(MENAFN - GlobeNewsWire - Nasdaq) itemprop="articleBody">CALGARY, Alberta, Feb. 21, 2019 (GLOBE NEWSWIRE) -- 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 and twelve months ended December 31, 2018.
Summary Table of Fourth Quarter and Twelve Months of 2018 Financial and Operating Results
($ Canadian millions, except per share amounts, horsepower, and percentages) Three months ended
December 31, Twelve months ended
2018 2017 Change 2018 2017 Change
Revenue $ 466.8 $ 450.1 $ 16.7 $ 1,703.3 $ 1,553.4 $ 149.9
Gross margin 81.8 84.1 (2.3) 308.0 286.5 21.5
EBIT 48.2 47.2 1.0 151.7 145.8 5.9
EBITDA (1) 75.2 67.4 7.8 241.5 226.4 15.1
Adjusted EBITDA (2) 64.8 68.2 (3.4) 225.2 214.1 11.1
Net earnings 32.5 26.7 5.8 101.4 97.8 3.6
Earnings per share 0.37 0.30 0.07 1.14 1.10 0.04
Recurring revenue % (3) 30.6% 29.7% 30.6% 29.7%
Bookings (4) 677.0 223.6 453.4 1,980.4 1,141.0 839.4
Backlog (4) 1,420.6 670.8 749.8 1,420.6 670.8 749.8
Rental horsepower 641,915 607,710 34,205 641,915 607,710 34,205
Earnings before Interest (Finance Costs), Income Taxes, Depreciation, and Amortization ('EBITDA') is considered a non-GAAP measure, which may not be comparable with similar non-GAAP measures used by other entities. Adjusted EBITDA is a non-GAAP measure. Please refer to the full reconciliation of these items in the Adjusted EBITDA section. Determined by taking the trailing 12-month period. Engineered Systems bookings and backlog are considered non-GAAP measures that do not have standardized meanings as prescribed by GAAP, and are therefore unlikely to be comparable to similar measures used by other entities.
'Enerflex delivered record quarterly bookings and backlog for a second consecutive quarter, driven by several major project awards in the USA and Canada segments,' said J. Blair Goertzen, Enerflex's President and Chief Executive Officer. 'In addition to our strong bookings, we also secured two 10-year Build-Own-Operate-Maintain ('BOOM') contracts in the quarter, which will add to our recurring revenue base. For the first time in recent years, every region has a clear line of sight on revenue growth – a function of the Company's healthy backlog and its robust bid pipeline for project work. While the near-term outlook is positive, Enerflex remains vigilant in monitoring the risk of a potential slowdown in certain markets.'
Quarterly Overview Bookings were the highest quarterly amount in the Company's history at $677 million, led by the USA with $451 million of bookings over a variety of customers. The USA segment continues to benefit from large international bookings for projects to be built in the Company's Houston fabrication facility, totaling $200 million in the fourth quarter. Canadian bookings increased to $219 million compared to $32 million in 2017, driven primarily by increased midstream activity. The Rest of World ('ROW') bookings of $7 million relate to projects in Australia, the Middle East/Africa ('MEA'), and Colombia. The movement in exchange rates resulted in an increase of $45 million on foreign currency denominated bookings during the fourth quarter of 2018, compared to $2 million in the comparable period. Backlog of $1,421 million increased from $671 million at December 31, 2017 due to the strength of the USA and Canada bookings outpacing Engineered Systems revenue recognized. Backlog is a key leading indicator of future revenues and the balance at December 31, 2018 represents the highest quarterly backlog in the Company's history, breaking the previous record established in the third quarter of 2018. EBIT for the quarter is $48 million, which is slightly higher than the comparative period. This increase is driven by cost recoveries related to the Oman Oil Exploration and Production LLC ('OOCEP') arbitration, partially offset by lower gross margins from higher costs on certain Engineered Systems projects. In the fourth quarter of 2018, the Company received the final ruling of the OOCEP arbitration, with the tribunal awarding Enerflex an amount of $13 million for costs, fees, taxes, and expenses incurred as part of the proceedings. The tribunal also dismissed OOCEP's claim for costs and concluded the arbitration proceedings. This brings the tribunal's total award to $55 million, with $22 million included in year to date EBIT and the balance related to accounts receivable already recorded on the financial statements. Positive outlook, record backlog, and continued strength of enquiry levels, particularly in the USA and ROW segments, provides strong line of sight on the need for additional manufacturing capacity to meet demand in these segments. The previously announced expansion of our Houston fabrication facility is progressing on schedule, with additional capacity expected to be fully operational in the second quarter of 2019. During the quarter, Enerflex was awarded two 10-year BOOM contracts, one in Latin America and one in MEA, building on our recent awards from previous quarters. These projects will be completed in late 2019 and contribute to recurring revenue and EBITDA in 2020. The Company invested $57 million in rental assets, largely in the USA, continuing its organic expansion of the USA rental fleet, which has grown 44 percent since the acquisition of the contract compression business from Mesa Compression, LLC ('Mesa'). Subsequent to December 31, 2018, Enerflex declared a quarterly dividend of $0.105 per share, payable on April 4, 2019, to shareholders of record on March 7, 2019.
Fourth Quarter Results Summary
Engineered Systems revenue was essentially flat when compared to the fourth quarter of 2017, as the strength in the USA segment was offset by lower revenue in Canada as a result of weaker bookings in the first half of 2018. The fourth quarter of 2017 benefitted from revenues that were deferred as a result of Hurricane Harvey in the USA and customer delays in Canada experienced during the third quarter of 2017. Service revenues have grown in all segments as a result of higher activity levels, particularly in the USA and Australia. Rental revenues increased due to the contributions of the contract compression fleet in the USA and BOOM revenues in Colombia. Gross margins decreased due to higher estimated costs to complete certain projects in the USA and ROW segments. SG & A costs decreased due to cost recoveries related to the OOCEP arbitration and lower third-party costs as the arbitration was completed, partially offset by higher compensation costs from an increased workforce and foreign exchange impacts.
Fourth Quarter Segmented Results
USA segment revenue was $297 million, an increase of $92 million from the same period in 2017. Engineered Systems revenue improved as a result of the realization of strong bookings seen in prior quarters and continued progress of certain large projects, as well as the impact of the stronger U.S. dollar in 2018 versus the comparative period. Service revenues increased on higher activity across the region while Rental revenues improved due to the organic growth of the contract compression fleet. An increase of $2 million in EBIT was driven by higher revenues and gross margin, partially offset by higher costs to complete certain projects and higher compensation costs due to an increased workforce.
Rest of World
Revenue in the Rest of World segment increased by $17 million, the result of higher Engineered Systems revenue in MEA and improved Service revenue, primarily in Australia. EBIT increased by $5 million due to higher revenues and the OOCEP recovery, partially offset by lower project margins in MEA resulting from higher estimated costs to complete certain Integrated Turn Key projects, as well as higher compensation costs and unfavorable foreign exchange impacts in LATAM.
Canadian revenue decreased by $91 million on lower Engineered Systems revenue driven by weaker bookings in the first half of the year. Service revenue increased by $3 million in the fourth quarter from additional parts sales, while Rental revenue decreased due to lower equipment sales. EBIT decreased by $6 million due to lower gross margins from reduced revenue, partially offset by improved project margins. SG & A costs were consistent with the comparable period in 2017.
The Company delivered strong financial results during the fourth quarter, primarily based on the strength of performance in the USA and ROW segments. Bookings were the highest in the Company's history, driven by strong market conditions in the USA and ROW segments and improved activity in Canada. The backlog provides visibility over revenues through 2019 and early 2020. Bidding activity for Engineered Systems remains strong, particularly in the USA, and the Company continues to see interest for Rentals and BOOM solutions in the USA and ROW segments. Despite a healthy near-term bid pipeline in all regions, the conversion of those opportunities into bookings and backlog has moderated to start 2019. The third and fourth quarters of 2018 benefitted from numerous multi-million dollar equipment orders, which may not recur in future quarters. As a result, the Company expects quarterly bookings in 2019 to be more in line with historical activity.
Enerflex's financial performance continues to benefit from strategic decisions to diversify product offerings for Engineered Systems and to focus on increasing the recurring revenue streams derived from new and existing long-term BOOM, Rental, and Service contracts. In the near term, Enerflex has a positive outlook supported by the record backlog and continued high enquiry levels. In the longer term, the Company continues to monitor the impacts of volatility in realized commodity prices, political uncertainty, egress issues in the Permian, as well as the lack of consistent access to market causing pricing differentials to widen in Canada. Enerflex continues to assess the effects of these contributing factors and the corresponding impact on our customers' activity levels, which could reduce demand for the Company's products and services in future periods.
The Company's results include items that are unique and items that management and users of the financial statements add back 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 been adjusted for presentation purposes relate generally to four categories: 1) impairment or gains on idle facilities; 2) restructuring activities; 3) acquisition costs; and, 4) share-based compensation. Identification of these items allows for an understanding of the underlying operations of the Company based on the current assets and structure. 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.
($ Canadian millions)
Three months ended December 31, 2018 Total Canada USA ROW
Reported EBIT $ 48.2 $ 6.3 $ 24.4 $ 17.5
Cost recovery related to OOCEP (12.9) - - (12.9)
Share-based compensation 2.5 0.4 1.3 0.8
Depreciation and amortization 27.0 2.0 6.6 18.4
Adjusted EBITDA $ 64.8 $ 8.7 $ 32.3 $ 23.8
($ Canadian millions)
Three months ended December 31, 2017 Total Canada USA ROW
Reported EBIT $ 47.2 $ 12.0 $ 22.3 $ 12.9
Write-down of equipment in COGS and SG & A 1.2 - 1.2 -
(Gain) loss on disposal of idle facilities (0.0) 0.0 0.0 (0.0)
Share-based compensation (0.4) 0.1 (0.2) (0.3)
Depreciation and amortization 20.2 3.2 4.9 12.1
Adjusted EBITDA $ 68.2 $ 15.4 $ 28.1 $ 24.7
There were no costs related to the ongoing arbitration proceedings with OOCEP during the quarter, whereas the fourth quarter of 2017 included approximately $1 million of arbitration related costs. These amounts are not adjusted for in the calculation of Adjusted EBITDA. Reported results for the fourth quarter of 2018 included cost recoveries related to the OOCEP arbitration totaling $13 million. These amounts are comprised of $12.5 million for costs, fees, taxes, and expenses incurred as part of the proceedings, awarded in the fourth quarter of 2018, and $0.5 million for interest on the outstanding amounts, which was awarded in the third quarter of 2018.
Subsequent to the end of the quarter, Enerflex declared a quarterly dividend of $0.105 per share, payable on April 4, 2019, to shareholders of record on March 7, 2019.
Quarterly Results Material
This press release should be read in conjunction with Enerflex's audited Consolidated Financial Statements as at and for the years ended December 31, 2018 and 2017, and the accompanying Management's Discussion and Analysis, both of which will be available on the Enerflex website at www.enerflex.com under the Investors section and on SEDAR at www.sedar.com .
Conference Call and Webcast Details
Enerflex will host a conference call for analysts, investors, members of the media, and other interested parties on Friday, February 22, 2019 at 8:00 a.m. MST to discuss the fourth quarter 2018 financial results and operating highlights. The call will be hosted by Mr. J. Blair Goertzen, President and Chief Executive Officer and Mr. D. James Harbilas, Executive Vice President and Chief Financial Officer of Enerflex.
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 February 22, 2019 at 8:00 a.m. MST. A replay of the teleconference will be available on February 22, 2019 at 3:00 p.m. MST until March 1, 2019 at 3:00 p.m. MST. Please call 1.855.859.2056 or 1.404.537.3406 and enter conference ID 2497962.
Enerflex Ltd. is a single source supplier of natural gas compression, oil and gas processing, refrigeration systems, and electric power generation equipment – plus related engineering and mechanical service expertise. The Company's broad in-house resources provide the capability to engineer, design, manufacture, construct, commission, and service hydrocarbon handling systems. Enerflex's expertise encompasses field production facilities, compression and natural gas processing plants, gas lift compression, refrigeration systems, and electric power equipment servicing the natural gas production industry.
Headquartered in Calgary, Canada, Enerflex has approximately 2,300 employees worldwide. Enerflex, its subsidiaries, interests in associates and joint-ventures operate in Canada, the United States, Argentina, Bolivia, Brazil, Colombia, Mexico, Australia, the United Kingdom, the United Arab Emirates, Oman, Bahrain, Kuwait, Indonesia, Malaysia, and Thailand. 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 Information
This press release contains forward-looking information within the meaning of applicable Canadian securities laws. These statements relate to management's expectations about future events, results of operations and the Company's future performance (both operational and financial) and business prospects. 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: the anticipated duration of weak natural gas prices and the effect thereof in Canada and USA markets; expected bookings; and the nature and scope of challenges and opportunities in the Rest of World segment. In developing the forward-looking information in this news release, the Company has made certain assumptions with respect to general economic and industry growth rates, commodity prices, currency exchange and interest rates, competitive intensity and regulatory approvals. Forward-looking information involves known and unknown risks and uncertainties and other factors, which are difficult to predict and may affect the Company's operations, including, among other things: the impact of general economic conditions; industry conditions, including the adoption of new environmental, taxation and other laws and regulations and changes in how they are interpreted and enforced; volatility of oil and gas prices; oil and gas product supply and demand; risks inherent in the ability to generate sufficient cash flow from operations to meet current and future obligations, including future dividends to shareholders of the Company; increased competition; the lack of availability of qualified personnel or management; labour unrest; political unrest; fluctuations in foreign exchange or interest rates; stock market volatility; opportunities available to, or pursued by, the Company; obtaining financing; and other factors, many of which are beyond its control. The foregoing list of factors and risks is not exhaustive. 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. The forward-looking information included in this press release should not be unduly relied upon. 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:
J. Blair Goertzen D. James Harbilas
President & Chief Executive Officer Executive Vice President & Chief Financial Officer
Tel: 403.236.6852 Tel: 403.236.6857