Enerflex Q1 2025: Unpacking Contradictions in Capital Allocation, Working Capital, and Market Outlook

Capital allocation strategy, working capital expectations, and market outlook and demand are the key contradictions discussed in Enerflex Ltd.'s latest 2025Q1 earnings call.



Financial Performance and Debt Reduction:
- Enerflex reported consolidated revenues of $552 million in Q1 2025 and delivered strong first quarter results with adjusted EBITDA of $113 million.
- The company reduced its leverage ratio to 1.3 times compared to 1.5 times at the end of Q4 2024, primarily due to efficient working capital management and repayment of $433 million in debt since 2023.

Energy Infrastructure and Aftermarket Services:
- Energy Infrastructure contributed 70% of the company's gross margin before depreciation and amortization in Q1 2025.
- The US contract compression business showed strong performance with utilization at mid-90% range and revenue per horsepower per month improving, driven by increases in natural gas production, notably in the Permian.

Bookings and Backlog:
- First quarter bookings were $205 million, tempered by accelerated customer activity in Q4 2024, resulting in a strong ES backlog of approximately $1.2 billion.
- Despite a soft Q1, the company maintains confidence in future bookings given the depth of opportunities in processing and compression markets, particularly in the US.

Capital Allocation and Shareholder Returns:
- Enerflex returned $6 million to shareholders through dividends in Q1 and authorized a normal course issuer bid to repurchase up to approximately 6.2 million shares.
- The company is focused on maintaining a strong balance sheet, lowering net finance costs, and allocating capital efficiently, with disciplined growth capital expenditures targeted for the US contract compression fleet.