functions. One example is the recent alignment of our Canadian and US operations under a unified North American framework.

Speaker #3: This change is designed to unlock greater collaboration leverage our scale, drive standardization, improve operational efficiency, and strengthen customer service. Enerflex reached several important reliable milestones in the quarter.

Paul Mahoney: Enerflex reached several important ReliaCore milestones in the quarter, advancing the company's digitally connected service ecosystem. We launched our Houston-based remote operations center, leveraging smart dispatch technology to connect customer assets with technical expertise and intelligent workflows, as well as developed and deploying Enerflex's first ReliaCore EDGE devices. Together, these capabilities extend service coverage, accelerate issue resolution, and build the foundation for advanced analytics and predictive maintenance capabilities that are expected to improve asset performance, reduce downtime, and create long-term economic value for both Enerflex and our client partners. Let me conclude by reiterating that our priorities remain clear. As a company, we are focused on improving productivity across our global operations, pursuing the highest value growth opportunities in markets where Enerflex can win, and allocating capital in a disciplined manner to drive long-term value creation.

Speaker #3: Advancing the company's digitally connected service ecosystem. We launched our Houston-based remote operations center. Leveraging smart dispatch technology to connect customer assets with technical expertise and intelligent workflows.

Speaker #3: As well as developed and deploying Enerflex's first reliable core edge devices. Together, these capabilities extend service coverage, accelerate issue resolution, and build the foundation for advanced analytics and predictive maintenance capabilities that are expected to improve asset performance, reduce downtime, and create long-term economic value for both Enerflex and our client partners.

Speaker #3: Let me conclude by reiterating that our priorities remain clear. As a company, we are focused on improving productivity across our global operations. Pursuing the highest value growth opportunities in markets where Enerflex can win and allocating capital in a disciplined manner to drive long-term value creation.

Speaker #3: We are encouraged by early progress, and we remain focused on building momentum as we execute against these initiatives. We look forward to providing updates on our progress over the coming quarters.

Paul Mahoney: We are encouraged by early progress. We remain focused on building momentum as we execute against these initiatives. We look forward to providing updates on our progress over the coming quarters. With that, I'll turn the call over to Preet to speak to the financial highlights.

Speaker #3: With that, I'll turn the call over to Preet to speak to the financial highlights.

Speaker #2: Thanks, Paul, and good morning, everyone. I'll start with highlights from the second quarter. We generated revenue of 582 million dollars compared to 615 million in Q2 '25 and 584 million in Q1 '26.

Preet Dhindsa: Thanks, Paul. Good morning, everyone. I'll start with highlights from Q2. We generated revenue of CAD 582 million compared to CAD 615 million in Q2 2025 and CAD 584 million in Q1 2026. Lower revenue compared with prior year is primarily driven by project sequencing and resource allocation for expansion of Enerflex's U.S. Contract Compression fleet within the Engineered Systems product line. ES book-to-bill ratio, calculated as bookings divided by revenue, was 1.6 times during Q2 2026 and 1.5 times during H1 of the year. This translated into our backlog increasing to a record CAD 1.5 billion at the end of Q2. Gross margin before depreciation and amortization was CAD 173 million, or 30% of revenue, compared to CAD 175 million or 29% of revenue in Q2 2025 and CAD 179 million or 31% of revenue during Q1 2026.

Speaker #2: Lower revenue compared with prior years primarily driven by project sequencing and resource allocation for expansion of Enerflex's US contract compression fleet, within the engineered systems product line.

Speaker #2: EF book-to-bill ratio calculated as bookings divided by revenue was 1.6 times during Q2 '26 and 1.5 times during the first half of the year.

Speaker #2: This translated into our backlog increasing to a record 1.5 billion dollars at the end of Q2. Gross margin before depreciation amortization was 173 million dollars or 30 percent of revenue.

Speaker #2: Compared to 175 million or 29 percent of revenue in Q2 '25 and 179 million or 31 percent of revenue during Q1 '26. Energy infrastructure and AMS product lines generated 69 percent of consolidated gross margin before depreciation amortization during the quarter.

Preet Dhindsa: Energy Infrastructure and AMS product lines generated 69% of consolidated gross margin before depreciation and amortization during the quarter. ES gross margin before depreciation and amortization of 18% in Q2 2026, compared to 18% in Q2 2025 and 19% in Q1 2026, with a sequential decrease related primarily to revenue mix and project sequencing. SG&A was CAD 81 million for the three months ended 30 June 2026, up CAD 20 million from the prior year period due to higher stock-based compensation expense and investments to support growth and operational improvements. Core SG&A was CAD 58 million for the three months ended 30 June 2026, compared to CAD 52 million in Q2 2025 and CAD 55 million during Q1 2026. Adjusted EBITDA of CAD 128 million compared to CAD 130 million in Q2 2025 and CAD 137 million in Q1 2026.

Speaker #2: EF's gross margin before depreciation amortization of 18 percent in Q2 '26 compared to 18 percent in Q2 '25 and 19 percent in Q1 '26, with a sequential decrease related primarily to revenue mix and project sequencing.

Speaker #2: SG&A was 81 million dollars for three months ended June 30, 2026, up 20 million from the prior year period due to higher stock-based compensation expense and investments to support growth and operational improvements.

Speaker #2: Core SG&A was 58 million dollars for the three months ended June 30, 2026, compared to 52 million in Q2 '25 and 55 million during the first quarter of 2026.

Speaker #2: Adjusted EBIT of 128 million dollars compared to 130 million in Q2 '25 and 137 million in Q1 '26. Cash provided by operating activities before changes in working capital or FFO of 87 million dollars in Q2 '26 compared to 89 million in Q2 '25 and 95 million in Q1 '26, a function of lower adjusted EBITDA.

Preet Dhindsa: Cash provided by operating activities before changes in working capital, or FFO, of CAD 87 million in Q2 2026, compared to CAD 89 million in Q2 2025 and CAD 95 million in Q1 2026, a function of lower adjusted EBITDA. Cash provided by operating activities, or CFO, was CAD 89 million, which included net working capital recovery of CAD 2 million. This compares to cash used in operating activities of CAD 4 million in Q2 2025 and cash provided by operating activities of CAD 32 million in Q1 2026. Free cash flow increased to CAD 32 million in Q2 2026, compared to a use of cash of CAD 39 million during Q2 2025 and a source of cash of CAD 15 million during Q1 2026. The increase in free cash flow compared to prior year and prior period reflected higher CFO being partially offset by higher capital spending.

Speaker #2: Cash provided by operating activities or CFO was 89 million dollars, which included net working capital recovery of 2 million dollars. This compares to cash used in operating activities of 4 million dollars in Q2 '25 and cash provided by operating activities of 32 million in Q1 '26.

Speaker #2: Free cash flow increased to 32 million dollars in Q2 '26 compared to a use of cash of 39 million during Q2 '25 and a source of cash of 15 million dollars during Q1 '26.

Speaker #2: The increase in free cash flow compared to prior year and prior period reflected higher CFO being partially offset by hiring capital spending. Return on capital employed was 15.4 percent in Q2 '26 compared to 16.4 percent in Q2 '25 and 17.3 percent during Q1 '26.

Preet Dhindsa: Return on capital employed was 15.4% in Q2 2026, compared to 16.4% in Q2 2025 and 17.3% during Q1 2026. Lower ROCE primarily reflects the decrease in trailing 12-month EBIT, which was impacted by unrealized gains on redemption options related to the senior secured notes recognized in prior periods, partially offset by lower average capital employed, primarily due to decline in net debt. Net earnings of CAD 30 million, or CAD 0.25 per share in Q2 2026, compared to CAD 60 million or CAD 0.49 per share in Q2 2025 and CAD 43 million or CAD 0.35 per share in Q1 2026. Compared to Q2 2025, profitability benefited from lower net finance costs, however, it was offset by higher share-based compensation expense and an unrealized gain of CAD 15 million related to the redemption options of the senior secured notes recognized in the prior year.

Speaker #2: Lower ROCE primarily reflects the decrease in trailing 12-month EBIT, which is impacted by unrealized gains on redemption options related to the senior secured notes recognized in prior periods partially offset by lower average capital employed primarily due to decline in net debt.

Speaker #2: Net earnings of 30 million dollars and 25 cents per share in Q2 '26 compared to 60 million or 49 cents per share in Q2 '25 and 43 million or 35 cents per share in Q1 '26.

Speaker #2: Compared to Q2 '25, profitability benefited from lower net finance cost. However, it was offset by higher share-based compensation expense and an unrealized gain of 15 million dollars related to the redemption options of its senior secured notes recognized in the prior year.

Speaker #2: Enerflex exited Q2 2026 with net debt of $455 million, which included $74 million of cash and cash equivalents, a reduction of $153 million compared to Q2 2025 and $46 million since the beginning of 2026.

Preet Dhindsa: Enerflex exits Q2 2026 with a net debt of CAD 455 million, which included CAD 74 million of cash and cash equivalents, a reduction of CAD 153 million compared to Q2 2025, and CAD 46 million since the beginning of 2026. Enerflex's bank-adjusted net debt to EBITDA ratio is approximately 0.8 times at the end of Q2 2026, down from 1.3 times at the end of Q2 2025 and 0.9 times at the end of Q1 2026. On 24 June, Enerflex entered into an amended and restated credit agreement with respect to our syndicated secured revolving credit facility. The maturity date of the RCF has been extended to 30 June 2029, and availability is unchanged at CAD 800 million. The limit under the RCF may be increased by up to CAD 200 million at the request of the company, subject to lender's consent, compared to CAD 50 million previously.

Speaker #2: Enerflex's bank-adjusted net debt to EBITDA ratios approximately 0.8 times at the end of Q2 '26, down from 1.3 times at the end of Q2 '25 and 0.9 times at the end of Q1 '26.

Speaker #2: On June 24th, Enerflex entered into an amended and restated credit agreement with respect to our syndicated secured revolving credit facility. The maturity date of the RCF has been extended to June 30, 2029, and availability is unchanged at 800 million dollars.

Speaker #2: The limit under the RCF may be increased by up to 200 million dollars at the request of the company, subject to lender's consent compared to 50 million dollars previously.

Speaker #2: Enerflex also continues to maintain a 70 million dollar unsecured LC facility with one of its lenders in its RCF syndicate. Let me shift to capital allocation.

Preet Dhindsa: Enerflex also continues to maintain a CAD 70 million unsecured LC facility with one of its lenders in its RCF syndicate. Let me shift to capital allocation. We invested CAD 53 million in the business during Q2, comprised of CAD 35 million for growth, primarily allocated to expand the company's contract compression fleet in the US, and CAD 18 million for maintenance in PP&E. Enerflex is refining its capital expenditure range for 2026, now targeting organic growth capital expenditures of CAD 185 million to 195 million, compared to prior guidance of CAD 175 million to 195 million. The updated guidance includes organic growth capital expenditures of approximately CAD 100 million, prior guidance of CAD 90 million to 100 million, maintenance capital expenditures of CAD 70 million to 80 million, unchanged from original guidance, and PP&E and infrastructure investments of approximately CAD 15 million to support the company's ES business and activity in adjacent markets, including electric power generation.

Speaker #2: We invested 53 million dollars in the business during the second quarter, comprised of 35 million for growth, primarily allocated to expand the company's contract compression fleet in the US, and 18 million dollars for maintenance and PP&E.

Speaker #2: Enerflex is refining its capital expenditure range for 2026, now targeting organic growth capital expenditures of 185 million to 195 million dollars compared to prior guidance of 175 to 195 million.

Speaker #2: The updated guidance includes organic growth capital expenditures of approximately 100 million dollars; prior guidance of 90 to 100 million; maintenance capital expenditures of 70 to 80 million dollars; unchanged from original guidance; and PP&E and infrastructure investments of approximately 15 million dollars to support the company's ES business and activity in adjacent markets, including electric power generation.

Speaker #2: Enerflex continues to evaluate selective disciplined bolt-on acquisition opportunities. Inorganic growth will be focused on enhancing capabilities and accelerating scale in the company's core North American markets.

Preet Dhindsa: Enerflex continues to evaluate selective, disciplined bolt-on acquisition opportunities. Inorganic growth will focus on enhancing capabilities and accelerating scale in the company's core North American markets. All opportunities will be balanced with Enerflex's focus on maintaining a strong financial position and opportunities to provide direct shareholder returns. Lastly, I would like to touch on the value creation drivers connected to our strategic objectives. These were highlighted during our investor day in May and are summarized on slide 16. Our objectives on a full-cycle basis are to grow our business ahead of underlying markets, increase profitability, and prioritize disciplined capital allocation. Specifically, we are focused on increasing adjusted EBITDA margin by 200-plus basis points, improving cash conversion ratio by 200-plus basis points, and driving return on capital employed 200-plus basis points higher.

Speaker #2: All opportunities will be balanced with Enerflex's focus on maintaining a strong financial position and opportunities to provide direct shareholder returns. Lastly, I would like to touch on the value creation drivers connected to our strategic objectives.

Speaker #2: These were highlighted during our investor day in May and are summarized on slide 16. Our objectives on a full cycle basis are to grow our business ahead of underlying markets, increase profitability, and prioritize disciplined capital allocation.

Speaker #2: Specifically, we are focused on increasing adjusted EBITDA margin by 200-plus basis points, improving cash conversion ratio by 200-plus basis points, and driving return on capital employed 200-plus basis points higher.

Speaker #2: As highlighted by the steady improvement in adjusted EBITDA margin, shown on slide 9, we are encouraged by early progress and look forward to providing further updates.

Preet Dhindsa: As highlighted by the steady improvement in adjusted EBITDA margin shown on slide nine, we are encouraged by early progress and look forward to providing further updates. With that, I will turn the call back over to Paul for closing remarks.

Speaker #2: With that, I'll turn the call back over to Paul for closing remarks.

Speaker #1: As we've discussed today, we continue to make meaningful progress executing our strategy while maintaining a disciplined focus on operational excellence, profitable growth, and capital allocation.

Paul Mahoney: As we have discussed today, we continue to make meaningful progress executing our strategy while maintaining a disciplined focus on operational excellence, profitable growth, and capital allocation. We believe the fundamentals across our core markets remain attractive, and Enerflex is well-positioned to capitalize on those opportunities through our integrated platform, global footprint, and longstanding customer relationships. While there is still work ahead, I am confident in our team's ability to create long-term value for our shareholders. I would like to thank our employees around the world for their continued dedication, and I would also like to thank our client partners, suppliers, and stakeholders for their ongoing support. I will now turn the call back to the operator for questions.

Speaker #1: We believe the fundamentals across our core markets remain attractive and Enerflex is well-positioned to capitalize on those opportunities through our integrated platform, global footprint, and long-standing customer relationships.

Speaker #1: While there is still work ahead, I am confident in our team's ability to create long-term value for our shareholders, I'd like to thank our employees around the world for their continued dedication and I'd also like to thank our client partners, suppliers, and stakeholders for their ongoing support.

Speaker #1: I will now turn the call back to the operator for questions.

Speaker #3: Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press *11 on your telephone and wait for your name to be announced.

Operator: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by. Our first question comes from Keith MacKey from RBC Capital Markets. Please go ahead.

Speaker #3: To withdraw your question, please press star 11 again. Please stand by. Our first question comes from Keith Mackey from RBC Capital Markets. Please go ahead.

Speaker #4: Hey, good morning, and thanks for taking my questions. Just firstly on the capital investment raise or refinement, can you just kind of run through the priorities for that spend?

Keith MacKey: Hey, good morning, and thanks for taking my questions. Just firstly, on the capital investment raise or refinement, can you just kind of run through the priorities for that spend? What gives you the confidence in the returns that you'll generate from it? Is the increase based on inflationary factors, or is it an increase in the amount of work you're actually able to put out?

Keith Mackey: Hey, good morning, and thanks for taking my questions. Just firstly, on the capital investment raise or refinement, can you just kind of run through the priorities for that spend? What gives you the confidence in the returns that you'll generate from it? Is the increase based on inflationary factors, or is it an increase in the amount of work you're actually able to put out?

Speaker #4: What gives you the confidence in the returns that you'll generate from it? And is this the increase based on inflationary factors or is it an increase in the amount of work you're actually able to put out?

Speaker #1: Yeah, good question, Keith. I mean, as you know, it's primarily our contract compression business, and so the refinement on the upper range is really a confidence in our ability to contract that business.

Paul Mahoney: Yeah, good question, Keith. As you know, it's primarily our U.S. Contract Compression business. The refinement on the upper range is really a confidence in our ability to contract a business. We do have our 2026 log filled. We do have portions of our 2027 log filled. It's more of increasing capabilities than it is an inflationary-related item.

Speaker #1: We do have our 26 log-filled. We do have portions of our 27 log-filled. And so it's more of increasing capabilities than it is an inflationary related item.

Speaker #4: Got it. Appreciate the color there, Paul. Maybe just to follow up on the bookings certainly very strong this quarter. Can you comment on the mix of those bookings?

Keith MacKey: Got it. Appreciate the color there, Paul. Maybe just to follow up on the bookings, certainly very strong this quarter. Can you comment on the mix of those bookings? Was there any data center activity in those? Ultimately, do you expect the CAD 400 to 500 million range to be the new normal for Enerflex over the next 12 months, or was this an exceptional quarter? Exceptional H1, I should say.

Keith Mackey: Got it. Appreciate the color there, Paul. Maybe just to follow up on the bookings, certainly very strong this quarter. Can you comment on the mix of those bookings? Was there any data center activity in those? Ultimately, do you expect the CAD 400 to 500 million range to be the new normal for Enerflex over the next 12 months, or was this an exceptional quarter? Exceptional H1, I should say.

Speaker #4: Was there any data center activity in those? And ultimately, do you expect the four to 500 million range to be the new normal for Enerflex over the next 12 months, or was this an exceptional quarter?

Speaker #4: Exceptional first half, I should say.

Speaker #1: Yeah, great question, Keith. And along our commitments in our Investor Day regarding growing above market, this is yet another quarter in a row of increasing bookings.

Paul Mahoney: Yeah. Great question, Keith. Along our commitments in our investor day regarding growing above market, this is yet another quarter in a row of increasing bookings. Q2 is a watermark for us. It does not include any bookings for data center in there. There's the cryogenic gas processing, there's refrigeration processing for LNG export, large compression, and some industrial-related power in that. This has been a multi-quarter expression of bookings. We see this continuing here into Q3. Just to reiterate, Q2 does not have data center elements in it.

Speaker #1: Q2 is a watermark for us. It does not include any bookings for data center in there. There's the cryogenic gas processing, there's refrigeration processing for LNG export, large compression, and some industrial related power in that.

Speaker #1: So this has been a multi-quarter expression of bookings. We see this continuing here into Q3. And just to reiterate, Q2 does not have data center elements in it.

Speaker #4: Okay, thanks very much.

Keith MacKey: Okay. Thanks very much.

Keith Mackey: Okay. Thanks very much.

Speaker #3: Thank you. Our next question comes from Tim Monticello from ATB Cormart Capital Markets. Please go ahead.

Operator: Thank you. Our next question comes from Tim Monachello from ATB Cormark Capital Markets. Please go ahead.

Speaker #5: Thanks for taking my questions. The EI backlog continues to sort of trend lower. The revenue throughput seems to be pretty consistent and obviously those projects are long in duration.

Tim Monachello: Thanks for taking my questions. The EI backlog continues to sort of trend lower. The revenue throughput seems to be pretty consistent and obviously those projects are long in duration. I'm just curious if you are expecting to see that revenue profile decline or if there's some perhaps contract renewals in the foreseeable future that'll start to boost that backlog.

Speaker #5: I'm just curious, if you are expecting to see that revenue profile decline or if there's some perhaps contract renewals in the foreseeable future that'll start to boost that backlog?

Speaker #1: Yeah, look, Tim, great question. I would say that what you're seeing and witnessing is the result of optimizing our footprint. It's not as much about contract rollover if you will on the large boom contracts.

Paul Mahoney: Yeah. Look, Tim, great question. I would say that what you are seeing and witnessing is the result of optimizing our footprint. It is not as much about contract rollover, if you will, on the large boom contracts. It is more about optimizing our footprint, mainly in our Latin American region. Just to put some color behind what you are seeing.

Speaker #1: It's more about optimizing our footprint, mainly in our Latin American region. So just to put some color behind what you're seeing.

Speaker #5: Okay, that's helpful. And then a lot of players in the US contract compression market have been talking about extending lead times. Even further now, for engine components up to almost four years now.

Tim Monachello: Okay, that is helpful. A lot of players in the U.S. Contract Compression market have been talking about extending lead times even further now for engine components up to almost 4 years now. Can you talk a little bit about your strategy to be able to fulfill new orders given that extending lead time for components, if there is anything you can do outside of normal supply chain channels to procure engines within the market?

Speaker #5: Can you talk a little bit about your strategy to be able to fulfill new orders given that extending lead time for components and if there's anything you can do outside of normal supply chain channels to procure engines within the market?

Speaker #1: Yeah, and the company has purchase obligations over the next four years from 26 through 29, significant, right? 521 in 26, 350 some odd in 27, 191, 28, and 53 in 29.

Paul Mahoney: Yeah. The company has purchase obligations over the next 4 years, from 2026 through 2029, significant, right? 521 in 2026, 350 some odd in 2027, 191 in 2028, and 53 in 2029. I would say we are in an interesting position having an advanced S&OP process while the lead times have gone out. Yes, do we need to look for some alternative items outside of engines and things like that? We constantly are seeking and working that. This is an area that I think our team has done a remarkable job putting in the purchase obligations. We have clear line of sight 2026, 2027, and are working from that type of framework on the engine.

Speaker #1: So I would say we're in a an interesting position having an advanced S&OP process while the lead times have gone out. And yes, do we need to look for some alternative items outside of engines and things like that?

Speaker #1: We constantly are seeking and working that. But this is an area that I think our team has done a remarkable job putting in the purchase obligations and we have clear line of sight 26, 27.

Speaker #1: And our working from that type of framework on the engine. So again, I think it's a unique strength being in the compression business at large, both contract and the purchase side.

Paul Mahoney: Again, I think it is a unique strength being in the compression business at large, both contract and the purchase side, and a normal standard S&OP process that has been extending over the last 12 plus months.

Speaker #1: And a normal, standard S&OP process that's been extended over the last 12-plus months.

Speaker #5: You got it. And then last one for me, just on the power gen, opportunity you said that continues to grow. Can you talk a little bit more about the strategy and the go-to-market and if you're finding any partners in the hyperscaler space or any other partners that may be showing a little bit of momentum and could point to some medium-term more tangible results in terms of bookings in that space?

Tim Monachello: You got it. Last one for me, just on the power gen opportunity set that continues to grow. Can you talk a little bit more about the strategy and the go to market, and if you're finding any partners in the hyperscaler space or any other partners that may be showing a little bit of momentum and could point to some medium term, more tangible results in terms of bookings in that space?

Speaker #1: Yeah, great question. Tim, I would tell you that we've reported many quarters now about our growing C in the market at what's seven gigawatts.

Paul Mahoney: Yeah. Great question, Tim. I would tell you that we've reported many quarters now about our growing C in the market at 7 gigawatts. We've reported out on that. I would tell you that our commercial operations and our organization has been intensely focused on probably the top 2 gigawatts. As we continue to drive that intensity, what we're seeing is an advancement in our sales funnel on that level of activity. Our engagement is with hyperscalers. Our engagement is with prime power providers. The partners come and go, but I would say that the stable connectivity that Enerflex has been able to achieve with the hyperscalers has been consistent now for a few quarters.

Speaker #1: We've reported out on that. I would tell you that our commercial operations and our organization has been intensely focused on probably the top two gigawatts.

Speaker #1: And as we continue to drive that intensity, what we're seeing is it advancement in our sales funnel on that level of activity. So our engagement is with hyperscalers.

Speaker #1: Our engagement is with prime power providers. The partners come and go, but I would say that the stable connectivity that Enerflex has been able to achieve with the hyperscalers has been consistent now for a few quarters.

Speaker #5: All right, I appreciate it. I'll turn it back.

Tim Monachello: All right. I appreciate it. I'll turn it back.

Speaker #3: Thank you. I am showing no further questions at this time. I would now like to turn it back over to Paul Mahoney for closing remarks.

Operator: Thank you. I am showing no further questions at this time. I would now like to turn it back over to Paul Mahoney for closing remarks.

Speaker #1: Well, thank you. Everyone for joining us today. And for your continued interest in Enerflex, we appreciate your time and look forward to providing further updates on our strategic progress with third-quarter results at the end of October.

Paul Mahoney: Well, thank you everyone for joining us today and for your continued interest in Enerflex. We appreciate your time and look forward to providing further updates on our strategic progress with Q3 results at the end of October. Thank you.

Speaker #1: Thank you.

Operator: Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.

Q2 2026 Enerflex Ltd Earnings Call

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