(MENAFN - GlobeNewsWire - Nasdaq) itemprop="articleBody">CALGARY, Alberta, May 02, 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 months ended March 31, 2019.
Summary Table of First Quarter of 2019 Financial and Operating Results
($ Canadian millions, except per share amounts, horsepower, and percentages) Three months ended
2019 2018 Change
Revenue $ 484.9 $ 385.8 $ 99.1
Gross margin 88.8 64.5 24.3
EBIT 33.3 19.3 14.0
EBITDA (1) 55.3 40.3 15.0
Adjusted EBITDA (2) 66.7 43.7 23.0
Net earnings 17.0 10.9 6.1
Earnings per share 0.19 0.12 0.07
Recurring revenue growth (3) 20.5 % 8.2 % -
Bookings (4) 118.4 301.2 (182.8 )
Backlog (4) 1,193.6 653.6 540.0
Rental horsepower 667,236 609,912 57,324
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. Recurring revenue is comprised of revenue from the Service and Rental 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. 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. 'The first quarter of 2019 benefitted from our record backlog at December 31, 2018, with strong revenue and gross margin realized from projects secured in the second half of 2018,' said J. Blair Goertzen, Enerflex's President and Chief Executive Officer. 'In addition to our success with Engineered Systems, we also saw improvements in both the Service and Rental product lines, attributable to the Company's strategy to increase recurring revenue. Despite lower bookings activity in this quarter, the Company's backlog remains strong at well over $1 billion and we continue to see a healthy bid pipeline for Engineered Systems. Enerflex will continue to monitor project and industry risks and activities across our diversified operations, however, with our backlog and an increasing demand for natural gas, our near-term outlook remains positive.'
Enerflex generated revenue of $485 million, an increase of $99 million over the prior year, driven by improved results across all product lines, particularly Engineered Systems revenue, which increased by $75 million on strength in the USA segment. Gross margin was $89 million in the first quarter of 2019 compared to $65 million in the same period of 2018. Higher gross margin was the result of increased revenue and improved gross margin percentage. The improved gross margin percentage is due to the realization of higher margin projects included in opening backlog and the continued contributions of the Service and Rental product lines, partially offset by higher estimated costs to complete certain projects and write-down of equipment in the ROW segment. The prior year margins were negatively impacted by margin erosion and project delays. EBIT for the quarter was $33 million, which represents an increase of $14 million over the comparative period. This improvement is the result of higher gross margins, partially offset by increased SG & A costs on higher compensation resulting from mark-to-market impacts on share-based compensation, increased profit share on improved operational results, and higher headcount. Recorded bookings of $118 million for three months ended March 31, 2019, a decrease of $183 million from the same period last year. Based on the aggressive delivery windows for new prospects and the record level of backlog that Enerflex had at the end of 2018, the Company's ability to respond to some North American projects with delivery times that met the client's needs was limited by the Company's fabrication and supply chain capacity. The Company has also seen delays in the timing of customer project approvals and a corresponding reduction in the conversion of opportunities, which has impacted bookings during the first quarter and could impact bookings over the balance of the year. The movement in exchange rates resulted in a decrease of $21 million on foreign currency denominated bookings during the first quarter of 2019, compared to a $12 million increase in the comparable period, resulting in a $33 million period-over-period decrease. Backlog of $1,194 million decreased from $1,421 million at December 31, 2018 due to Engineered Systems revenue recognized in the period outpacing bookings, as well as unfavourable foreign exchange impacts on foreign currency denominated backlog. The balance at March 31, 2019 provides visibility for Engineered Systems revenue through 2019 and early 2020. The Company invested $24 million in rental assets, largely in the USA, continuing the organic expansion of the USA contract compression fleet. Additionally, the previously announced expansion of our Houston fabrication facility is progressing on schedule, with additional capacity to be fully operational in the second quarter of 2019. In March 2019, the Company collected the $40 million U.S. dollars owing from Oman Oil Company Exploration and Production LLC ('OOCEP'), concluding this arbitration. The amounts received from OOCEP were immediately used to repay debt. The Company repaid $95 million of debt in the quarter, resulting in a bank-adjusted net debt to EBITDA ratio of 0.2:1, compared to a maximum ratio of 3:1. Subsequent to March 31, 2019, Enerflex declared a quarterly dividend of $0.105 per share, payable on July 4, 2019, to shareholders of record on May 16, 2019. First Quarter Results Summary
Engineered Systems revenue increased due to execution of the work from the Company's record December 31, 2018 backlog, particularly in the USA segment. 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 build-own-operate-maintain ('BOOM') revenues in Colombia. Gross margins increased due to higher revenue and improved gross margin percentage, while SG & A costs increased due to higher compensation costs, partially offset by positive foreign exchange impacts. First Quarter Segmented Results
USA segment revenue was $293 million, an increase of $101 million from the same period in 2018. 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 2019 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 $11 million in EBIT was driven by higher revenues across all product lines and improved gross margin performance, partially offset by higher compensation costs on a larger workforce and mark-to-market impacts on share-based compensation.
Rest of World
Revenue in the Rest of World segment decreased by $1 million, the result of lower Engineered Systems revenue, partially offset by improved Service revenue, primarily in Australia, and improved Rental performance in Latin America. EBIT decreased by $1 million due to lower revenues for the segment and higher SG & A costs, partially offset by improved gross margin performance in the quarter when compared to the prior year. Gross margin for the quarter was negatively impacted by higher estimated costs to complete certain projects and write-down of equipment, while the first quarter of 2018 included some margin erosion and project delays for a large project. SG & A costs have increased from the prior year due to increased compensation on a larger workforce and mark-to-market impacts on share-based compensation, partially offset by the effects of restructuring activities in Australia recognized in the first quarter of 2018.
Canadian revenue decreased by $1 million on lower Engineered Systems revenue resulting from weaker bookings seen in the first half of 2018, partially offset by higher Service revenue due to increased parts sales. EBIT increased by $3 million due to higher gross margin on improved project margins, while SG & A costs were consistent with the comparable period in 2018.
The Company's products and services remain dependent on strength and stability in commodity prices. Stability and improvement in commodity prices are required to allow customers to continue to increase investment, which should translate to further demand for the Company's products and services. Record bookings and backlog in the second half of 2018 provide visibility for Engineered Systems revenue through 2019 and early 2020. However, Enerflex has experienced lower bookings activity in the first quarter of 2019 as the Company's ability to respond to some North American projects with delivery times that met the client's needs was limited by the Company's fabrication and supply chain capacity. We have also seen delays in the timing of customer project approvals and a corresponding reduction in the conversion of opportunities, which impacted bookings during the first quarter and could impact bookings over the balance of the year. The Company expects quarterly bookings for the remainder of 2019 to trend closer to historical activity. 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.
Enerflex's financial performance continues to benefit from strategic decisions to diversify product offerings for Engineered Systems, to focus on increasing the recurring revenue streams derived from new and existing long-term BOOM, rental, and service contracts, and to develop a geographically diversified business. In the near term, Enerflex has a positive outlook supported by continued strength in our backlog and high enquiry levels across all regions. In the longer term, the Company continues to monitor the impacts of volatility in realized commodity prices, political uncertainty, and egress issues in the Permian, as well as the lack of consistent access to market causing unpredictable pricing differentials in Canada. While recent liquefied natural gas ('LNG') project approval has offered some future relief to the Canadian gas industry, management still expects activity in Canada to be largely subdued through 2019. Enerflex continues to assess the effects of these contributing factors and the corresponding impact on our customers' activity levels, which will drive the 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) transaction costs related to M & A activity; 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 March 31, 2019 Total USA ROW Canada
Reported EBIT $ 33.3 $ 25.8 $ 2.0 $ 5.5
Write-down of equipment in COGS 2.0 - 2.0 -
Share-based compensation 9.4 5.1 2.3 2.0
Depreciation and amortization 22.0 7.7 11.7 2.6
Adjusted EBITDA $ 66.7 $ 38.6 $ 18.0 $ 10.1
($ Canadian millions)
Three months ended March 31, 2018 Total USA ROW Canada
Reported EBIT $ 19.3 $ 14.7 $ 2.7 $ 1.9
Restructuring costs in COGS and SG & A 0.9 - 0.9 -
(Gain) loss on disposal of idle facilities 0.1 - - 0.1
Share-based compensation 2.4 1.2 0.6 0.6
Depreciation and amortization 21.0 5.1 12.9 3.0
Adjusted EBITDA $ 43.7 $ 21.0 $ 17.1 $ 5.6
Effective January 1, 2019, the Company applied IFRS 16 Leases ('IFRS 16') for the first time. The effect of the new standard is to increase EBIT by $0.6 million, as a portion of lease expenses are included as interest. In addition, depreciation and amortization increased by $2.9 million, resulting in a total increase in EBITDA of $3.5 million. The standard was adopted prospectively from January 1, 2019, and accordingly the 2018 results have not been affected. Refer to the Adjusted EBITDA section of the Management's Discussion and Analysis for further detail on the new standard. Dividend
Subsequent to the end of the quarter, Enerflex declared a quarterly dividend of $0.105 per share, payable on July 4, 2019, to shareholders of record on May 16, 2019.
Quarterly Results Material
This press release should be read in conjunction with Enerflex's unaudited interim condensed consolidated financial statements for the three months ended March 31, 2019 and 2018, 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, May 3, 2019 at 8:00 a.m. MDT to discuss the first quarter 2019 financial results and operating highlights. The call will be hosted by Mr. Marc Rossiter, incoming 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 May 3, 2019 at 8:00 a.m. MDT. A replay of the teleconference will be available on May 3, 2019 at 11:00 a.m. MDT until May 10, 2019 at 11:00 a.m. MDT. Please call 1.855.859.2056 or 1.404.537.3406 and enter conference ID 9184569.
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 2,500 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; anticipated revenue; 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:
Marc Rossiter D. James Harbilas
Incoming President & Chief Executive Officer Executive Vice President & Chief Financial Officer
Tel: 403.387.6325 Tel: 403.236.6857