ENRFF - Earnings call transcript Q1 2022

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Operator

Good morning, ladies and gentlemen, and welcome to the Enerflex First Quarter 2022 Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Stefan Ali, Vice President, Strategy and Investor Relations. Please go ahead.

Stefan Ali

Thank you, operator, and good morning, everyone.

Vice Marc Enerflex' President Chief Senior and Park, are Officer; Chief Financial me Ben Bishnoi, Controller. Sanjay Vice Enerflex' with Rossiter, and Enerflex' Executive Officer; Here Corporate President, President and

for discussion this regarding a months March performance the summary financial X future performance of we'll for commentary X Enerflex' our Today's a ended providing financial our XX, our During prospects. results will call, business business statements the of brief expectations XXXX, include forward-looking on be and segments position. and

Forward-looking information expectations actual performance. involves risks and the and results could stated uncertainties, from differ materially or

For be more following please the on the under available hour call, the other and our advisory comments this information, our release, website MD&A news X section. see filings. Investors completion will Approximately recording regulatory of within a

you've call, We'll Marc. this March ended period XXXX, During referring be otherwise on release. over to we'll I'll proceed X turn the taken of unless to the the to now months the that call read yesterday's compared all same XXXX. the press to opportunity XX, stated, basis

Marc Rossiter

and Stefan, morning, Thanks, everyone. good

We are a successful momentum across first report our business. pleased and continued quarter to positive

gross business, recent points as improvement a customers normalizing of supply basis bookings in Engineered Systems robust to activity in the towards is a pressures. in where led Our higher backlog result secure of volumes function of increased and $XXX Engineered renewed in commodity a we've XXX demand security, our the million strength generated of ongoing focus industry and bookings energy and quarterly margins first sheets grew and fifth months ability manufacturing chain our is balance quarter-over-quarter over a activity, consecutive work of of oil and to industry Increased on supply despite fundamentals for recent margin Systems quarter. our gas improved gross step prices, a

customers maintain continue across recovery, geopolitical impact landscape capital our of their regions. some optimistic discipline our events many trajectory commitment remains of development the and energy seeing cautiously the of the about predicting the energy our there to of on we're we While in uncertainty pace and global

businesses recover business downturn broad-based expected on revenue of though throughout with the stable the the to challenges and Aftermarket to to along inflationary continues with cost recurring delivered we'll our predictable be service delivery from do performance. chain pressures. is overall OEM Our so contributions timely spare parts year, operating supply contending

as contract grew within of for utilization infrastructure asset performance. of our We progressed continued a contract its U.S. Our U.S. XX%. another Energy activity in an basins horsepower In during and operations XX-year business, our transition our performing average benefit Improved to assets natural infrastructure XX-year the and perform quarter across business natural In compression flows. expected. fleet, the Collectively, Infrastructure renewable segment, carbon energy the January to continued of which of several Rest of key and hydrogen am that capture, to was awarded cash to I generating team's fourth our efforts Overall, and assets of our stable XXXX. continue goal proud quarter we our reinforce these stakeholders. keep our long-term to the spaces. our strong gas XXX,XXX World demand for strategic Enerflex progressing customers drove early commenced opportunities during maintained assets gas

our which from benefit emerging electrified will emissions investment assist market, Scope for across solutions customers are X their coming regions, policy also this are We seeing helping in in operations. should support Constructive public eliminate in multiple the years. Enerflex promoting which continued demand

prevent aware acquisition XXXX. obtained, of we Exterran announced already currently of would of necessary in obtaining are been Lastly, us our the we and close continue of was to remaining January that approvals. have regulatory from progress to matters number not share A all approvals any that reason all

over the on As support of by synergy better Enerflex energy structure the recurring acquisition, we review a support for companies. will the create including macroeconomic Bishnoi strategic about margin our infrastructure I now a gross client of fit closing, Upon global we delivering remains company fundamentals increasingly true increasing capabilities to the the rationale will The and our market. to transaction X the pre-integration growth base. focused progress for sustainable of global of received total, to and cost this the providing our pro approximately XX% turn planning to are results. strategic financial through natural excited work, forma on striving gas production call and Sanjay realization

Sanjay Bishnoi

Marc. Thanks,

First quarter the revenue our and higher project, Systems $XX infrastructure continued momentum same combination prior year. of the last in on of recognition utilizations natural in work revenue on a $XXX gas on increased Bookings announced million, revenue from periods, volume bookings of period year segments. $XXX stronger previously in across Engineered energy the million increased up infrastructure the recent significantly period from significantly a XX-year versus totaling all million quarter higher

over and Our which backdrop the at a $XXX Xx provides Engineered is the quarter backlog healthy than for XXXX. at backlog Systems March higher million, exited XX, XXXX,

management During are its how review the quarter, completed expenses continuous classified. of

SG&A. review, Following of were this sold reclassified expenditures between certain goods cost and

in was XXXX first $XX.X recoveries directly less better million primarily partially quarter on provides compensation. users prior lower from million last that has received associated to reflects shift XX.X% the material change government net quarter supply $XX.X cost current reclassification government pricing are by resulting year. grants labor. for XXXX reduced of primarily with of of subsidies. $XX and is due the costs to The up for the on transaction competitive These the and same percent due gross to quarter the costs compared first increase is comparable in were production transaction and pressures from increases in lower Exterran or the The impact period. of share-based in the the or the margin XX.X% and margin the product periods, million of services. a gross financial statements relevant no more the period to of $XX.X attributable the in goods are this the pending mix, and the The to Although SG&A million costs information earnings offset

towards natural During and $XX.X be will the finance asset was million fourth gas infrastructure which XXXX of quarter, for awarded a we a as that of construction invested lease. in the quarter accounted

grown in primarily growth the of liquidity, From capital to projects in-flight access limited We $XXX in our funding million perspective, our XXX,XXX also compression ample CapEx to capital USA to criteria. our horsepower. units invested of has hand a approximately million be which capital giving fleet With million and of XXXX and Enerflex $X.X working us has liquidity allocation cash continue to assets. contract will on to and those opportunities satisfying required stringent investment $XXX on capital fund facility, respect to investments bank towards

at balance exiting the quarter debt-to-EBITDA bank of sheet maintain to net continue strength ratio We a X.XXx. adjusted

basis the the flow be per Lastly, anticipated will of completes This continue on Yesterday and market of Enerflex' on a cash Board declaring dividend conditions. to based X, XXXX. payments the to formal webcast. share component quarterly July on $X.XXX evaluate paid availability dividend a of

in our May found be X can details release. Additional press

take any to now questions. will be We happy

Operator

Financial. Robertson Instructions] with Bank [Operator from of question Your line Michael first National comes the

Michael Robertson

for pricing implemented in increase from help initiatives and targeted are raw projects? to availability, firm And the in the segment or approach, whether to service components up delivery margins? Given larger-scale timing parts in solidify suppliers try or it's there of volatility material and order pricing and I are noted differences date you've guess, your there of any your

Marc Rossiter

before large, we relationships our and issues accept about Michael, when the #X, having when this the opportunity by is question. extremely of hear and being the job, Marc or and of take business, get unforeseen with that Engineered frequently Rossiter. that close businesses. customers those to all allow XX% lock order clients. are with us on the mostly cost professionals and also Thanks can is equipment X fast In effectively we service both there possible those Systems, in we base. for those it's more X we to Dealing strategies as that. news cost Engineered in overall aftermarket business the our supply chain the prices in for in pass to the as in acting different update the nimble the chain increases probably Systems nature I'll But supply and a and and

can so issues. the mitigates of that In with parts right for. know And what them quoted go that buy exactly those some the frequently business, projects, we moment. We spare service at they're

for parts. Omicron the the in downward to some other pressure the bit business like Some issue little a our in people AMS wave of just costs, at margins quarter AMS is that waiting had biggest in And things due fuel was of home. our

they So ready parts, up go a some job, leads if service don't and we the inefficiency. show sit to have go they to then start technicians out they to have that around to perform until and

Michael Robertson

Got That's it. helpful it. appreciate I Got color, it. Marc. really

for Just CCUS credit one the impact other the inbounds opportunities investment if seen in you've related terms sentiment in wondering potential Canada was on I federal or in me. an of following one CCUS budget? tax

Marc Rossiter

on customers, especially we've to prior There's had a and themselves to I lot of how seen decarbonize gas of announcement. looking year inbounds the that for been think a a CCUS -- over lot don't we oil at have now.

different That's my don't I that? on do take. investment take conversations the have think credit, Sanjay, those tax you so any And up significantly. sped

Sanjay Bishnoi

Yes.

closer But pretty think we dialogue already before I going with like to the projects credit, maybe we from a healthy felt dialogues perspective, comments, And very having get going finance it's investment the we already actuality. helpful budget. think those to of tax high-quality these I had we to guy's that be some are pretty echoing that Marc's customers. set a think certainly,

Operator

next the TD with Your Securities. of from line question Aaron comes MacNeil

Aaron MacNeil

you steps not give you've a with but there's whole still done on appreciate say, synergy could in details maybe can to any outstanding? you you if more probably your less a if sense wondering your what provide Exterran. of preliminary or or on guidance? target XXXX what's And can us anecdotes I confident lot you're date, I'm and integration

Marc Rossiter

After We're sorry for still functional had question. along regions pre-integration still made the market. another which strategic in Aaron, the integration date. Enerflex. to teams have we're announcement, allowed progress and Andrew -- in independent we've operate. competing one thanks And at a the established doing the I'm of lines. degree competing been within -- we're planning, we We're made it and against teams lot we quite the to companies, all Exterran Aaron, two to also we and do with pleased the the And that

limits happy with can do. limits, I'm there's much how and those some satisfied been the on quite planning made. within that's But So integration quite we progress

Aaron MacNeil

close, the one high-yield obtained were the -- the Sanjay. that debt with your probably ability is line to you in concerned your intend a this pursue respect reasonable offering for at But to Fitch all high-yield and With obtain interest with at at rate to rising you coupon you environment? S&P the ratings expectations? are Okay. from to given with respect And

Sanjay Bishnoi

that the oil have as getting energy much take that's closely. things macro that thought say interest say ratings bit particular. say and we of where them I'll something Aaron. would is shake terms I that surprises gone I up, would So by a I And The But gas, headwind. in market, and around that in there. were the of we're knows, would with everybody line it's the tailwind No one in quite one, high-yield would fundamentals a very and rates, out. monitoring we're

seen in actually market. and strength you've so in And high-yield issuances some gas-related the oil

still a waiting conditions and the approvals we're time to get then constructive are very regulatory and once so going that bring these to market for through and ready go And we the to the think some offering market to other it's really is that right. we to market of

Aaron MacNeil

since remarks Understood. question quick, prepared another so I'll in. Maybe sneak your are

with you from perspective? Hub? if capital can Meadowbrook might it's involvement an can CCUS sense Just your be, and what line, of time know but I wondering early the operational both us speak days, a you give involvement to your

Sanjay Bishnoi

project. Yes. be working No, with partners and on our Bison to that the we're with team delighted

can be which the to project. the of thought primarily is happy we're capture team. in carbon moving supportive really -- proponents of to we We doing and We it phase, the to the be want we was is story. phase, because doing really delighted of everything involvement like neat of industry the be want to we province evaluation of Our partners. as we to stewards a We to industry. a that's but just that Alberta. the be And be an And solution to here part like to part be going next that management

Aaron MacNeil

So you're in a like? an evaluation And stage, be but time commercial look actually what might involved?

Sanjay Bishnoi

of the of how project. a that mean we'll We're are that project. not I No, that's in the be participating we consortium. Yes. part operator

how continue that in We think say investment yes, evaluation expect of wells But days, the have to the we nonoperating that's is test safety capacity. be work a really of minority we I when And has phase I the well. as some the is how Alberta formation to evaluation, that's -- and it. the which next evaluate sort that the -- part do to evaluation involved of have in formation to some couched and really and it's Energy

we'll how a detailed so of beyond the phase And we'll of will of -- project phase, be generating it, capital the and that during of idea this more sort unfold.

the be the to project, as develops. that point this at probably commenting commitment appraised on market we'll for So the capital keep but us certainly early to

Operator

the next Instructions] Pereira with question [Operator of Your comes Stifel. line Cole from

Cole Pereira

start wanted U.S. Engineered margins. the to Systems on I

all think the that metric pressures, of consideration fair, over your improvement that there I quarters. well. is some few I uncertainty, aware obviously, do the work next in is we're sense obviously? and I acknowledging you should margin mean, that Is commentary, an the see a as get But mix from

Marc Rossiter

That's fair, Cole.

Cole Pereira

think could can the through supply still commented Do Okay. And side, the the get And you costs. COVID U.S. do shutdowns on you ES think do of the China, enough think Perfect. potential the worse? about from you you you there's you not front, lot chain pass a it in on think passed? has visibility? Or worst as impacts

terms So in is timing cetera? and of it inputs, et more risk logistics is the of

Marc Rossiter

February COVID in Cole, was XXXX, a to not I be deal. predicted going big

out about hopefully me anything So got It's projects I'm every has shutdowns really will our impact our of China system that difficult how a in Almost chip consider predict a again. for one door chain. not on computer to the supply goes COVID in ever going it's it. control the it, to

specifically that's one How over been so is months. to that's of sort our chain predict. challenging supply impact of shutdown last Chinese commodity And couple forward the going difficult the

Cole Pereira

it. that's Got fair. totally Yes, Okay.

just I the quickly just error. million made provide if would have acknowledge details termination you which Exterran any a can Mexican lawsuit, on wondering additional complicated support that lawsuit occurred? but exactly I I'm surprised there's Just it's $XXX obviously payout, on mean how an any jurisdiction, I'm was a it that helps it

Sanjay Bishnoi

Cole, this Yes, Sanjay. is

point And to Exterran you is think and team they error a I they XX-Q Exterran's this believe you there's it's think things calculation issue is not the an of said, would we I articulated that that management the has that material. that which managing. some been believe they've

Cole Pereira

late is think guidepost visibility on QX, additional it. be point? And enough Got not mean, of acquisition, QX? quickly, it could you closing just add? at just can any still the Okay. do you the QX, this I Or early late there

Sanjay Bishnoi

Yes.

we very What feel are we can way the at got dialogue tell good level. don't that is down we that the we're levels, from believe you So happy in optimistic working C-suite the QX teams the we with Exterran in We can get there all working to we've that together. like We the could QX. really were like team with anymore.

to And regulatory wait can things can. that's have really, to side we'll We're so how things satisfy. as we conditions unfold we're in and we're get close to we and trying I the on and guess, working hopeful as diligently QX, see the but that other fast that of

Operator

Markets. question with next comes Tim ATB from Monachello of the Capital Your line

Tim Monachello

is unlikely. the a there Is unlikely on it -- need the of in regardless a -- to that over this I get you labor you question material, hurdle that is to think to be before just Just probably and is how dispute follow-up I'm Cole's transaction? Mexico. close

Sanjay Bishnoi

we I I have are that X is guess really now as would the separate because on we companies what say operating to. right issue itself,

perspective, a They We very got it's I And to the nothing back in that us. a is there's to the front deal of comments. you hurdles from the going get time down we've did we're concern of think them. focused Exterran's timing comments regulatory on little But in so And that would disclosures comments. subject. on really take the some clearing those process they're to really -- fairway we point are SEC, from bit of

regulatory really lining focused hopefully getting those second So but believe, on and of in we up clearing XXXX. hurdles, we're shareholder a vote to in close, QX, the half

Tim Monachello

Okay.

close serve a see before don't with this limbo? deal matter this you the you resolution whether be formal you'd need still So can comfortable a to in closing to deal

Sanjay Bishnoi

here where monitoring would currently I it today. situation, We're Yes. we Tim, and that's think leave the

Tim Monachello

bookings Okay. in statement the there's what little on saw a And demand bit seeing just Canada, come around market we little then increment and of bit Canadian cautionary second egress Can to talk and related you for the capacity a about a down in question, constraints. there? slowness you're demand

Marc Rossiter

seeing in That's the we a to out with the detailed story it is this significant than coming be been we're And with with in And what supply based Tim, QX few. us having front want conversations Western hoping we've more of bookings with chains a spend collaborative We're Canada in in on with believe last will on do forward up more Canadian customers, quarters manner. that addition Canada was infrastructure optimistic Basin the sort into the of the Sedimentary We're the work. positive for. should the a getting CapEx they're front. of Marc. in be lot in of lining pricing engineering work that really customers

Tim Monachello

chain guys you maybe have for last in last margins. better the year, part been quarter, service those dealing Obviously, just Okay. the for And then on me full supply the with but issues of the one down year. came

the service here? your down? for brought that in going changed what's what QX margins And margins outlook those So forward

Marc Rossiter

Yes. suppliers kind there In parts acute of our from QX, view. of number from of a issue an was point delivery a

managing getting time. had particular locally. supply a suppliers, year. quarter, had for had on that has issues And And So like business North I January business a behind it We teens been the they little in everybody for. for one challenge our that say, chain our we we a in our return looking which for bit in sidelines, short key a globally. order. what our impacted the not reiterate us been I'll is Omicron that, and lot in more to or two parts is too But would was that us. at of really traditional bad, upper is think returned technicians we're American AMS We but quarter of that's to had to margin numbers, which AMS expect

Operator

All right. turn this back Rossiter. I'm now conference to showing Marc question would no I time. the at further like to

Marc Rossiter

look no Since I'd August. operator. are joining further you, Thank forward giving We the second call. for our to like in us there results to quarter thank again you questions, on once you

Operator

this today's Thank and gentlemen, have for and concludes Ladies you participation, a wonderful conference. day. your

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Enerflex (EFXT) 7 May 222022 Q1 Earnings call transcript