EFXT

Welcome to the Enerflex first quarter 2026 earnings conference call. At this time all participant is only listen-mode. 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, Corporate Development and Capital Markets. Please go ahead.

Thank you, Jill, and good morning, everyone. With me today are Paul Mahoney, President and CEO, Preet Dhindsa, Senior Vice President and CFO, and Ben Park, Enerflex's Controller. During today's call, our prepared remarks will focus on three key areas. One, the continued strong performance of Enerflex's business, two, our outlook for 2026, and three, an update on operational and strategic initiatives. 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, and 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 webcast in our investor presentation, which is available through a link on this webcast in our website under the investor relations section. I'll now turn it over to Paul.

Thanks, Jeff, and thank you all for joining us on this morning's call. I would first like to start by acknowledging our people, our client partners, and stakeholders in the Middle East as they navigate the ongoing conflict. The commitment of our team has been on full display as they support one another and our client partners. Turning to Q1. We are pleased to report another strong quarter of operational and financial performance. Results reflect continued discipline execution across our global footprint as well as our ongoing efforts to optimize and streamline our business. Performance was underpinned by the Energy Infrastructure and After-Market Services business lines, which generated 65% of adjusted gross margin before depreciation and amortization during the first quarter. The Engineered Systems business is demonstrating strong execution and commercial momentum, supported by healthy backlog levels and ongoing bidding activity across key markets, particularly in North America.

A few comments on each of our business lines. ES bookings of CAD 483 million during Q1 2026 compared to a trailing eight-quarter average of CAD 344 million. ES book-to-bill ratio was 1.5x during Q1 2026 and one time on a trailing eight-quarter average, highlighting that the company is consistently replenishing its backlog in line with project execution. The outlook for ES products and services continues to be attractive, driven by expected increases in natural gas, associated liquids, and electric power generation across Enerflex's core operating countries. Enerflex is advancing its electric power generation business, including opportunities associated with data centers. During the quarter, the company was awarded a behind-the-meter power generation project for a data center utilizing reciprocating engine generator sets and secured additional projects supporting island power applications.

Enerflex continues to see strong demand across its Engineered Systems business line and emerging opportunities for After-Market Services support with our current scope of opportunities now exceeding 5 GW. Turning to After-Market Services. This business line continued to reflect steady customer maintenance spending. We are particularly encouraged by the performance of our AMS business in countries where we also operate Energy Infrastructure assets, highlighting the strength of our integrated offering and competitive positioning in key markets. The Energy Infrastructure business continues to deliver solid performance underpinned by approximately CAD 1.3 billion of contracted revenue. Within this segment, Enerflex's U.S. Contract Compression business is performing well, led by increasing natural gas production in the Permian Basin. Utilization remains stable at 94% across a fleet size of 486,000 horsepower.

You can find additional detail on operational KPIs for this segment on slides 15 and 16 of our investor presentation. Enerflex's U.S. Contract Compression market fleet increased by 13% over the course of 2025, and we continue to expect growth capital expenditures will deliver growth at a similar pace or greater during 2026. Enerflex is also securing long lead time components to support further growth in 2027. Turning to our international Energy Infrastructure operations, which are outlined on slide 17 and 18. This portfolio is supported by a strong contract position with a weighted average remaining term of approximately five years, providing durable and predictable cash flow that we expect will continue to support Enerflex's financial performance in the years ahead. I'd like to touch briefly on our operations in the Middle East.

Enerflex is closely monitoring the conflict. To date, the company's operations in the region have operated uninterrupted. Local teams are actively managing with established response processes and contingency planning, ensuring continued safety of our people and reliability of the company operations. Enerflex's operations in Bahrain and Oman comprise 17 distinct natural gas and produced water projects. Once the conflict in the Middle East finds resolution, we see the potential for opportunities across Enerflex's business lines. Our aftermarket services capabilities are well-positioned to support the recovery of operations. Our engineered system solutions enable rapid replacement, debottlenecking, and temporary capacity in the reconstruction of Energy Infrastructure. Enerflex's book provides flexibility to deploy capital toward rebuilding. Beyond the Middle East, we expect energy security, diversification of supply, and emphasis on domestic resources will be enduring themes for our client partners.

We believe this could result in short-cycle energy investments increasing in North America and Latin America, especially if oil prices settle above pre-conflict levels. Under this scenario, Enerflex is well-positioned with our strong market position in those two regions and see the potential for additional demand across our business. Let me now speak to building momentum around execution. We are advancing the implementation of a disciplined enterprise-wide productivity system. Key elements of this include, one, leveraging our full capabilities and scale. Two, a focus on lean and continuous improvement. Three, improving structural cost, competitiveness, and speed of execution. Four, modernizing our IT and automation to enable decision-making and speed. We are excited about early wins and the potential impact across Enerflex and look forward to providing updates on our progress. Lastly, I'd like to touch on our strategic priorities.

For the past several months, we have been engaging with internal and external partners in a broader assessment of Enerflex's strategy, capabilities, and market opportunities. The outcomes of this work will be shared in more detail at our virtual investor update on May 27th. For today, let me share that Enerflex's approach to long-term value creation will be anchored on strategic growth opportunities aligned with secular growth trends, a relentless focus on execution, and a disciplined capital structure and capital allocation framework. With that, I'll turn it over to Preet to speak to the financial highlights.

Thanks, Paul, and good morning, everyone. I'll start with highlights from the first quarter. We generated revenue of CAD 584 million compared to CAD 552 million in Q1 2025 and CAD 627 million in Q4 2025. Higher revenue compared with prior year reflects strong execution and high level of operational activity in the Engineered Systems product line. The sequential decline relates primarily to lower parts sales and service utilization in the After-Market Services product line. Gross margin before depreciation and amortization was CAD 179 million, or 31% of revenue, compared to CAD 161 million, or 29% of revenue in Q1 2025, and CAD 177 million, or 28% of revenue during Q4 2025. Energy Infrastructure and AMS product lines generated 65% of consolidated gross margin before depreciation and amortization during Q1 2026.

ES gross margin before depreciation and amortization increased to 19% in Q1 2026 compared to 18% in Q1 2025 and 18% in Q4 2025, primarily related to product mix. SG&A was CAD 79 million for the three months ended March 31, 2026, up CAD 22 million from the prior year period due to higher stock-based compensation. On a sequential basis, SG&A decreased from CAD 83 million, primarily due to lower core SG&A from cost savings initiatives, partially offset by higher stock-based compensation expense. adjusted EBITDA of CAD 137 million compared to CAD 113 million in Q1 2025 and CAD 123 million in Q4 2025.

Cash provided by operating activities before changes to working capital or FFO increased to CAD 95 million in Q1 2026 compared to CAD 60 million in Q4 2025 and CAD 62 million in Q1 2025, a function of higher adjusted EBITDA and lower net finance costs. Cash provided by operating activities was CAD 32 million, which included net working capital investment of CAD 63 million. This compares to CAD 96 million in Q1 2025 and CAD 179 million in Q4 2025. Free cash flow decreased to CAD 15 million in Q1 2026 compared to CAD 85 million during Q1 2025 and CAD 141 million during Q4 2025, with higher FFO offset by investment in net working capital. Return on capital employed was 17.3% in Q1 2026, a new record for the company, compared to 14.2% in Q1 2025 and 16.9% during Q4 2025.

Higher ROCE is a function of the increase in trailing 12-month EBIT and lower average capital deployed, primarily due to a decline in net debt. Net earnings of CAD 43 million, or CAD 0.35 per share in Q1 2026, compared to CAD 24 million or CAD 0.19 per share in Q1 2025, and a loss of CAD 57 million or CAD 0.47 per share in Q4 2025. Compared to Q1 2025, profitability benefited from higher gross margin and lower net finance costs, partially offset by higher SG&A expense. Enerflex exited Q1 2026 with net debt of CAD 505 million, which included CAD 47 million of cash and cash equivalents, a reduction of CAD 59 million compared to Q1 2025. Since the beginning of 2023, Enerflex has repaid approximately CAD 550 million of long-term debt through Q1 2026.

Enerflex's bank adjusted net debt to EBITDA ratio is approximately 0.9x at the end of Q1 2026, down from 1.3x at the end of Q1 2025 and 1x at the end of Q4 2025. Let me shift to capital allocation. We invested CAD 16 million in the business, comprised of CAD 7 million for growth, primarily allocated to expand the company's contract compression fleet in the U.S., and CAD 9 million for maintenance and PP&E. Despite the slower start in Q1, we continue to target organic capital expenditures of CAD 175 million-CAD 195 million during 2026. This includes growth capital of CAD 90 million-CAD 100 million, maintenance capital of CAD 70 million-CAD 80 million, and PP&E and infrastructure investments approximately CAD 15 million to support the company's ES business and activity in adjacent markets, including electric power generation.

Enerflex returned CAD 4 million to shareholders through dividends during the first quarter. There were no repurchases under our NCIB. We continue to allocate capital in a balanced manner across growth investments, shareholder returns, and managing our financial position. The company's focus remains on enhancing profitability in our core operations, executing our Engineered Systems backlog, and maintaining a strong, flexible balance sheet to support long-term value creation. With that, I'll turn the call back over to Paul for closing remarks.

Thanks, Preet. We continue to advance our business and take meaningful steps to support long-term shareholder value creation. While there remains important work ahead to fully realize our ambitions, I am confident in our ability to build on this foundation, and we would like to thank our global team for their continued efforts and commitment. I will now turn the call back to the operator for questions.

Thank you. At this time, we will conduct a 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 while we compile the Q&A roster. Our first call comes from the line of Aaron MacNeil with TD Cowen. Go ahead, your line is open.

Hey, morning all. Thanks for taking my questions. When you think about opportunities in the Middle East, can you give us a sense of what sort of boxes you'd need to check in order to get to a positive FID, from a build multiple contract duration perspective, as well as any other important metrics that you'd want to highlight?

Good morning, Aaron. Thanks for the question. First, staying extremely close to our knitting, meaning, you know, focused on gas treating, gas processing, compression, very strict discipline around project activity, whether it be assessment through engineering, audits, whether it be engineering work all the way through a full BOOM engagement, the digital element being on top of that. We also participate, as you know, in the water business. We do have a nice installed base. As that installed base takes on additional requirements or advances, we participate there with our engineering know-how and our abilities. Certainly, driving a return focus, a disciplined return focus on our capital allocation.

Working very hard on our execution, our operational position for cost, whether it be any of the lines. We have a strict discipline on that. Looking for solid returns, contract durations that extend at least beyond our break-even periods and then some. More opportunities, a little bit different in today's environment. More audit assessment, AMS focus as we look at potential debottlenecking. Prior to contract, there was a growing opportunity list. Like I said, it was very, very close to our knitting and gas processing, treating, and compression.

Okay, fair enough. It looks like your purchase obligations stepped up by about CAD 230 million this quarter, including CAD 138 million in 2028. Can you say how much of the increase is tied to backlog additions? What's speculative? On the working capital build this quarter and in light of a very good outlook, how should we think about that working capital balance going forward?

Hi, Aaron, it's Preet. I'll touch on both those points. Number one, you're right. We have, as we've mentioned, Paul mentioned today, and we mentioned earlier, that we have been getting ahead of the curve on long lead time major components and largely for the ES line of business. We've secured our place in line well into 2027, 2028, and we're looking forward to 2029 also. We've got the capacity capability through our plants to execute, but we wanna make sure we're not stalled by any supply chain constraints. We've been, as you've seen, the purchase obligations have increased materially year-over-year out to 2028 versus 0 in 2028 as of a year ago. It's important to note also that there's minimal cash outlay for these.

These are spots in line, so we can execute, but not a ton of cash that's going out the door. Managing very carefully our obligations, managing our place in line, so we continue to execute effectively going into next year and the following year. On working capital, if you look at Q4, we had a harvest of CAD 119 million. Q1, we had CAD 63 million use or investment of working capital across AR inventory primarily. This is aligned to obviously the lead times that we just discussed on some of the inventory and pre-deposits down. Also, with respect to receivables, we received a significantly large cash deposits late in Q4, and we're now returning to more normalized working capital metrics, DSO, DPO inventory turn as at Q1.

Going forward for the remainder of 2026, largely, I would say relatively flat working capital movement, maybe some movement quarter-over-quarter, but for the next three quarters, approximately flat. That's what I think that would be the best estimate as we look out the rest of the year. Q1 was a little more normalized relative to Q4.

Gotcha. Thanks, guys. I'll turn it back.

Thank you. One moment for our next question. The next question comes from the line of Keith Mackey with RBC Capital Markets. Go ahead, your line is open.

Hey, thanks, and good morning. Paul, as you've gotten to learn the different parts of the business over the last, you know, several months, can you just talk about some of the parts of the business that you think, whether it be product, service or region that you think have been sort of underappreciated or, you know, maybe don't get the same attention as the power side of the business does now that, you know, you've found have been, you know, very good parts of Enerflex that you'd like to highlight?

Sure. First, good morning, Keith Mackey, and thank you for the question. Look, there's several areas that are exciting within the portfolio, whether it's product or geo. We're quite pleased as I learn about our gas processing capabilities. Our cryogenic processing capabilities are quite strong, very encouraging. The other elements, our After-Market Services business, especially those tied to our Energy Infrastructure and our international markets are quite strong and very well-positioned and differentiate, I believe, Enerflex in the marketplace. When it comes to maybe under appreciation, you know, I'm just coming back recently from a trip to the Southern Cone, Brazil, Argentina.

I had a chance to meet several of our employees, visit all of our facilities, visit six, seven customers. Quite impressed with the operational excellence first off there. I'm not sure that's fully understood or appreciated. The brand equity tied to Enerflex plus Exterran history is quite strong. Good installed base. That would be an area that I would highlight, Keith. It's an area that certainly we bring discipline to the approach, the Vaca Muerta being, you know, a world-class asset, bringing all of the right controls, treasury controls, financial discipline is important.

Got it. Appreciate the comments. Paul, just on the, on the productivity system, can you just expand upon maybe what you hope to achieve with the implementation of that? Is there a margin improvement target you can highlight for us or any other targets that you'd like to achieve as you, as you implement this system?

Yeah. No, great question, Keith. You know, simply think of Enerflex as a CAD 2.6 billion enterprise. The integrated capabilities of a CAD 2.6 billion enterprise give us a lot of opportunity. You know, there's some key areas I would highlight. Our core priorities when it comes to the productivity system are to leverage that scale and operating footprint. That comes from structure, design, things like that. You know, the business procures well over CAD 1.6 billion on supply chain materials around the world.

We see opportunities there to act and behave and bring forward an integrated approach to the supply chain. One really big area is to build a culture around lean continuous improvement, where employees engage daily on identifying waste, improving knowledge engagement in the system, as well as be very formalized in Kaizen projects that go across the enterprise that will bring us some nice productivity gains. Lastly, technology. Whether technology is in its OT form, where we provide technology to customers in digital areas, or we leverage IT automation systems internally on cleansed data to take advantage of that across the different value streams in the business. Really excited about what we can do on this front. The company has demonstrated quarter to quarter now, many quarters of improving margin.

We'll be talking more in depth about those commitments here coming up in our virtual investor day on May 27th.

Okay. Thank you very much.

One moment, please. Our last question will come from Tim Monachello with ATB Capital Markets. Please go ahead, your line is open.

Thanks for taking my questions. It strikes me that you're working in a fairly strong demand environment and lead times for critical components are extending. Within that construct, your pre-order behavior somewhat dictates your capacity to, for throughput over the next couple years. Can you talk to us a little bit about how you're thinking about that and the visibility to growth that you're modeling within the Engineered Systems business?

Sure. Tim, I'll start, and then, if we need to add. It's a great question. Having had the opportunity to visit some of our large equipment OEM factories and suppliers, first off, I would say a fair amount of capital is being deployed to better lead times. We've watched lead times on equipment extend. We've seen a pretty robust ordering environment. I would say, you know, that this comment or question around productivity, you know, presenting Enerflex wide in a strategic way with equipment vendors has been very beneficial for us to be able to negotiate and get a position that secures that, I mean, well beyond 2026, 2027. We're talking about 2028 type negotiations for equipment.

That position, in a constricted environment is quite strategic. It affords us opportunities, in the marketplace as well. I would tell you 2026 is secured, 2027. A lot of these relationships as the capital deployed by the equipment vendor starts to take hold really come into play in 2028.

Okay. How should we think about the growth profile for, I guess, power gen is probably the one where you're seeing the most inflection. Maybe start there, and then maybe if you have a comment on.

Yeah.

Gas.

Yeah.

And compression processing as well along those same lines, that'd be helpful.

Yeah. Great, great question. Maybe I'll start backwards here. Commitment on growth capital in our contract compression business has been there. You know, we expect another 13%+ year-over-year growth in contract compression. We are also seeing a pretty favorable environment in our Engineered Systems business, non-power. So that's a place where we see, you know, above market type of position on growth. Then the wild, I think I've used the word embryonic in the past, on power. Look, that changes daily, weekly, monthly. You can see our visibility and commitment to the market has grown from, what, 1.5 GW of visibility to over 5 GW of visibility. That does line up with the ability of equipment there.

Look, I think it's hard to say. We're ready to participate. We have the capacity. We have the operational bandwidth. as we close some of these opportunities, we'll be able to talk more firmly about that at that time.

Okay. That's helpful. The margins were strong, particularly in Engineered Systems and Energy Infrastructure in the quarter. Do you expect that level of margin to persist through the year?

Good morning, Tim Monachello. It's Jeff Fetterly. Splitting those apart. On the Energy Infrastructure side, we did have some margin benefit in the first quarter as it relates to some performance bonuses and KPIs as part of our Energy Infrastructure contracts, especially in the eastern hemisphere. We don't necessarily expect that that'll be a continuing element in subsequent quarters. In terms of the Engineered Systems margins, we've talked in the past about mix being a factor there, and we certainly continue to see strong demand in the gas processing side, which is typically accretive to margins on a consolidated basis for ES. We're seeing fairly stable pricing environment today. As Paul Mahoney referenced, the efforts around continuous improvement and operational improvements and continuous or lean is also an ongoing initiative within the company.

All right. That's helpful. Appreciate the time. I'll turn it back.

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

Thank you for joining today's call. We are excited about the path ahead for Enerflex and look forward to providing more detail around Enerflex's strategy, capabilities, and market opportunities at our virtual investor update on May 27th.

Thank you for.

Thank you for joining.

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

Good day, and thank you for standing by. Welcome to the Enerflex Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] 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, Corporate Development and Capital Markets. Please go ahead.

Thank you, Jill, and good morning, everyone. With me today are Paul Mahoney, President and CEO; Preet Dhindsa, CFO; and Ben Park, Enerflex's Controller. During today's call, our prepared remarks will focus on 3 key areas: one, the continued strong performance of Enerflex's business; two, our outlook, priorities and capital spending guidance for 2026; and three, an update on operational and strategic initiatives, including a definitive agreement to divest the majority of our operations in the APAC region. 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, and 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 profile. As part of our prepared remarks, we will be referring to slides in our investor presentation, which is available through a link on this webcast and on our website under the Investor Relations section. I'll now turn it over to Paul.

Thanks, Jeff, and thank you all for joining us on this morning's call. We are pleased to report another strong quarter that caps off an excellent year for Enerflex. The strength of our financial and operating results is a testament to the resilience, commitment and deep knowledge of our global team. Today, we will share more about the consistency of Enerflex's results, our growing and relentless focus on execution and the strategic opportunities within a constructive natural gas market. Together, we believe these fundamentals position Enerflex for long-term value creation. Results during the fourth quarter reflect solid performance across our geographies and business lines as well as our ongoing efforts to optimize and streamline our business. The Energy Infrastructure and After-Market Services business lines continue to be the foundation of our results, contributing 65% of gross margin before depreciation and amortization in 2025. The Engineered Systems business line continued to demonstrate strong project execution and visibility for this business line remains solid, supported by a $1.1 billion backlog at the end of Q4 and healthy bidding prospects. Firstly, I would like to touch on our announcement related to Enerflex's operations in the Asia Pacific region. Enerflex has entered into a definitive agreement to divest the majority of its operations in the APAC region to the INNIO Group. This business operates principally in Australia, Indonesia and Thailand and is primarily focused on the AMS product line. Completion of the transaction is subject to standard closing conditions and regulatory approvals and is expected to close in the second half of 2026. Following close, Enerflex will continue to deliver Engineered Systems solutions in APAC, including natural gas compression, processing and electric power generation through local sales teams with equipment manufactured from the company's 3 facilities in North America. I would like to thank our strong team in the APAC region for their commitment to Enerflex and their contributions as we built a leading AMS business in the APAC region. This accretive divestiture underscores Enerflex's commitment to simplifying and optimizing our operations while sharpening our focus on our core regions of North America, Latin America and the Middle East. Enerflex and INNIO share a long-standing global relationship, including Enerflex's role as a channel partner across our core regions, and we look forward to building on this partnership. Moving to other strategic and operational highlights that Enerflex achieved in the quarter. The company continues to expand and deepen relationships with upstream and midstream client partners across the U.S. through strategic collaboration and long-term partnership development. During Q4, this momentum contributed to Enerflex securing multiple orders for large-scale compression, natural gas processing, retrofits and power generation equipment. Activity continues to be centered in the Permian, where increasing gas and NGL ratios are supportive of demand for Enerflex' solutions, but we are also seeing a broadening of opportunities, including in the Haynesville, where natural gas supply growth is expected to be connected with LNG export capacity expansion. In the fourth quarter, Enerflex established a long-term framework agreement for compression solutions with a large diversified integrated midstream client partner in the United States. Enerflex's U.S. Contract Compression business continues to perform well, led by increasing natural gas production in the Permian. Utilization remained stable at 94% during Q4 across a fleet size of approximately 483,000 horsepower. Enerflex increased its marketed fleet by 13% over the course of 2025, and we expect approved growth capital expenditures will deliver growth at a similar pace or greater during 2026. Enerflex is also securing long lead time components to further support growth in 2027. Enerflex continues to develop opportunities in the electric power generation part of our business, including projects associated with AI and data centers. In early 2026, Enerflex, one, received an order to supply power generation units for a large data center project in the U.S. with deliveries scheduled into 2027. Two, we've completed a front-end engineering and design study for a client partner related to a large data center power generation project in the U.S., advancing the opportunity toward potential future execution; and three, executed contracts to supply power generation equipment to 2 client partners in the North American market. Enerflex continues to evaluate over 1.5 gigawatt of opportunities across our Engineered Systems business line. And now a few comments on each of our business lines. Engineered Systems backlog as at December 31, '25, of $1.1 billion provides strong visibility into future revenue generation and business activity levels. Bookings of $377 million during Q4 compared to $301 million in Q4 of '24 and $339 million in Q3 of '25 as well as a trailing 8-quarter average of $336 million. ES book-to-bill ratio was 1.1x during Q4 and 1x on a trailing 8-quarter average, highlighting that the company is consistently replenishing its backlog in line with project execution. The outlook for ES products and services continues to be attractive, driven by expected increases in natural gas, associated liquids and electric power generation across Enerflex's core operating countries. Turning to After-Market services. This business line continued to benefit from strong activity levels and increased customer maintenance spending. We are particularly encouraged by the performance of our AMS business in countries where we also operate Energy Infrastructure assets, highlighting the strength of our integrated offering and competitive positioning in key markets. The Energy Infrastructure business continues to deliver solid performance, underpinned by approximately $1.3 billion of contracted revenue. Within this segment, our U.S. contract compression fleet remains a core component of our asset base and the underlying fundamentals for that business continue to be constructive. You can find additional detail on operational KPIs for this segment on Slides 15 and 16 of our investor presentation. Turning to our international Energy Infrastructure operations, which are outlined on Slides 17 and 18. We currently operate 1.1 million horsepower of compression and have 24 build, own, operate and maintain or BOOM projects across Bahrain, Oman and Latin America. This portfolio is supported by a strong contract position with a weighted average remaining term of approximately 5 years, providing durable and predictable cash flow that we expect will continue to support Enerflex's financial performance in the years ahead. I'd like to take a moment to touch on our strategic priorities. Since joining Enerflex at the end of September, I've had the opportunity to spend time across our global operations and interact extensively across all levels of the organization. Concurrent with this, we have been engaging with internal and external partners and a broader assessment of Enerflex's strategy, capabilities and market opportunities. We expect to provide further insights into our strategic priorities, including capital allocation expectations in the coming months. At a high level, Enerflex's strategy will be anchored by a continued focus on Enerflex's strengths and areas of excellence; two, alignment with the values that have guided the company for decades; and three, emphasis on discipline, providing meaningful direct shareholder returns and making investments that support long-term shareholder value creation. During 2026, the company's priorities are focused on leveraging our leading position in core operating countries to capitalize on expected increases in demand for Enerflex' solutions, enhancing the profitability of our core operations and maximizing free cash flow, positioning the company to invest in customer-supported growth opportunities and provide meaningful direct shareholder returns. With that, I'll turn it over to Preet to speak to the financial side and capital allocation moving forward.

Thanks, Paul, and good morning, everyone. I'll start with highlights from the fourth quarter. We generated revenue of $627 million in the fourth quarter compared to $561 million in Q4 '24 and $777 million in Q3 '25. Higher revenue compared with prior year reflects strong execution and a high level of operational activity in the Engineered Systems product line. The sequential decline relates primarily to commencement of the Block 60 Bisat-C Expansion facility and the pull forward of certain projects into the third quarter. Gross margin before depreciation and amortization was $177 million or 28% of revenue compared to $174 million or 31% of revenue in Q4 '24 and $206 million or 27% of revenue during Q3 '25. The EI and AMS product lines generated 67% of consolidated gross margin before depreciation and amortization during Q4 '25. Energy Infrastructure performance continued to be strong with gross margin before D&A of $89 million compared to $86 million in Q4 '24 and $95 million in Q3 '25. After-Market Services gross margin before D&A was 22% in the quarter, benefiting from strong customer maintenance programs. SG&A was $83 million for the 3 months ended December 31, 2025, down $9 million from the prior year period, driven by cost savings initiatives, improved operational efficiencies and lower depreciation and amortization. On a sequential basis, SG&A increased from $71 million due to higher stock-based compensation and third-party expenses. Adjusted EBITDA of $123 million compares to $121 million in Q4 '24 and $145 million during Q3 '25. The sequential decrease in adjusted EBITDA was primarily related to the pull forward of certain ES projects into Q3 '25 and higher core SG&A in the fourth quarter. Return on capital employed was 16.9% in Q4 '25, an increase compared to 10.3% in Q4 '24 and consistent with the record level during Q3 '25. Higher ROCE compared to Q4 '24 is a function of the increase in trailing 12-month EBIT and lower average capital employed, primarily due to a decline in net debt. Cash provided by operating activities before changes in working capital or FFO of $60 million compared to $74 million in Q4 '24 and $115 million in Q3 '25. FFO for the fourth quarter included $26 million of tax expense related to the refinancing of our high-yield notes. Free cash flow increased to a record $141 million in Q4 '25 compared to $76 million during Q4 '24 and $43 million in Q3 '25. Free cash flow included working capital recovery of $119 million, which benefited from collection and execution of projects in the ES business line. Net loss of $57 million or $0.47 per share in Q4 '25 compared to earnings of $15 million or $0.12 per share in Q4 '24 and earnings of $37 million or $0.30 per share in Q3 '25. Included in Q4 '25 was $81 million of expenses related to redemption of the 2027 senior secured notes. On a normalized basis, net income was $24 million or $0.20 per share in the fourth quarter. The early redemption of Enerflex's 9% senior secured notes due 2027 resulted in debt redemption cost of $42 million, comprised of the redemption premium paid and derecognition of the unamortized original issue discount and deferred transaction costs. Additionally, the company incurred withholding taxes of $26 million for a total onetime cost of $68 million. The embedded derivative associated with the redemption options in the 2027 notes of $13 million was also fully derecognized during Q4 '25. While these costs impacted results in the fourth quarter, the redemption will reduce future financing and tax costs and improve capital structure. The company refinanced $563 million of 9% senior secured notes due 2027 with $400 million of 6.875% senior unsecured notes due 2031, along with availability under the company's secured revolving credit facility. The refinancing is expected to reduce annual interest costs and enhance the company's tax efficiency. Now I'll touch on our strong financial position. Enerflex exited Q4 '25 with net debt of $501 million, which included $81 million of cash and cash equivalents, a reduction of $115 million compared to Q4 '24 and $83 million compared to the third quarter of '25. Cash increased by $17 million on a quarter-over-quarter basis due to strong collections late in the fourth quarter, but we remain focused on optimizing cash balances held on a global basis. Enerflex's bank adjusted net debt-to-EBITDA ratio is approximately 1x at the end of Q4 '25, down from 1.5x at the end of Q4 '24 and 1.2x at the end of Q3 '25. Now let me shift to capital allocation. During Q4 '25, we invested $34 million in the business, comprised of $14 million for growth capital, primarily allocated to expand the company's contract compression fleet in the U.S. and $20 million for maintenance and PP&E. Capital expenditures for 2025 were $115 million, consistent with our previous guidance of $120 million. The company repurchased 102,800 common shares at an average price of CAD 15.10 per share during Q4 '25 and a total of approximately 2.8 million common shares at an average price of CAD 11.08 since its normal course issuer bid commenced on April 1 to December 31, 2025. Under the NCIB, which expires March 31, 2026, the company is authorized to acquire up to a maximum of approximately 6.2 million common shares or 5% of its public float as at the application date for cancellation. During 2025, Enerflex returned $40 million to shareholders through dividends of $17 million and share repurchases of $23 million. Now turning to 2026. Enerflex is targeting organic capital expenditures of $175 million to $195 million. This includes growth capital of $90 million to $100 million, maintenance capital of $70 million to $80 million and PP&E and infrastructure investments of approximately $15 million to support the company's ES business and activity in adjacent markets, including power generation. Organic growth capital spending will continue to focus on customer support opportunities and primarily allocated to expand the company's contract compression fleet in the U.S. Although not contemplated in the company's 2026 capital spending plan, Enerflex continues to evaluate opportunities to organically expand its business in the Middle East. And now direct shareholder returns. Going forward, capital allocation decisions will be based on delivering value to Enerflex shareholders and measured against Enerflex's ability to maintain balance sheet strength. In addition to disciplined growth capital spending, share repurchases and dividends, Enerflex will also consider further debt reduction to strengthen its balance sheet and lower net finance costs. We remain focused on enhancing profitability of our core operations, growing our business in a disciplined and structured way and ensuring Enerflex generates sustained attractive returns for shareholders. I want to thank Enerflex employees for their efforts in continuing to deliver strong operational and financial results. With that, I'll turn the call back over to Paul for closing remarks.

Thanks, Preet. Over the course of 2025, we continue to advance our business, strengthened our financial position and took meaningful steps to enhance long-term shareholder value. While there remains important work ahead to fully realize our ambitions, I'm encouraged by the momentum across our global operations and confident in our ability to build on this foundation. Once again, we believe the consistency of Enerflex's results, our growing and relentless focus on execution and strategic opportunities within a constructive natural gas market position Enerflex for long-term value creation. We are excited about the path ahead for Enerflex and look forward to providing more detail in the coming months around Enerflex's strategy, capabilities and market opportunities. And before I hand the call back over to the operator, I too want to thank the 4,400 employees around the world for their commitment, resilience and focus on customers day in and day out. We will now hand the call back to the operator for questions.

[Operator Instructions] Our first question comes from the line of Aaron MacNeil with TD Cowen.

Yesterday, a large contract compression company in the U.S. noted that lead times on large engines has extended to 110 to 120 weeks. So I'm just hoping that you can speak to sort of the amount of the Engineered Systems backlog, potential orders, including power generation beyond the backlog and the sort of energy infrastructure organic growth that would have sort of an associated engine today? And then ultimately, do you see this as a constraint that would reduce your ability to execute on the business? And then maybe more directly as it relates to the 1.5 gigawatts of opportunities, like can you practically execute or like how much of it, I guess, could you practically execute on in the near term in light of those constraints?

Aaron, great question. First, I would say, the element of availability of engines and things is not a new phenomenon. This is something that we've been strategizing, grappling with for a bit now. I would say, our '26 is secure. We are currently positioning for 2027, given the light of the delivery constraints. And to answer the question relating to power generation, we did in Q4, if you remember and even Q3, a small element of putting more of a speculative position to secure engines such that we could deliver on our commitments in '26.

Got you. Okay. And then maybe keeping with the lead times. Again, I know you said you had '26 sort of locked in, but if lead times are effectively 2 years, is it fair to assume that you sort of now have a multiyear growth outlook for the contract compression business specifically? Like I'm thinking about you upticked the capital spend for next year or I guess, for this year. Like should we expect sort of that cadence to continue into 2027? And sort of do you have visibility to that today? And do you have customers sort of lined up ready to take that equipment today?

Yes. Great question. As we've stated, our CapEx position in '26, that demonstrates our commitment to further growth similar to what you've seen in '25. We do have customer-specific positions with that. I know there is some discussion around Permian Basin and what have you. But when it comes to gas processing, production of gas and the outlook of gas, yes, I think the statement that you've made around 2 years of confidence on growth is accurate.

[Operator Instructions] Our next question comes from the line of Tim Monachello with ATB Cormark Capital Markets.

Just a quick one to follow up on Aaron's question. Do you think that lead time, as you stated, 110 to 120 weeks is accurate across your product lines that you're seeing? Or is there some variability in lead times based on, I guess, the size of engines that you're looking at and end markets?

Yes. The stated 120 weeks is for a portion of the product line, I think, is the first thing to realize. And it does come in the higher horsepower ranges. I think it also -- which provides a little bit of potential opportunity. Expansion and operations in the key equipment manufacturers has been going on, and it's pretty fervent. So right now, a large horsepower, 120 weeks is the current lead time. But as we go out here over the next so many months, we should see some impact due to CapEx with the equipment manufacturers, number one. And two, there -- again, it's not the entire portfolio. It's a select piece of the portfolio that's actually 120 weeks.

Got it. And then having 2026 sort of secured, would you say, I don't know, the majority or almost all of the new orders that you received today won't be delivered in '26? Or do you still have capacity to book and turn work in '26?

If you're referring to data center power gen-related items, yes, most of that would be 2027 and beyond. Do we find opportunities here or there for book-to-bill business to pursue? That certainly is the plan, and that certainly is something that we do. But when it comes to the data center world, that would be more of 2027 and on in terms of deliveries.

And I meant more for the compression processing piece?

In terms of...

Like if you get an order for compression tomorrow, do you have enough, I guess, orders with your channel partners for engines and components that you could deliver an order in '26? Or is that sort of the outlook for '26 in terms of that backlog for baked in [indiscernible]?

Yes. Tim, it's Jeff. As Paul referenced in the remarks a minute ago, we've secured capacity to support our activity levels in '26, and that includes a book-and-bill as Paul referenced. And we also have a view for where activity and opportunities set for '26 going into '27 as well.

Okay. Apologies for asking the question twice here. Preet mentioned potential growth opportunities in the Middle East. I wonder if you can elaborate on how you -- on what those opportunities look like and how you would pursue those opportunities relative to your cost of capital and relative to your growth opportunities in North America?

Yes, Tim. So I mean, as we mentioned, the growth capital noted in our outlook is largely earmarked for the U.S. contract compression fleet, call it, 60% to 65% greater than prior year. Currently, in the growth capital, we don't have anything directly allocated to, call it, Oman, Bahrain, the countries you're currently in, good GCC countries. But we still are active in that market. We've got a team on the ground based out of Abu Dhabi who are quite well versed in that region. And those projects, as you probably mentioned earlier, don't come around every year. And if they do, when they do hit, they usually straddle a couple of year ends. And so we're active in the market. There are often good quality assets, the BOOM assets, whether finance or operating leases we see on our balance sheet, great counterparties, good economics, take-or-pay without direct volumetric or commodity price risk. So we like the asset class. But right now, we just put a marker out there that nothing in our current growth capital guidance speaks to those potential projects, but we are active exploring good markets in those good countries.

Okay. And then around capital allocation, I appreciate your prepared remarks there, Preet. But just curious, in terms of the NCIB that you have outstanding for the year, do you expect to exhaust that NCIB? Or how should we be thinking about your share repurchase activity in '26?

Tim, I mean, all the capital allocation levers that we've spoken about in the past are relevant growth capital, we put markers out there now. The dividend, as you know, we've increased as at Q3 last couple of years. And we've been active in the NCIB since inception, April 1 last year, purchased just under 5%, that being half of 5% of the authorized float that we had. But what I would say is that we'll be a little more prescriptive on capital allocation in the coming months once the strategy work is done. And right now, the NCIB is open until the end of March, and we'll make a call accordingly at that time.

Our next question comes from the line of John Gibson with BMO Capital Markets.

First, just wondering if you could maybe expand on the customers associated with these power gen contracts, are they with the order you signed or future orders you're working on? Is there any counterparty risk? Or are they all pretty high quality?

Yes, John, great question. In this market space, I think I used the word embryonic last quarter. So having a really strong disciplined approach on counterparties, on terms, on different conditions and whatnot is extremely important. But I would say that prime for us is counterparty risk, counterparty stability. So right now, in the recent win, very, very strong counterparty in the projects that we're pursuing here in the near term, very, very strong counterparty, well-developed relationships, well-developed understanding across the value stream, whether they're developers, real estate developers, power developers and then the hyperscalers. So that's been a key piece of our strategy and why we've kind of metered and been conservative, if you will, on our approach.

Okay. Great. And then last one from me. Just given the recent disposition, is your business kind of where it's at in terms of kind of where you want it overall? Or are there any other geographies or areas you're continuing to evaluate here?

Yes. Maybe I'll just give an overview, and Preet, you can jump in here. Early on, we've deployed more of a residual cash earnings type of North Star metric. And we've looked at all geographies, all business line, all countries and certainly continue to stay focused on that, and that's around creating shareholder value. So we continue to look at it. And I would say that's just a part of our normal discipline, operating discipline, but I wouldn't go beyond that.

The only thing I'd add is at deal close 3 years ago, we were in 27 countries. Most recently and currently, we're in 17. We'll monetize Asia Pacific, get down to likely 14 or so. And then we've got 7 core Canada, U.S., Oman, Bahrain, Brazil, Argentina and Mexico. To say, there's probably a few other noncore geographies we can get out of and free up some capital, working capital, close some bank accounts, improve our tax compliance positions in these countries. So just overly overall simplify and optimize, but there's probably a few more noncore countries to look at.

Congrats on a great year here.

Thank you.

I'm showing no further questions at this time. I would now like to turn it back to Paul Mahoney for closing remarks.

Thank you. Well, thank you for joining today's call. We look forward to sharing our first quarter financial and operation results in early May.

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