Enerflex Q2 2026 Earnings Call Transcript

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August 6, 2026

Key Takeaways

  • Positive Sentiment: Engineered Systems bookings remained strong at CAD 488 million in Q2, with first-half bookings nearing CAD 1 billion and a record CAD 1.5 billion backlog. Management said demand spans cryogenic processing, LNG refrigeration, compression, and power generation, with further strength expected in Q3.
  • Positive Sentiment: U.S. Contract Compression delivered 93% fleet utilization across approximately 496,000 horsepower, supported by Permian Basin production growth. Enerflex continues to target 10%–15% customer-backed fleet expansion in 2026 and has secured long-lead components to support growth through 2029.
  • Positive Sentiment: Balance-sheet and cash-flow metrics improved, with free cash flow rising to CAD 32 million and net debt declining to CAD 455 million, or approximately 0.8 times bank-adjusted net debt to EBITDA. The company also extended its CAD 800 million revolving credit facility maturity to 2029.
  • Negative Sentiment: Q2 revenue declined to CAD 582 million from CAD 615 million a year earlier, while net earnings fell to CAD 30 million from CAD 60 million. Higher stock-based compensation, increased SG&A, project sequencing, and the absence of a prior-year unrealized gain pressured results.
  • Neutral Sentiment: Enerflex raised the midpoint-related scope of its 2026 organic growth capital program to CAD 185 million–CAD 195 million, primarily to expand Contract Compression capacity. Management also highlighted a power-generation opportunity pipeline exceeding seven gigawatts, including ongoing engagement with hyperscalers and prime power providers, though no data-center bookings were included in Q2.
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Earnings Conference Call
Enerflex Q2 2026
00:00 / 00:00

Transcript Sections

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Operator

Good day. Thank you for standing by. Welcome to the Enerflex second quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jeff Fetterly, Vice President of Corporate Development and Capital Markets. Please go ahead.

Jeff Fetterly
Jeff Fetterly
VP of Corporate Development and Capital Markets at Enerflex

Thank you, Shannon. Good morning, everyone. With me today are Paul Mahoney, Enerflex's President and CEO, Preet Dhindsa, Senior Vice President and Chief Financial Officer, and Ben Park, Enerflex's Controller. Before I turn it over to Paul, I'll remind everyone that today's discussion will include non-IFRS and other financial measures, as well as forward-looking statements regarding Enerflex's expectations for future performance and business prospects. Forward-looking information involves risks and uncertainties. The stated expectations could differ materially from actual results or performance. For more information, refer to the advisory statements within our news release, MD&A, and other regulatory filings, all available on our website and under our SEDAR+ and EDGAR profiles. As part of our prepared remarks, we will be referring to slides in our updated investor presentation, which is available through a link on this webcast and on our website under the investor relations section.

Jeff Fetterly
Jeff Fetterly
VP of Corporate Development and Capital Markets at Enerflex

I'll now turn it over to Paul.

Paul Mahoney
Paul Mahoney
President and CEO at Enerflex

Thanks, Jeff. Thank you all for joining us on this morning's call. During the second quarter, Enerflex delivered solid operational performance, reflecting disciplined execution and our focus on operational excellence. Results continued to be underpinned by our Energy Infrastructure and After-Market Services business lines, while the Engineered Systems business maintained strong commercial momentum. As we highlighted during our investor update in May, Enerflex is focused on competing intentionally in the markets where we can win, improving relentlessly through operational excellence, and delivering disciplined growth for our shareholders. We are moving with urgency to execute on these priorities, including initiatives to enhance collaboration, leverage our scale, improve operational efficiency, and strengthen our capabilities across the business. Let me speak in more detail about near-term performance. Starting with Engineered Systems, bookings remained very strong during the quarter at $488 million, compared to a trailing eight-quarter average of $363 million.

Paul Mahoney
Paul Mahoney
President and CEO at Enerflex

The year is off to a strong start, with first-half bookings approaching $1 billion, or approximately 75% of our full-year bookings during 2025. Strong bookings has translated into increasing visibility for our ES business, with a book-to-bill ratio of 1.5x during the first half of 2026, and our forward visibility for ES revenue increasing to $1.5 billion, the highest level in Enerflex's history. ES bookings during the second quarter reflect a broad mix of end markets, including cryogenic gas processing, refrigeration for LNG exports, large compression stations, and power generation. The outlook for our Engineered Systems business remains strong, supported by healthy demand for compression and processing equipment across our key markets, together with increasing natural gas, associated liquids, and electric power generation activity.

Paul Mahoney
Paul Mahoney
President and CEO at Enerflex

Interest in distributed power solutions also continues to build, with our pipeline of opportunities now exceeding 7 GW across data center and other power generation applications. Turning to After-Market Services, results improved during the second quarter after a slower start to the year in North America. Performance reflected steady customer maintenance spending, particularly in regions where we also operate Energy Infrastructure assets, highlighting the strength of our integrated platform and competitive positioning across our core markets. As highlighted during our investor update, our core priorities for the AMS business include, one, growing profitable services, notably in our retrofit segment. Two, optimizing costs through basin focus and pooling of resources across AMS and Contract Compression business lines. Three, capturing opportunities for installation and O&M services associated with power generation.

Paul Mahoney
Paul Mahoney
President and CEO at Enerflex

The Energy Infrastructure business continues to deliver solid performance, supported by approximately $1.2 billion of contracted revenue over the remaining terms of our customer contracts. Within this segment, Enerflex's U.S. Contract Compression business continues to perform well, led by increasing natural gas production in the Permian Basin. Utilization was strong at 93% across a fleet of approximately 496,000 horsepower. Additional operating KPIs for the business are available on slides 33 and 34 of our investor presentation. We continue to target customer-supported fleet growth of 10%-15% during 2026, with the majority of additions in the second half of the year. We are also securing long lead time components to support fleet growth in 2027, 2028, and 2029. Turning to our international Energy Infrastructure operations, which are outlined on slides 31 and 36.

Paul Mahoney
Paul Mahoney
President and CEO at Enerflex

This portfolio continues to be supported by a strong contract position with a weighted average remaining term of approximately five years, providing durable and predictable cash flows that we expect will continue to support Enerflex's financial performance for years to come. I'd also like to touch briefly on our operations in the Middle East. While we continue to closely monitor the situation in the region, our operations have remained uninterrupted to date. The safety of our people remains our highest priority, and our local teams continue to execute established response processes and contingency plans while maintaining reliable operations for our customers. Today, Enerflex's operations in Bahrain and Oman comprise of 17 projects, supported by an installed fleet of approximately 350,000 horsepower across compression and power generation applications. We remain focused on supporting our customers while continuing to execute safely and reliably across the region.

Paul Mahoney
Paul Mahoney
President and CEO at Enerflex

Let me now speak about progress we are making on the strategic priorities outlined during our investor update in May. We continue to advance a disciplined, enterprise-wide approach to operational excellence. We are also progressing the professionalization of our $1.9 billion per year enterprise-wide supply chain, driving productivity improvements and modernizing IT and automation systems. We expect each of these initiatives to be meaningful contributors in achieving our financial objectives. Preet will provide additional detail on the financial impact and targets associated with these priorities during his prepared remarks. We have developed five specific work streams with meaningful projects underway in each region and across key partner functions. One example is the recent alignment of our Canadian and U.S. operations under a unified North American framework. This change is designed to unlock greater collaboration, leverage our scale, drive standardization, improve operational efficiency, and strengthen customer service.

Paul Mahoney
Paul Mahoney
President and CEO at Enerflex

Enerflex reached several important ReliaCore milestones in the quarter, advancing the company's digitally connected service ecosystem. We launched our Houston-based remote operations center, leveraging smart dispatch technology to connect customer assets with technical expertise and intelligent workflows, as well as developed and deploying Enerflex's first ReliaCore EDGE devices. Together, these capabilities extend service coverage, accelerate issue resolution, and build the foundation for advanced analytics and predictive maintenance capabilities that are expected to improve asset performance, reduce downtime, and create long-term economic value for both Enerflex and our client partners. Let me conclude by reiterating that our priorities remain clear. As a company, we are focused on improving productivity across our global operations, pursuing the highest value growth opportunities in markets where Enerflex can win, and allocating capital in a disciplined manner to drive long-term value creation.

Paul Mahoney
Paul Mahoney
President and CEO at Enerflex

We are encouraged by early progress. We remain focused on building momentum as we execute against these initiatives. We look forward to providing updates on our progress over the coming quarters. With that, I will turn the call over to Preet to speak to the financial highlights.

Preet Dhindsa
Preet Dhindsa
SVP and CFO at Enerflex

Thanks, Paul. Good morning, everyone. I will start with highlights from the second quarter. We generated revenue of $582 million compared to $615 million in Q2 2025 and $584 million in Q1 2026. Lower revenue compared with prior years, primarily driven by project sequencing and resource allocation for expansion of Enerflex's U.S. Contract Compression fleet within the Engineered Systems product line. ES book-to-bill ratio, calculated as bookings divided by revenue, was 1.6x during Q2 2026 and 1.5x during the first half of the year. This translated into our backlog increasing to a record $1.5 billion at the end of Q2. Gross margin before depreciation and amortization was $173 million, or 30% of revenue, compared to $175 million or 29% of revenue in Q2 2025 and $179 million, or 31% of revenue during Q1 2026.

Preet Dhindsa
Preet Dhindsa
SVP and CFO at Enerflex

Energy Infrastructure and AMS product lines generated 69% of consolidated gross margin before depreciation and amortization during the quarter. ES gross margin before depreciation and amortization of 18% in Q2 2026, compared to 18% in Q2 2025 and 19% in Q1 2026, with a sequential decrease related primarily to revenue mix and project sequencing. SG&A was $81 million for the three months ended June 30, 2026, up $20 million from the prior year period due to higher stock-based compensation expense and investments to support growth and operational improvements. Core SG&A was $58 million for the three months ended June 30, 2026, compared to $52 million in Q2 2025 and $55 million during the first quarter of 2026. Adjusted EBIT of $128 million compared to $130 million in Q2 2025 and $137 million in Q1 2026.

Preet Dhindsa
Preet Dhindsa
SVP and CFO at Enerflex

Cash provided by operating activities before changes in working capital or FFO of $87 million in Q2 2026, compared to $89 million in Q2 2025 and $95 million in Q1 2026, a function of lower adjusted EBITDA. Cash provided by operating activities, or CFO, was $89 million, which included net working capital recovery of $2 million. This compares to cash used in operating activities of $4 million in Q2 2025, and cash provided by operating activities of $32 million in Q1 2026. Free cash flow increased to $32 million in Q2 2026 compared to a use of cash of $39 million during Q2 2025, and a source of cash of $15 million during Q1 2026. The increase in free cash flow compared to prior year and prior period reflected higher CFO being partially offset by higher capital spending.

Preet Dhindsa
Preet Dhindsa
SVP and CFO at Enerflex

Return on capital employed was 15.4% in Q2 2026 compared to 16.4% in Q2 2025 and 17.3% during Q1 2026. Lower ROCE primarily reflects the decrease in trailing 12-month EBIT, which was impacted by unrealized gains on redemption options related to the senior secured notes recognized in prior periods, partially offset by lower average capital employed, primarily due to decline in net debt. Net earnings of $30 million or $0.25 per share in Q2 2026, compared to $60 million or $0.49 per share in Q2 2025 and $43 million or $0.35 per share in Q1 2026. Compared to Q2 2025, profitability benefited from lower net finance costs. However, it was offset by higher share-based compensation expense and an unrealized gain of $15 million related to the redemption options of its senior secured notes recognized in the prior year.

Preet Dhindsa
Preet Dhindsa
SVP and CFO at Enerflex

Enerflex exited Q2 2026 with a net debt of $455 million, which included $74 million of cash and cash equivalents, a reduction of $153 million compared to Q2 2025, and $46 million since the beginning of 2026. Enerflex's bank-adjusted net debt to EBITDA ratio is approximately 0.8x at the end of Q2 2026, down from 1.3x at the end of Q2 2025, and 0.9x at the end of Q1 2026. On June 24, Enerflex entered into an amended and restated credit agreement with respect to our syndicated secured revolving credit facility. The maturity date of the RCF has been extended to June 30, 2029, and availability is unchanged at $800 million. The limit under the RCF may be increased by up to $200 million at the request of the company, subject to lender's consent, compared to $50 million previously.

Preet Dhindsa
Preet Dhindsa
SVP and CFO at Enerflex

Enerflex also continues to maintain a $70 million unsecured LC facility with one of its lenders in its RCF syndicate. Let me shift to capital allocation. We invested $53 million in the business during the second quarter, comprised of $35 million for growth, primarily allocated to expand the company's contract compression fleet in the U.S., and $18 million for maintenance in PP&E. Enerflex is refining its capital expenditure rate for 2026, now targeting organic growth capital expenditures of $185 million-$195 million, compared to prior guidance of $175 million-$195 million. The updated guidance includes organic growth capital expenditures of approximately $100 million, prior guidance of $90 million-$100 million, maintenance capital expenditures of $70 million-$80 million, unchanged from original guidance, and PP&E and infrastructure investments of approximately $15 million to support the company's ES business and activity in adjacent markets, including electric power generation.

Preet Dhindsa
Preet Dhindsa
SVP and CFO at Enerflex

Enerflex continues to evaluate selective, disciplined bolt-on acquisition opportunities. Inorganic growth will be focused on enhancing capabilities and accelerating scale in the company's core North American markets. All opportunities will be balanced with Enerflex's focus on maintaining a strong financial position and opportunities to provide direct shareholder returns. Lastly, I would like to touch on the value creation drivers connected to our strategic objectives. These were highlighted during our investor day in May and are summarized on slide 16. Our objectives on a full-cycle basis are to grow our business ahead of underlying markets, increase profitability, and prioritize disciplined capital allocation. Specifically, we are focused on increasing adjusted EBITDA margin by 200+ basis points, improving cash conversion ratio by 200+ basis points, and driving return on capital employed 200+ basis points higher.

Preet Dhindsa
Preet Dhindsa
SVP and CFO at Enerflex

As highlighted by the steady improvement in adjusted EBITDA margin shown on slide nine, we are encouraged by early progress and look forward to providing further updates. With that, I'll turn the call back over to Paul for closing remarks.

Paul Mahoney
Paul Mahoney
President and CEO at Enerflex

As we've discussed today, we continue to make meaningful progress executing our strategy while maintaining a disciplined focus on operational excellence, profitable growth, and capital allocation. We believe the fundamentals across our core markets remain attractive, and Enerflex is well-positioned to capitalize on those opportunities through our integrated platform, global footprint, and long-standing customer relationships. While there is still work ahead, I am confident in our team's ability to create long-term value for our shareholders. I'd like to thank our employees around the world for their continued dedication, and I'd also like to thank our client partners, suppliers, and stakeholders for their ongoing support. I will now turn the call back to the operator for questions.

Operator

Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by. Our first question comes from Keith Mackey from RBC Capital Markets. Please go ahead.

Keith Mackey
Keith Mackey
Analyst at RBC Capital Markets

Hey, good morning, thanks for taking my questions. Just firstly, on the capital investment raise or refinement, can you just kind of run through the priorities for that spend? What gives you the confidence in the returns that you'll generate from it? Is the increase based on inflationary factors, or is it an increase in the amount of work you're actually able to put out?

Paul Mahoney
Paul Mahoney
President and CEO at Enerflex

Yeah, good question, Keith. As you know, it's primarily our contract compression business. The refinement on the upper range is really a confidence in our ability to contract a business. We do have our 2026 log filled. We do have portions of our 2027 log filled. It's more of increasing capabilities than it is an inflationary related item.

Keith Mackey
Keith Mackey
Analyst at RBC Capital Markets

Got it. Appreciate the color there, Paul. Maybe just to follow up on the bookings, certainly very strong this quarter. Can you comment on the mix of those bookings? Was there any data center activity in those? Ultimately, do you expect the $400 million-$500 million range to be the new normal for Enerflex over the next 12 months, or was this an exceptional quarter? Exceptional first half, I should say.

Paul Mahoney
Paul Mahoney
President and CEO at Enerflex

Yeah. Great question, Keith. Along our commitments in our Investor Day regarding growing above market, this is yet another quarter in a row of increasing bookings. Q2 is a watermark for us. It does not include any bookings for data center in there. There's the cryogenic gas processing, there's refrigeration processing for LNG export, large compression, and some industrial related power in that. This has been a multi-quarter expression of bookings. We see this continuing here into Q3. Just to reiterate, Q2 does not have data center elements in it.

Keith Mackey
Keith Mackey
Analyst at RBC Capital Markets

Okay, thanks very much.

Operator

Thank you. Our next question comes from Tim Monachello from ATB Cormark Capital Markets. Please go ahead.

Tim Monachello
Tim Monachello
Analyst at ATB Cormark Capital Markets

Thanks for taking my questions. The EI backlog continues to sort of trend lower. The revenue throughput seems to be pretty consistent, and obviously those projects are long in duration. I'm just curious if you are expecting to see that revenue profile decline or if there's some, perhaps, contract renewals in the foreseeable future that'll start to boost that backlog.

Paul Mahoney
Paul Mahoney
President and CEO at Enerflex

Look, Tim, great question. I would say that what you're seeing and witnessing is the result of optimizing our footprint. It's not as much about contract rollover, if you will, on the large BOOM contracts. It's more about optimizing our footprint, mainly in our Latin American region. Just to put some color behind what you're seeing.

Tim Monachello
Tim Monachello
Analyst at ATB Cormark Capital Markets

Okay, that's helpful. A lot of players in the U.S. Contract Compression market have been talking about extending lead times even further now for engine components, up to almost four years now. Can you talk a little bit about your strategy to be able to fulfill new orders given that extending lead time for components, and if there's anything you can do outside of normal supply chain channels to procure engines within the market?

Paul Mahoney
Paul Mahoney
President and CEO at Enerflex

The company has purchase obligations over the next four years from 2026 through 2029. Significant, right? [$521 million in 2026, $350 million some odd in 2027, $191 million in 2028, and $53 million in 2029.] I would say we're in an interesting position having an advanced S&OP process while the lead times have gone out. Yes, do we need to look for some alternative items outside of engines and things like that? We constantly are seeking and working that. This is an area that I think our team has done a remarkable job putting in the purchase obligations. We have clear line of sight 2026, 2027, and are working from that type of framework on the engine.

Paul Mahoney
Paul Mahoney
President and CEO at Enerflex

Again, I think it's a unique strength being in the compression business at large, both contract and the purchase side, and a normal standard S&OP process that's been extending over the last 12+ months.

Tim Monachello
Tim Monachello
Analyst at ATB Cormark Capital Markets

Okay, got it. Last one from me, just on the power gen opportunities that continues to grow. Can you talk a little bit more about the strategy and the go-to-market, and if you're finding any partners in the hyperscaler space or any other partners that may be showing a little bit of momentum and could point to some medium-term, more tangible results in terms of bookings in that space?

Paul Mahoney
Paul Mahoney
President and CEO at Enerflex

Great question, Tim. I would tell you that we've reported many quarters now about our growing [C] in the market at, what, 7 GW? We've reported out on that. I would tell you that our commercial operations and our organization has been intensely focused on probably the top 2 GW. As we continue to drive that intensity, what we're seeing is an advancement in our sales funnel on that level of activity. Our engagement is with hyperscalers. Our engagement is with prime power providers. The partners come and go, but I would say that the stable connectivity that Enerflex has been able to achieve with the hyperscalers has been consistent now for a few quarters.

Tim Monachello
Tim Monachello
Analyst at ATB Cormark Capital Markets

All right. I appreciate it. I'll turn it back.

Operator

Thank you. I am showing no further questions at this time. I would now like to turn it back over to Paul Mahoney for closing remarks.

Paul Mahoney
Paul Mahoney
President and CEO at Enerflex

Well, thank you, everyone, for joining us today and for your continued interest in Enerflex. We appreciate your time and look forward to providing further updates on our strategic progress with third-quarter results at the end of October. Thank you.

Operator

Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.

Executives
    • Jeff Fetterly
      Jeff Fetterly
      VP of Corporate Development and Capital Markets
    • Paul Mahoney
      Paul Mahoney
      President and CEO
    • Preet Dhindsa
      Preet Dhindsa
      SVP and CFO
Analysts
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