CALGARY, Alberta, Aug. 10, 2017 (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 six months ended June 30, 2017.
Summary Table of Second Quarter and First Half of 2017 Financial and Operating Results
| (Unaudited) ($ Canadian millions, except per share amounts, horsepower, and percentages) |
Three months ended June 30, |
Six months ended June 30, |
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| 2017 | 2016 | Change | 2017 | 2016 | Change | |||||||||||||||||||||||||
| Revenue | $ | 433.5 | $ | 253.1 | $ | 180.4 | $ | 788.3 | $ | 524.8 | $ | 263.5 | ||||||||||||||||||
| Gross margin | 77.4 | 64.2 | 13.2 | 150.7 | 110.6 | 40.1 | ||||||||||||||||||||||||
| EBIT (loss) (1) | 32.7 | 21.9 | 10.8 | 65.8 | (69.3 | ) | 135.1 | |||||||||||||||||||||||
| Adjusted EBIT (2) | 34.1 | 22.2 | 11.9 | 64.3 | 29.4 | 34.9 | ||||||||||||||||||||||||
| EBITDA (1) | 53.0 | 44.9 | 8.1 | 105.9 | (23.7 | ) | 129.6 | |||||||||||||||||||||||
| Adjusted EBITDA (2) | 54.5 | 45.2 | 9.3 | 104.5 | 75.0 | 29.5 | ||||||||||||||||||||||||
| Net earnings (loss) – continuing operations | $ | 21.3 | $ | 16.8 | $ | 4.5 | $ | 45.9 | $ | (76.6 | ) | $ | 122.5 | |||||||||||||||||
| Earnings (loss) per share – continuing operations | 0.24 | 0.21 | 0.03 | 0.52 | (0.97 | ) | 1.49 | |||||||||||||||||||||||
| Recurring revenue % (3) | 33.7 | % | 37.7 | % | 33.7 | % | 37.7 | % | ||||||||||||||||||||||
| Bookings (4) | $ | 400.2 | $ | 154.4 | $ | 245.8 | $ | 718.8 | $ | 219.4 | $ | 499.4 | ||||||||||||||||||
| Backlog (4) | 773.2 | 345.4 | 427.8 | 773.2 | 345.4 | 427.8 | ||||||||||||||||||||||||
| Rental horsepower | 474,707 | 499,615 | (24,908 | ) | 474,707 | 499,615 | (24,908 | ) | ||||||||||||||||||||||
(1) Earnings before Interest (Finance Costs), Taxes, Depreciation and Amortization (“EBITDA”) and Earnings before Interest (Finance Costs) and Taxes (“EBIT”) are considered non-GAAP and additional GAAP measures, which may not be comparable with similar non-GAAP or additional GAAP measures used by other entities.
(2) Adjusted EBITDA and Adjusted EBIT are non-GAAP measures. These measures provide a better representation of the Company’s ongoing operations. Please refer to the full reconciliation of these items in the Adjusted EBIT and Adjusted EBITDA section.
(3) Determined by taking the trailing 12-month period.
(4) 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’s second quarter financial results reflect the improved market dynamics, demonstrated by the Company’s strengthened operating income and earnings relative to last year. With over $400 million in bookings in the quarter, the strong trend continued from recent quarters and provides visibility into activity levels over the remainder of 2017 and into 2018,” said J. Blair Goertzen, Enerflex’s President and Chief Executive Officer. “We continue to see solid momentum in the USA and Rest of World segments. Within Canada, the Company remains cautious as the market continues to face price volatility which creates uncertainty around customer capital budgets for the remainder of the year. Enerflex also closed the acquisition of Mesa Compression on July 31 and we are excited to welcome Mesa’s experienced and skilled employees to Enerflex and will continue to build on the strength of this established platform.”
Quarterly Overview
- Recorded bookings of $400.2 million, a significant increase of 159.2% compared to the $154.4 million recorded in the second quarter of 2016. Bookings in the second quarter of 2017 marked the fifth consecutive quarter where bookings increased over the same quarter from the comparative period. Subsequent to the end of the quarter, the Company recorded bookings of approximately $92 million, the majority of which was in the USA segment.
- Engineered Systems backlog at June 30, 2017 was $773.2 million, a 24.4% increase compared to the backlog of $621.4 million at December 31, 2016.
- Generated revenue of $433.5 million, a 71.3% increase compared to $253.1 million in the second quarter of 2016, largely driven by increased Engineered Systems revenues.
- Reported EBIT of $32.7 million during the second quarter of 2017, compared to $21.9 million in the second quarter of 2016.
- Enerflex entered into an agreement to acquire the U.S. based contract compression business of Mesa Compression, LLC (“Mesa”) for USD $106 million, subject to certain purchase price adjustments. The acquisition closed on July 31, 2017.
- Subsequent to quarter end, Enerflex declared a quarterly dividend of $0.085 per share payable October 12, 2017 to shareholders of record on August 24, 2017.
Second Quarter Results Summary
Net earnings for the second quarter and first half of 2017 were higher compared to the same periods of 2016, primarily as a result of higher revenues. The increase in revenues was primarily driven by improved Engineered Systems revenues in the Canada and USA segments, as well as Service revenue in all segments. Rental revenues declined over the prior year due to lower utilization and rental rates, largely in the Rest of World segment. The consolidated gross margin percentage of 17.9% for the quarter was lower than the 25.4% margin realized in the prior year due to pressure on awarded margins and increased competition for the pipeline of work. SG&A expenses increased $2.2 million during the three months ended June 30, 2017 primarily as a result of higher share based compensation, partially offset by the effects of restructuring activities undertaken in prior periods.
Adjusted EBIT and Adjusted EBITDA
The Company recorded a number of items in its results that are not expected to recur in the normal course of business. The exclusion of these items presents a view of the results that should be more representative of the Company’s normal operations. The presentation of adjusted EBIT and adjusted EBITDA should not be considered in isolation from EBIT or EBITDA as determined under IFRS. The adjusted EBIT and adjusted EBITDA may not be comparable to similar measures presented by other companies and should not be considered in isolation or as a replacement for measures prepared as determined under IFRS.
The items that have been adjusted for presentation purposes relate generally to three categories: 1) impairment or gains on assets; 2) restructuring activities; and 3) acquisition costs of Mesa. Exclusion of these items should allow for a better understanding of ongoing, normal operations of the Company. The Company has also presented the impact of share based compensation as it is an item that can fluctuate significantly with share price changes that are not directly linked to the performance of the Company.
| ($ Canadian millions) | ||||||||||||||||
| Three months ended June 30, 2017 | Total | Canada | USA | ROW | ||||||||||||
| Reported EBIT | $ | 32.7 | $ | 2.6 | $ | 24.3 | $ | 5.8 | ||||||||
| Restructuring costs in COGS and SG&A | 0.9 | 0.5 | – | 0.4 | ||||||||||||
| (Gain) loss on disposal of PP&E | 0.0 | – | 0.0 | 0.0 | ||||||||||||
| Acquisition costs | 0.5 | – | 0.5 | – | ||||||||||||
| Goodwill impairment | – | – | – | – | ||||||||||||
| Adjusted EBIT | $ | 34.1 | $ | 3.1 | $ | 24.8 | $ | 6.2 | ||||||||
| Depreciation and amortization | 20.4 | 3.4 | 2.7 | 14.3 | ||||||||||||
| Adjusted EBITDA | $ | 54.5 | $ | 6.5 | $ | 27.5 | $ | 20.5 | ||||||||
| Share based compensation (“SBC”) | 2.2 | |||||||||||||||
| Adjusted EBITDA excluding SBC | $ | 56.7 | ||||||||||||||
| ($ Canadian millions) | ||||||||||||||||
| Three months ended June 30, 2016 | Total | Canada | USA | ROW | ||||||||||||
| Reported EBIT (loss) | $ | 21.9 | $ | 0.6 | $ | 5.0 | $ | 16.3 | ||||||||
| Restructuring costs in COGS and SG&A | 0.3 | 0.1 | 0.2 | 0.0 | ||||||||||||
| (Gain) loss on disposal of PP&E | 0.0 | – | 0.0 | 0.0 | ||||||||||||
| Acquisition costs | – | – | – | – | ||||||||||||
| Goodwill impairment | – | – | – | – | ||||||||||||
| Adjusted EBIT | $ | 22.2 | $ | 0.7 | $ | 5.2 | $ | 16.3 | ||||||||
| Depreciation and amortization | 23.0 | 4.3 | 3.9 | 14.8 | ||||||||||||
| Adjusted EBITDA | $ | 45.2 | $ | 5.0 | $ | 9.1 | $ | 31.1 | ||||||||
| Share based compensation | 1.8 | |||||||||||||||
| Adjusted EBITDA excluding SBC | $ | 47.0 | ||||||||||||||
Segmented Results
Canada
Canada segment revenue in the second quarter of 2017 was $100.3 million, an increase of $42.2 million or 72.6% from $58.1 million recorded in the same period of 2016, primarily as a result of Engineered Systems. The increase of $40.7 million in Engineered Systems revenue is reflective of the increased level of bookings from the last half of 2016 and first half of 2017.
Operating income for the second quarter of 2017 was $2.7 million compared to an operating income of $0.6 million in the comparable quarter last year. This improvement resulted from higher revenues and lower SG&A costs during the quarter. The reduction in SG&A expense was attributable to lower compensation expense on lower headcount. EBIT for the second quarter of 2017 was $2.6 million compared to an EBIT of $0.6 million in the second quarter of 2016.
USA
USA segment revenue in the second quarter of 2017 was $227.8 million, an increase of $133.5 million or 141.6% from $94.3 million a year earlier. This increase was due to significantly higher Engineered Systems revenue, as well as higher Service revenue, partially offset by lower Rental revenue. Engineered Systems revenue increased due to the realization of the increased bookings in the back half of 2016 and first half of 2017 as compared to the same periods in the comparative year. Service revenue was higher as a result of the commencement of a new long-term service agreement, while Rental revenue was lower due to weaker utilization and rental rates.
Operating income increased by $19.3 million during the second quarter of 2017 due to higher revenue, partially offset by higher SG&A expenses due to higher compensation expense.
Rest of World
Rest of World segment revenue in the second quarter of 2017 was $105.4 million, which increased by $4.7 million or 4.7% from 2016 due to increases in Engineered Systems and Service revenues, partially offset by a decrease in Rental revenue. Engineered Systems revenue increased due to bookings in the quarter, largely in the Middle East / Africa (“MEA”) region. Service revenue increased due to higher activity in the MEA region. Rental revenues decreased due to lower utilization and rental rates in Mexico, and slower economic conditions in some of the markets this segment services.
Operating income decreased by $10.5 million in the second quarter of 2017, compared to the same period of 2016 as a result of decreased gross margin. The decrease in gross margin was the result of a change in product mix with a lower proportion of sales coming from high-margin revenue streams and the completion of a high margin project in Q2 2016.
The stabilization of commodity prices in the second half of 2016 led to increased enquiries and continued strength in bookings in the second quarter of 2017, particularly in the Canada and USA segments. Further stability or improvement in commodity prices will be required for customers to continue to increase investment, which should translate to further demand for the Company’s products and services.
Mesa Acquisition
The acquisition of Mesa closed on July 31, 2017 for USD $106 million, subject to certain purchase price adjustments. This acquisition is consistent with Enerflex’s objective of increasing recurring revenue streams and expanding in the USA market while supporting the Company’s long-term strategy. The strategic fit between both organizations, as well as the growth opportunities will enhance the Company’s position in the contract compression business.
Dividend
Subsequent to the end of the second quarter of 2017, Enerflex declared a quarterly dividend of $0.085 per share, payable on October 12, 2017, to shareholders of record on August 24, 2017.
Quarterly Results Material
This press release should be read in conjunction with Enerflex’s Interim Condensed Financial Statements as at and for the three and six months ended June 30, 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, August 11, 2017 at 8:00 a.m. MDT (10:00 a.m. EDT) to discuss the second quarter 2017 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 August 11, 2017 at 8:00 a.m. MDT (10:00 a.m. EDT). A replay of the teleconference will be available on August 11, 2017 at 3:00 p.m. MDT until August 18, 2017 at 3:00 p.m. MDT. Please call 1.855.859.2056 or 1.404.537.3406 and enter conference ID 64829236.
About Enerflex
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, refrigeration systems, and electric power equipment servicing the natural gas production industry.
Headquartered in Calgary, Canada, Enerflex has approximately 1,800 employees worldwide. Enerflex, its subsidiaries, interests in associates and joint-ventures operate in Canada, the United States, Argentina, Bolivia, Brazil, Colombia, Mexico, Peru, Australia, the United Kingdom, the United Arab Emirates, Oman, Bahrain, 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 Statements
To provide Enerflex shareholders and potential investors with information regarding Enerflex, including management’s assessment of future plans, Enerflex has included in this news release certain statements and information that are forward-looking statements or information within the meaning of applicable securities legislation, and which are collectively referred to in this advisory as “forward-looking statements”. Information included in this news release that is not a statement of historical fact may be forward-looking information. When used in this document, words such as “plans”, “expects”, “will”, “may” and similar expressions are intended to identify statements containing forward-looking information. Forward-looking statements and information contained in this press release include, but are not limited to: (i) the anticipated duration of weak natural gas prices and the effect thereof in Canada and USA markets; (ii) expected bookings; and (iii) 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. Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the future circumstances, outcomes or results anticipated in or implied by such forward-looking statements will occur or that plans, intentions or expectations upon which the forward-looking statements are based will occur. Forward-looking information involves known and unknown risks and uncertainties and other factors, which may cause or contribute to Enerflex achieving actual results that are materially different from any future results, performance or achievements expressed or implied by such forward-looking information. Such risks and uncertainties include, 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. The reader is cautioned that these factors and risks are difficult to predict and that the assumptions used in the preparation of such information, although considered reasonably accurate at the time of preparation, may prove to be incorrect. Readers are cautioned that the actual results achieved will vary from the information provided in this press release and that such variation may be material. Consequently, Enerflex does not represent that actual results achieved will be the same in whole, or in part, as those set out in the forward-looking information. Furthermore, the statements containing forward-looking information that are included in this news release are made as of the date of this news release, and Enerflex does not undertake any obligation, except as required by applicable securities legislation, to update publicly or to revise any of the included forward-looking information, whether as a result of new information, future events or otherwise. The forward-looking information contained in this news release is expressly qualified by this cautionary statement.
J. Blair Goertzen
President & Chief Executive Officer
Tel: 403.236.6852
D. James Harbilas
Executive Vice President & Chief Financial Officer
Tel: 403.236.6857