Enerflex Ltd. (TSX:EFX) (“Enerflex” or “the Company” or “we” or
“our”), a leading supplier of products and services to the global
energy industry, today reported its financial and operating results
for the three months ended March 31, 2021.
Summary Table of First Quarter of 2021
Financial and Operating Results
|
Three months ended |
|
(Unaudited) |
March 31, |
|
($ Canadian millions, except per share amounts, horsepower, and
percentages) |
|
2021 |
|
|
2020 |
|
|
Change |
|
Revenue |
$ |
203.2 |
|
$ |
365.7 |
|
$ |
(162.5 |
) |
Gross margin |
|
49.5 |
|
|
93.7 |
|
|
(44.2 |
) |
EBIT |
|
6.6 |
|
|
50.0 |
|
|
(43.4 |
) |
EBITDA (1) |
|
27.7 |
|
|
70.8 |
|
|
(43.1 |
) |
Adjusted EBITDA (2) |
|
29.6 |
|
|
66.6 |
|
|
(37.0 |
) |
Net earnings |
|
3.0 |
|
|
37.4 |
|
|
(34.4 |
) |
Earnings per share –
basic |
|
0.03 |
|
|
0.42 |
|
|
(0.39 |
) |
Recurring revenue growth
(3) |
|
(6.7 |
)% |
|
0.7 |
% |
|
|
Bookings (4) |
|
98.7 |
|
|
155.4 |
|
|
(56.7 |
) |
Backlog (4) |
|
169.4 |
|
|
397.8 |
|
|
(228.4 |
) |
Rental horsepower |
|
767,842 |
|
|
686,554 |
|
|
81,288 |
|
(1) |
Earnings Before Interest (Finance Costs), Income Taxes,
Depreciation, and Amortization (“EBITDA”) is considered a non-IFRS
measure, which may not be comparable with similar non-IFRS measures
used by other entities. |
(2) |
Adjusted EBITDA is a non-IFRS measure. Please refer to the full
reconciliation of these items in the Adjusted EBITDA section. |
(3) |
Recurring revenue is comprised of revenue from the Service and
Rentals product lines, which are typically contracted and extend
into the future. While the contracts are subject to cancellation or
have varying lengths, the Company does not believe these
characteristics preclude them from being considered recurring in
nature. Growth in recurring revenue is calculated over the
comparative period. |
(4) |
Engineered Systems bookings and backlog are considered non-IFRS
measures that do not have standardized meanings as prescribed by
IFRS, and are therefore unlikely to be comparable to similar
measures used by other entities. |
|
|
“Enerflex’s manufacturing facilities, rental,
BOOM, and service operations have continued operating safely and
reliably throughout the quarter. Highlights of the first quarter
include a modest increase in Engineered Systems backlog and steady
cash flow generation from our global natural gas and power assets.
A quarterly decrease in recurring revenue was driven largely by a
seasonal decrease in aftermarket service in North America that was
partially caused by the unseasonably cold weather experienced in
Texas in February,” said Marc Rossiter, Enerflex’s President and
Chief Executive Officer.
“The increase in backlog in the quarter is good
news, although we would caution against seeing it as a firm signal
of an inflection point in the market. Our pipeline of new
opportunities is slowly improving in both quality and quantity, but
North American oil and gas operators continue to exhibit a cautious
approach to growth capex. The same operators are exhibiting an
increasing level of interest in de-carbonizing the core of their
operations. This is an encouraging theme and a growing market that
Enerflex will be able to serve in the years to come.”
Quarterly Overview
- Operating income was lower than the
prior year, primarily due to reduced Engineered Systems revenue on
lower bookings in recent periods, driven by uncertainty around
commodity price stability and the ramifications of COVID-19, as
well as the reduced contribution from certain large, high margin
Engineered Systems projects that were largely completed by the
third quarter of 2020. These impacts were partially offset by the
increased contribution from higher margin recurring revenue product
offerings. SG&A in the quarter was lower due to decreased
compensation expense on reduced headcount, decreased profit share
on lower operational results, cost recoveries related to government
assistance programs, and lower travel costs, partially offset by
higher share-based compensation on the increase of the Company’s
share price during the first quarter. This movement in share price
resulted in $5.3 million of share-based compensation in the
quarter, compared to $(5.1) million in the first quarter of 2020 –
a net increase of $10.4 million period-over-period.
- Enerflex was awarded a new 10-year
natural gas infrastructure contract during the first quarter of
2021, as previously disclosed in the 2020 Annual Report. The
manufacturing portion of the transaction is being recorded as part
of our Engineered Systems product line and has been included in
bookings for the quarter. The finance lease income portion will
then be recognized in the Rentals product line over the lease
term.
- Bookings totaled $99 million, down
from $155 million in the same period last year. Although first
quarter bookings were healthier than cycle lows, bookings activity
continued to be impacted by restrained spending within the oil and
gas industry. The movement in foreign exchange rates resulted in a
decrease of $1 million on foreign currency denominated backlog
during the first quarter of 2021.
- The Company invested $10 million in
rental assets to fund the organic expansion of the USA contract
compression fleet. In addition, Enerflex achieved full-time
operations and began generating revenue from a previously awarded
Build-Own-Operate-Maintain (“BOOM”) project in the Middle East. The
Company continues to exercise capital discipline and to prioritize
capital spending related to executed contracts with customers. At
March 31, 2021, the USA contract compression fleet totaled
approximately 375,000 horsepower with an average fleet utilization
of 82 percent for the quarter.
- The Company maintained balance
sheet strength by managing working capital, reducing debt, and
continuing to exercise capital discipline. The Company exited the
quarter financially strong, with a bank-adjusted net debt to EBITDA
ratio of 1.37:1, compared to a maximum ratio of 3:1. The Company
has substantial undrawn credit capacity and cash on hand.
- Subsequent to March 31, 2021,
Enerflex declared a quarterly dividend of $0.02 per share, payable
on July 8, 2021, to shareholders of record on May 20, 2021.
Enerflex’s Board of Directors will continue to evaluate dividend
payments on a quarterly basis, based on the availability of cash
flow and anticipated market conditions.
- Subsequent to March 31, 2021, a
subsidiary of the Company finalized access to a credit facility,
secured by certain assets of the subsidiary, of up to $52.5 million
U.S. dollars. This new credit facility is non-recourse to the
Company.
OutlookEnerflex’s recent focus
has been on stabilizing cash flows to maintain a strong balance
sheet through a volatile commodity price environment. Engineered
Systems sales remain dependent on global capital investment in oil
and natural gas, and operators have reduced investment levels
across the energy industry. However, in recent months, commodity
prices and drilling activity in North America have strengthened,
which may precede increased activity within these regions. In
addition, an “Energy Transition” towards less carbon-intensive
energy sources may result in new opportunities for the Company in
all of its operating regions.
The Company anticipates that Engineered Systems
revenues in the Canada and USA regions are likely to remain
pressured through the first half of 2021, however the Company is
seeing indications that bookings activity may pick up later in the
year. In contrast, the outlook for recurring revenue product
offerings, namely Service and Rentals, appears to have stabilized
in North America in the near-term and we continue to see interest
in our BOOM and long-term lease offerings in our Rest of World
segment, including a new 10-year natural gas infrastructure
contract signed during the quarter. The completion of multiple BOOM
projects in recent periods, as well as long-term contract
extensions on certain existing projects, provides the Company with
long-term, stable cash flows. Enerflex continues to assess the
effects of various market factors, including supply and demand
dynamics, particularly the demand for natural gas as an energy
transition fuel to support decarbonization, as well as political
and economic uncertainty, and the corresponding impact on customer
activity levels, which will drive the demand for the Company’s
products and services in future periods.
In the short-term, Enerflex remains focused on
providing a safe working environment for all employees, while
preserving capital and maintaining balance sheet strength in
response to uncertainty caused by the COVID-19 pandemic and recent
market volatility. Given the current environment, the Company is
carefully assessing project spending, with a focus on ensuring
future projects provide maximum returns on invested capital. In the
longer term, the Company continues to balance the expected impacts
of broader market factors, such as volatility in realized commodity
prices, political and economic uncertainty, and consistent access
to market, against the projected increases in global demand for
natural gas. Enerflex continues to assess the effects of these
contributing factors and the corresponding impact on customer
activity levels, which will drive the demand for the Company’s
products and services in future periods.
First Quarter Segmented
Results
USAUSA segment revenue was $82 million, a
decrease of $145 million from the same period in 2020. Engineered
Systems revenue decreased due to lower opening backlog on reduced
bookings in recent periods, while Service was lower due to
inclement weather during the quarter, as well as pricing pressure
on certain Service offerings and a weaker U.S. dollar. Rentals
revenue was consistent with the comparative period, with a larger
rental fleet being offset by lower utilization and a weaker U.S.
dollar. EBIT was down $37 million due to decreased gross margin,
driven by lower revenue on soft bookings throughout 2020, as well
as the reduced contribution from certain large, high margin
Engineered Systems projects that were largely completed by the
third quarter of 2020. SG&A was consistent with the comparative
period, as reduced compensation expenses on lower headcount and
salaries, decreased profit share on lower operational results, and
lower travel costs were offset by mark-to-market impacts on
share-based compensation. The Company continues to monitor costs in
response to recent commodity price weakness and the uncertainty
caused by the COVID-19 pandemic and remains focused on controlling
costs where possible.
Rest of WorldRevenue in the Rest of World
segment was $71 million, consistent with the comparative period,
with higher Engineered Systems and Service revenue being offset by
lower Rentals revenue. Engineered Systems revenue improved on the
continued progress made on a power and gas treating plant project,
while Service revenues increased on higher activity levels in
Australia. Rentals revenue decreased due to lower rates on extended
contracts in the Middle East, expiration of certain contracts in
Mexico during the prior year, and a weaker U.S. dollar during the
period. During the first quarter of 2021, the Company commenced
operations on a BOOM project, which will provide full contribution
to operating results in future quarters. EBIT decreased by $6
million due to lower gross margin on reduced revenue and gross
margin percentage. SG&A costs were consistent with the
comparable period in 2020, with higher share-based compensation on
mark-to-market movement being offset by lower travel costs and
favourable foreign exchange movement, as well as lower allocation
of corporate costs.
CanadaCanadian revenue was $51 million, a
decrease of $18 million, primarily due to lower Engineered Systems
revenue on a lower opening backlog and reduced bookings in recent
periods. Service revenue increased on higher parts sales, while
Rentals revenue decreased slightly due to certain rental units
being returned rather than renewed. EBIT decreased due to lower
gross margin on reduced revenue, partially offset by improved gross
margin percentage and lower SG&A in the quarter. SG&A
decreased due to lower compensation and cost recoveries related to
government assistance programs, partially offset by higher
share-based compensation on mark-to-market movement.
Adjusted EBITDAThe Company’s
results include items that are unique and items that management and
users of the financial statements adjust for when evaluating the
Company’s results. The presentation of Adjusted EBITDA should not
be considered in isolation from EBIT or EBITDA as determined under
IFRS. Adjusted EBITDA may not be comparable to similar measures
presented by other companies and should not be considered in
isolation or as a replacement for measures prepared as determined
under IFRS.
The items that have historically been adjusted
for presentation purposes relate generally to four categories: 1)
impairment or gains on idle facilities (not including rental asset
impairments); 2) severance costs associated with restructuring
activities and cost reduction activities undertaken in response to
the COVID-19 pandemic; 3) transaction costs related to M&A
activity; and, 4) share-based compensation. Enerflex has presented
the impact of share-based compensation as it is an item that can
fluctuate significantly with share price changes during a period
based on factors that are not specific to the long-term performance
of the Company. The disposal of idle facilities is isolated within
Adjusted EBITDA as they are not reflective of the ongoing
operations of the Company and are idled as a result of
restructuring activities.
During the second quarter of 2020, the Company
added another adjustment related to government grants, most notably
the Canada Emergency Wage Subsidy. The amount of subsidies received
has been recorded as a reduction in cost of goods sold and selling
and administrative expense within the consolidated statements of
earnings in accordance with where the associated expense was
recognized. Enerflex considers this to be a unique item as these
temporary grants relate to the recent COVID-19 pandemic and are not
anticipated to be part of the ongoing financial results of the
Company.
Management believes that identification of these
items allows for a better understanding of the underlying
operations of the Company based on the current assets and
structure.
($ Canadian millions) |
|
|
Three
months ended March 31, 2021 |
Total |
USA |
ROW |
Canada |
Reported EBIT |
$ |
6.6 |
|
$ |
0.4 |
|
$ |
4.7 |
|
$ |
1.5 |
|
Severance costs in COGS and
SG&A |
|
0.7 |
|
|
0.1 |
|
|
0.2 |
|
|
0.4 |
|
Government grants |
|
(4.1 |
) |
|
(0.5 |
) |
|
- |
|
|
(3.6 |
) |
Share-based compensation |
|
5.3 |
|
|
2.2 |
|
|
2.1 |
|
|
1.0 |
|
Depreciation and amortization |
|
21.1 |
|
|
10.2 |
|
|
8.9 |
|
|
2.0 |
|
Adjusted EBITDA |
$ |
29.6 |
|
$ |
12.4 |
|
$ |
15.9 |
|
$ |
1.3 |
|
($ Canadian millions) |
|
|
Three
months ended March 31, 2020 |
Total |
USA |
ROW |
Canada |
Reported EBIT |
$ |
50.0 |
|
$ |
37.4 |
|
$ |
10.3 |
|
$ |
2.3 |
|
Severance costs in COGS and
SG&A |
|
1.0 |
|
|
0.3 |
|
|
0.0 |
|
|
0.7 |
|
Share-based compensation |
|
(5.1 |
) |
|
(2.7 |
) |
|
(1.6 |
) |
|
(0.8 |
) |
Depreciation and amortization |
|
20.8 |
|
|
9.9 |
|
|
8.6 |
|
|
2.3 |
|
Adjusted EBITDA |
$ |
66.7 |
|
$ |
44.9 |
|
$ |
17.3 |
|
$ |
4.5 |
|
DividendSubsequent to the end
of the quarter, Enerflex declared a quarterly dividend of $0.02 per
share, payable on July 8, 2021, to shareholders of record on May
20, 2021. Enerflex’s Board of Directors will continue to evaluate
dividend payments on a quarterly basis, based on the availability
of cash flow and anticipated market conditions.
Quarterly Results MaterialThis
press release should be read in conjunction with Enerflex’s
unaudited interim condensed consolidated financial statements for
the three months ended March 31, 2021 and 2020, and the
accompanying Management’s Discussion and Analysis, both of which
are available on the Enerflex website at
www.enerflex.com under the Investors section and on SEDAR at
www.sedar.com.
Conference Call and Webcast
DetailsEnerflex will host a conference call for analysts,
investors, members of the media, and other interested parties on
Thursday, May 6, 2021 at 8:00 a.m. MDT to discuss the first quarter
2021 financial results and operating highlights. The call will be
hosted by Mr. Marc Rossiter, President and Chief Executive Officer;
Mr. Sanjay Bishnoi, Senior Vice President and Chief Financial
Officer; and Mr. Stefan Ali, Director, Strategy, Risk, and Investor
Relations.
If you wish to participate in this conference
call, please call 1.844.231.9067 or 1.703.639.1277. Please dial in
10 minutes prior to the start of the call. No passcode is required.
The live audio webcast of the conference call will be available on
the Enerflex website at www.enerflex.com under the Investors
section on May 6, 2021 at 8:00 a.m. MDT. A replay of the
teleconference will be available on May 6, 2021 at 11:00 a.m. MDT
until May 13, 2021 at 11:00 a.m. MDT. Please call 1.855.859.2056 or
1.404.537.3406 and enter conference ID 5228714.
About EnerflexEnerflex is a
single-source supplier of natural gas compression, oil and gas
processing, refrigeration systems, and electric power generation
equipment – plus related in-house engineering and mechanical
services expertise. The Company’s broad in-house resources provide
the capability to engineer, design, manufacture, construct,
commission, service, and operate hydrocarbon handling systems.
Enerflex’s expertise encompasses field production facilities,
compression and natural gas processing plants, gas lift
compression, refrigeration systems, and electric power solutions
serving the natural gas production industry.
Headquartered in Calgary, Canada, Enerflex has
approximately 2,000 employees worldwide. Enerflex, its
subsidiaries, interests in associates, and joint operations operate
in Canada, the United States of America (“USA”), Argentina,
Bolivia, Brazil, Colombia, Mexico, the United Kingdom (“UK”),
Bahrain, Kuwait, Oman, the United Arab Emirates (“UAE”), Australia,
New Zealand, Indonesia, Malaysia, and Thailand. Enerflex operates
three business segments: USA, Rest of World, and Canada. Enerflex’s
shares trade on the Toronto Stock Exchange under the symbol “EFX”.
For more information about Enerflex, go to www.enerflex.com.
Advisory Regarding Forward-Looking
InformationThis press release contains forward-looking
information within the meaning of applicable Canadian securities
laws. All statements other than statements of historical fact are
forward-looking statements. The use of any of the words
“anticipate”, “plan”, “contemplate”, “continue”, “estimate”,
“expect”, “intend”, “propose”, “might”, “may”, “will”, “shall”,
“project”, “should”, “could”, “would”, “believe”, “predict”,
“forecast”, “pursue”, “potential”, “objective” and “capable” and
similar expressions are intended to identify forward-looking
information. In particular, this press release includes (without
limitation) forward-looking information pertaining to: anticipated
financial performance; the Company’s growth capital expenditure
plans and maintenance capital spending; anticipated market
conditions and impacts on the Company’s operations; development
trends in the oil and gas industry; business prospects and
strategy; the ability to raise capital; the ability of existing and
expected cash flows and other cash resources to fund investments in
working capital and capital assets; the impact of economic
conditions on accounts receivable; expectations regarding future
dividends; and implications of changes in government regulation,
laws and income taxes. This forward-looking information is based on
assumptions, estimates and analysis made in the light of the
Company's experience and its perception of trends, current
conditions and expected developments, as well as other factors that
are believed by the Company to be reasonable and relevant in the
circumstances. Forward-looking information involves known and
unknown risks and uncertainties and other factors, which are
difficult to predict, including but not limited to: the impact of
economic conditions including volatility in the price of oil, gas,
and gas liquids, interest rates and foreign exchange rates;
industry conditions including supply and demand fundamentals for
oil and gas, and the related infrastructure including new
environmental, taxation and other laws and regulations; disruptions
to business operations resulting from the COVID-19 pandemic and the
responses of government and the public to the pandemic; changes in
economic conditions that restrict Enerflex’s cash flow and impact
its ability to declare and pay dividends; the ability to continue
to build and improve on proven manufacturing capabilities and
innovate into new product lines and markets; increased competition;
insufficient funds to support capital investments required to grow
the business; the lack of availability of qualified personnel or
management; political unrest; and other factors, many of which are
beyond the Company's control. For an augmented discussion of the
risk factors and uncertainties that affect or may affect Enerflex,
the reader is directed to the section entitled “Risk Factors” in
Enerflex’s most recently filed Annual Information Form, as well as
Enerflex’s other publicly filed disclosure documents, available on
www.sedar.com. While the Company believes that there is a
reasonable basis for the forward-looking information and statements
included in this press release, as a result of such known and
unknown risks, uncertainties and other factors, actual results,
performance, or achievements could differ materially from those
expressed in, or implied by, these statements, and readers are
cautioned not to unduly rely on forward-looking statements. The
forward-looking information contained herein is expressly qualified
in its entirety by the above cautionary statement. The
forward-looking information included in this press release is made
as of the date hereof and, other than as required by law, the
Company disclaims any intention or obligation to update or revise
any forward-looking information, whether as a result of new
information, future events or otherwise.
For investor and media inquiries, please contact: |
|
|
|
|
|
Marc Rossiter |
Sanjay Bishnoi |
Stefan Ali |
|
President & Chief Executive Officer |
Senior Vice President & Chief Financial Officer |
Director, Strategy, Risk, and Investor Relations |
|
Tel: 403.387.6325 |
Tel: 403.236.6857 |
Tel: 403.717.4953 |
Enerflex (TSX:EFX)
Historical Stock Chart
From Mar 2024 to Apr 2024
Enerflex (TSX:EFX)
Historical Stock Chart
From Apr 2023 to Apr 2024