Enerflex Ltd. (TSX: EFX) (NYSE: EFXT) (“Enerflex”) reported its financial and operational results for the three months and year ended December 31, 2023. All amounts are presented in Canadian dollars unless otherwise stated.
Q4 2023 FINANCIAL AND OPERATIONAL OVERVIEW
- Generated revenue of $782 million compared to $778 million in Q3/2023, with results driven by continued strong performance from recurring businesses.
- Increased gross margin before depreciation and amortization to $216 million, or 27.7% of revenue, compared to $201 million, or 25.8% of revenue in Q3/2023. Energy Infrastructure and After-market Services product lines generated 67% of consolidated gross margin before depreciation and amortization during Q4/2023, comparable with the third quarter.
- Adjusted earnings before finance costs, income taxes, depreciation, and amortization (“adjusted EBITDA”) of $126 million compared to $122 million in Q3/2023 and $86 million in Q4/2022.
- In the fourth quarter of 2023, EBITDA was reduced by $39 million of losses related to foreign exchange and associated instruments. Additionally, $4 million of interest income in Q4/2023 is not reflected in adjusted EBITDA.
- Repaid $167 million of long-term debt during Q4 2023, consistent with the Company’s focus on strengthening the balance sheet. Reported net debt declined by $151 million including reductions in cash and cash equivalents and the impact of a strengthening Canadian dollar on the measurement of U.S. Dollar denominated debt.
- Cash provided by operating activities was $209 million in Q4/2023, which included net working capital recovery of $144 million. This is a $138 million improvement over cash provided by operating activities in Q3/2023 and an increase of $225 million compared to Q4/2022. Free cash flow was $185 million in Q4/2023 compared to a use of cash of $43 million during Q4/2022.
- Invested $24 million in the business, including $6 million of growth investments in response to strong demand and customer commitments for electric drive contract compression equipment in the U.S.
- Recorded Engineered Systems bookings of $327 million in Q4/2023 and $1.7 billion for the year. Exited Q4/2023 with Engineered Systems backlog of $1.5 billion, providing strong visibility into future revenue generation and business activity levels.
- Since closing of the transaction (the “Transaction”) to acquire Exterran Corporation (“Exterran”), Enerflex has captured approximately US$62 million of annual run-rate synergies, exceeding the US$60 million of anticipated synergies within 18 months from Transaction close of October 13, 2022.
- Recognized an $87 million goodwill impairment in the LATAM segment. This non-cash impairment was largely driven by the ongoing devaluation of the Argentine peso and the restrictions on repatriating cash held in Argentina.
- Capitalized on continuing robust demand for natural gas, as customers aim to decarbonize their operations. Customer activity levels remained solid, particularly for cryogenic natural gas processing facilities, reflecting Enerflex’s expanded product offering as a result of the Transaction.
“We delivered a strong finish to the year, with solid operating results across Enerflex’s geographies,” said Marc Rossiter, Enerflex’s President and Chief Executive Officer. “Our Energy Infrastructure and After-Market Services business lines demonstrated steady performance in 2023, and are positioned to continue driving stable, sustainable returns thanks to Enerflex’s diversified global footprint. Our Engineered Systems business line achieved record annual revenue and successfully navigated a volatile supply chain environment to deliver solid margins. As we enter 2024, visibility across our business is strong, supported by contract coverage across our Energy Infrastructure assets, the recurring nature of our After-market Services business and a $1.5 billion Engineered Systems backlog. We are in the home stretch of the integration of Exterran, with over US$60 million of annual run-rate synergies and recent achievements including the streamlining of our global manufacturing footprint, exiting six non-core geographies, and monetization of non-core assets. We expect these actions, coupled with our focus on further enhancing the profitability of core operations, to enable continued debt reduction in 2024 and enhance Enerflex’s ability to deliver shareholder returns over the mid-and-long term.”
Preet Dhindsa, Enerflex’s Interim Chief Financial Officer, added, “Enerflex’s results in the fourth quarter met or exceeded the ranges provided in our most recent guidance. We are especially pleased with our on-going efforts to more efficiently manage working capital. With the support of Enerflex’s strong global leadership team and talented employees, we are improving the profitability and resiliency of our international business, with an objective to generate sustainable free cash flow, reduce debt levels, and position the company for long term growth and value creation.”
