Enerflex Aktie

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Enerflex Investor Update Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Paul Mahoney, President and CEO of Enerflex. Sir, please begin.

Welcome, everyone. I'm Paul Mahoney. Over 8 months ago, I joined as Enerflex's President and CEO. At the time, I was believing I was joining a strong company with untapped potential. Over the last 8 months, I've gone on an exhaustive tour. I've had a wonderful opportunity to meet well over 2,400 Enerflex employees all around the world.

I've visited factories in Calgary, in Broken era, Oklahoma in Houston at our Telge Road facility. I visited field locations in the Permian Basin both Odessa and Delaware Basin facilities, employees and customers. I've had the opportunity to travel to the Middle East and visit with our Oman operation, our Omani employees, and an opportunity to visit at our headquarters in the Middle East and Abu Dhabi.

Most recently, I've had an opportunity to visit our Brazil and Argentinian operations in the Southern Cone. On top of all of that, I've added relationship development with our major OEM equipment vendors. I've had an opportunity to build relationships with the likes of Caterpillar, Lakeshore, Jenbacher and Aerial Corporation. In fact, I visited factories. I visited the Caterpillar large engine factory in Lafayette, Indiana, I've had an opportunity to visit the Ariel Corporation in Mount Vernon, Ohio as well as build relations and meet personnel with Neo with the 2 brands of Waukesha and Jenbacher.

Further, I've had an opportunity to engage with outside consultants. We've had 2 main outside consultants working with Enerflex over the last 8 months. One, very strategically to embed a new economic metric around an economic value-add ability, what we call internally Flex E. It gives us a wonderful opportunity to evaluate our portfolio, our products, our services and our geographical locations country by country in terms of shareholder value creation.

More importantly, we've engaged in a long-term exercise with a management consultant on our strategy. We've evaluated our markets, our products, main trends, and current issues where Enerflex is involved with. With that, we've been able to tighten our strategic clarity -- where can we prioritize our growth investments as well as evaluate and discuss internally some inorganic expansion within Enerflex.

So as I've gone on this 8-month tour, I found that there's actually 2 incremental elements than what I originally thought. One, the untapped potential is quite large. There's beautiful opportunities to embed operational excellence, continuous improvement lean processes and build solid process foundation from the bottom up.

More importantly, as we've evaluated our markets, our strength, our weaknesses and our opportunities and threats, I see some fantastic prioritized growth opportunities for us organically and like I said, inorganically. So I stand here today very excited about Enerflex's future. I'm super excited about our potential and what we've been able to accomplish in just a short 8 months.

As global events and accelerating innovation, reshape our energy landscape, Enerflex is uniquely positioned to deliver a combination of our products, services and technical expertise needed to sustain customers both today and support the energy systems of tomorrow. So let's get started.

Today, what you'll find is 2 main areas that we will cover. Preet Dhindsa, our Senior Vice President and Chief Financial Officer, will join me today, and we'll talk about those strategic priorities that I had mentioned. But more importantly, is the mantra. The mantra of competing intentionally and improving daily, improving relentlessly.

That is a beautiful mantra that Enerflex employees smile, get excited and energized and believe in the direction of the corporation. Secondly, we'll follow our financial and capital allocation framework, we'll talk specifically about shareholder value creation.

You will also find in the appendix other details about our operating priorities and strengths around our business should you choose to peruse. So let's get started on our strategy. Enerflex is a compelling investment opportunity capable of delivering value across the full life cycle. What you're going to hear today is that Enerflex is positioned as a leader.

What you're going to hear today that our business model combines resilient recurring revenue streams with a differentiated technical capability and operational strength. You'll also hear very clear strategy that's focused on accretive, profitable growth with operational excellence and a disciplined capital allocation.

So as we look at Enerflex today, it's a scaled global platform with meaningful operating breadth and recurring earnings power, well over 100 years of operating history $3.8 billion in scale with 4,400 employees, 17 operating countries with 7 being core to the operation. You could see the revenue recurring metrics and the solid financial stability and flexibility that the organization has as we move forward.

I'm going to start with something that's very near and dear to my heart. Not only is capital allocation and framework important that's tied to an unbelievable strategy is really around building a culture, a culture that is purpose-driven. At Enerflex, we firmly believe that we're building the energy future and driving progress and empowering lives.

That gets us up in the morning. That is our purpose. That is our purpose to a balanced set of stakeholders, whether it's investors, whether it's customers, whether it's our suppliers, whether it's the communities that we operate in. And to have this lofty purpose around powering lives is built on a solid foundation, a solid foundation that exists within Enerflex for decades, built on integrity, commitment, creativity and success in delivering on its promises.

Incrementally, in the foundation is this unbelievable support and commitment to the safety of our employees, to the safety of our partners, our contractors and those in the facilities that we operate. So what is it that we actually do -- what does Enerflex do? What is the economic engine of Enerflex stated quite simply.

We are the leading modular gas, power and water technology solutions provider. That's what we do. That enables us to live our purpose. But to do that, you can't be everything to everyone. So we have toiled over what is it that we want to be exceptional at. Do we want to be low cost? Do we want to be R&D-driven, do we want to be customer focused -- and we've settled on our company characteristics, both today and tomorrow.

That is around an exceptional team. That's not only our employees around development. It's not only about our partners, our contractors, our suppliers. It's about the entire ecosystem to really execute on our purpose and our economic engine, it requires all elements of our team.

So commitment to an exceptional team is a differentiating aspect. On top of that, in our markets and with the opportunities that we can see driving operational excellence gives us the flexibility and the decision-making ability to go after things that are attractive. There is a beautiful opportunity to embed continuous improvement and lean in our organization, a beautiful opportunity to act as an integrated organization and really professionalized processes.

It all starts and ends with focus on customers, anticipating needs, not only transacting business, but anticipating needs being in front of our customers' desires, building relationships, building connectivity, so that we can deliver to the best of our abilities for our customers.

And like I said, it all starts with improving relentlessly, driving a continuous improvement environment that ultimately allows our employees to do their best work. So that's it. This displays our purpose Prism, as we say internally to Enerflex. It's the building blocks for a sustainable future. Equally exciting is to describe Enerflex in terms of how we meet customers. So what you see is an integrated model, an integrated model that allows engineered modular technology solutions and natural gas compression, natural gas processing, electric power generation, including the emerging opportunity in data centers as well as water technology.

What you see is that we'll meet customers where they are. Our go-to-market strategy is quite broad. In terms of equipment sales, with our Engineered Systems business unit or whether it's owning and operating or renting infrastructure for the energy future. All of this quite simply to leverage the technology and the go-to-market is to wrap all of this with ongoing aftermarket support.

With a growing base of installed equipment is a beautiful opportunity to help our customers get the most out of what they do with Enerflex. What you see here is an integrated life cycle capability. You could see the tight nature of the value system between designing, engineering, manufacturing, fabrication, operating and servicing our equipment. We're a very diversified company in terms of its geographical focus, in terms of its customer base. But you'll also notice high-quality counterparties that support the resiliency of our business.

We've built leadership positions across key regions and business line through operational capability and long-standing customer relationships. So our roots run deep. What this slide shows is over 100 years of technical and operating debt. This slide often catches our employees and our customers somewhat by a surprise. You could see some of the industry names that have been part of the fabric that has built Enerflex of today.

Often, we hear Exterran, Hanover or Universal Compression or Toromont or Enerflex -- but the company history goes as far back as 1913 in refrigeration processing with CIMCO, the early days of a Halliburton, Jesse ran, Weatherford, Schlumberger, so on and so forth, compression businesses are part of the fabric that today represents 100 gears and technical expertise within Enerflex.

As we take a look at performance. Performance on a global scale -- these numbers excite our employees. They're proud of these numbers. They stand behind these numbers. And when you take a step back and we walk through them from left to right, top to bottom, you get a better feel for -- what is that history, that depth of Enerflex. Enerflex has over 60 million-horsepower of gas compression ever since 1913.

That equates roughly to 30% of the world's reciprocating gas compression. It's been built by Enerflex. Additionally, there's over 600-plus gas processing plants in over 30 countries around the world. Within that slice of gas processing, is this focus, this intense unique focus on cryogenic gas processing where we have over 139 plants, where we move over 19 billion cubic feet of gas a day.

On top of that, there's 100-plus power generating units installed. And what catches people typically by surprise is that we have over 400 intelligent, bright astute engineers.

We're committed to our engineering depth. We're committed to our excellence in engineering. We commit to recruiting and development and building best practice around staying current globally with our engineering base. So how do we think about our next phase in sharpening the business to unlock additional value.

Let's start with reflections as the CEO over the last 8 months. I mentioned the opportunity that I had to engage exhaustively around the world with customers, suppliers, factories, employees and so on and partners. But let me highlight some specific strengths and opportunities that really stood out over the last 8 months.

Strengths, the team is amazing. The amount of grit and focus on meeting commitments that true foundational values of success were very evident in my travels. We do have a leadership position in operating capabilities in our core business lines, a lot of learning, a lot of exposure, a lot of history. -- fantastic market, strong market demand on our business lines as well as what people don't necessarily realize how well -- our business lines are complementary with 1 another. They do fit nicely with 1 another between energy infrastructure, engineered systems and aftermarket services.

And then lastly, really nice financial foundation the flexibility and the ability afforded to make decisions is fantastic as we look to the next phase of our journey. A cash engine with this flexibility is a strength that allows us to move forward. So where are the opportunities? As you think about the 100 years of formation of Enerflex, what you have is a compilation of business units and locations and historical perspectives.

To some degree, it's come together, but there's far more we can be doing and leveraging the size and the scale of Enerflex as a $2.6 billion entity. I do believe that there is meaningful earnings health potential in driving operational excellence. Driving productivity programs, allowing people to reach their full potential under holistic enterprise-wide continuous improvement program.

I'm really, really excited about data and digital. When you think about the handoffs to the curve between sales, applications, design, detailed design, fabrication, installation, operate and maintain, being able to connect all those value systems under 1 backbone of digital data allows us an opportunity to operate far more efficiently.

That's internally. Externally with a digital backbone we have a wonderful opportunity to harness all the data that we collect off these complex systems to maintain them smarter, maintain them more efficiently to really drive a preventative and a predictive maintenance program, digital and the backbone will allow us to do this more efficiently.

Additionally, with this information, building on digital twins and having the opportunity to have real-time optimization, change operating parameters as they occur allows us to get after productivity and drive the machine more efficiently for our customers. On top of that, we've done a really nice job of simplifying and optimize the portfolio.

There are further opportunities to optimize our business and really drive that level of simplification as 1 Enerflex. And then lastly, jeez, this embryonic growing dynamic environment around data centers that's emerging in the power generation industry being quick to form and being strategic in our approach and being disciplined on our investment such that we credibly address this growing beautiful market in a holistic way that's accretive with discipline and effective risk management.

So how do we really boil this all down to a very disciplined strategy. Number 1 is to be very succinct. What exactly is our growth thesis. We are driving to be the leader provider of modularized gas, power and water technology solutions. That is our thesis. Daily we intend to compete, compete intentionally and improve relentlessly.

That's our guiding strength. That's the guiding element of our strategy. We see 3 main buckets within the strategy. One starts with operational excellence. To drive the earnings health of the organization gives us the opportunity to be flexible, make growth decisions. We're earning it. We're earning it by leading with operational excellence.

Second, let's focus on those prioritized opportunities. We don't intend to be everything to everybody everywhere. We intend to be very disciplined on the highest growth, highest levels of impact to customers that is accretive to our portfolio. And lastly, you'll see a very disciplined organization around allocating capital to drive growth and overall shareholder returns.

So what you see here in this slide is really a summary of what we believe are the main thrusts behind our strategy. As I mentioned before, it starts with productivity. In North America, there are afforded beautiful opportunities to expand our EI business, our energy infrastructure business with our contract compression opportunity.

We're afforded fantastic opportunities in our Engineered Systems business. gas processing, cryogenic processing and perhaps other gas processing as we evolve. All of that with a very, very strong committed field tech organization that helps our customers extract the value out of what they engage with Enerflex. And that's our aftermarket service.

Additionally, there are some fantastic opportunities internationally. And LatAm, having visited Brazil and Argentina was blown away by the operational excellence, the continuous improvement, lean that already exists in Argentina, really optimizing our footprint, optimizing our leading footprint and really driving focus on where we see accretive returns in energy infrastructure and aftermarket services is our opportunity in LatAm.

Similarly, in the Middle East, we do have 17 boom facilities, boom, build, own, operate and maintain facilities in the Middle East, principally in Oman and Bahrain -- but we have a wonderful opportunity to leverage that expertise to broaden that field of portfolio to more transactional as well as evaluating more EI opportunities in region. And again, this wraparound of consulting, assessment services, parts, retrofits, field service exists in our aftermarket service business.

So let me talk a little bit deeper about operational excellence. You could see that the company has been on a nice journey. You could see the improvement in earnings, earnings quality, earnings health over the period here from 2023. You could see in Q1 of '26, we continue to increase 70 basis points of improvement in quarter 1.

As we look forward to the planning period, we believe we can improve adjusted EBITDA margin by 200-plus basis points. And how are we going to do that? Where are we going to prioritize? I mentioned leveraging our scale and optimizing based on our size, it affords us some structural opportunities in front of us.

Secondly, professionalizing the supply chain. Enerflex has $1.9 billion of material buy. In fragmented ways, so a beautiful opportunity to professionalize build a world-class supply chain organization affords us an opportunity to continue driving operational excellence. On top of that, a bottoms-up side-to-side and top-down approach to lean and continuous improvement, enabling our employees to reach their full potential, will drive further engagement, will drive further productivity and Enerflex.

And lastly, an area that gets me quite excited as well is around modernizing our IT and our automation systems. It's a beautiful opportunity internally and externally. So let me talk a little bit about that on our next slide. RelyCore is the name of the digital backbone. RelyCore is the name that's going to allow us to harness the power of all the data that we collect in the field.

And so what does that mean? At the end of the day, what's the business purpose that we're going to solve? What's the business outcome that we're going to solve with our digital backbone called RelyCore. What you see today in action and Bahrain and Argentina in the Permian Basin is a beautiful collection of data, beautiful collection of data and a data lake that sits there that is just a beautiful opportunity for AI and ML processing and algorithms. It will allow us to really power our maintenance and our field tech organization to be working in a reliability system around predictive types of alerts to have the right part at the right time to take care of customers in a speedy and effective way.

Additionally, as you own and operate complex systems, having a real-time optimizer that's built off the RelyCore digital backbone will allow operations to reach heights that haven't been achieved before. So I'm really excited about ReyCore. I'm really excited about bringing digital technologies to the field to a whole another level within Enerflex, and I see that as a beautiful strategic lever for us.

So our next stage of growth. It's focused on long-term secular trends. You could see here we're participating in very large markets. We're participating in a $20 billion plus size market. We do so with our 3 business components and aftermarket services and energy infrastructure and energy systems.

All of the market data, all of our internal management estimates, all are colliding around a similar number. And what we should expect and see over the next 5 years in our planning period is a 6% compound annual growth rate. On top of that, is this number on the bottom of the slide, $15 billion estimate of what powering data centers could generate for reciprocating engine solutions, super exciting, super exciting for a company like Enerflex that has been in the power generation business for decades and has well over 100 units around the world.

When you dig a little bit deeper into North America, that same consistent 6% CAGR, a little bit different when you get down into the basin realities of the Permian Basin, Haynesville, so on and so forth. But overall, we see a 6% compound annual growth rate. Really nice opportunity for infrastructure that is needed and required to support the LNG export needs, the power generation needs and all the associated gas that's being produced in the U.S. market.

More gas processing plants, more cryogenic plants, beautiful opportunity where we bring operational excellence and our technical depth to a growing market in Engineered Systems. Our contract compression business is very attractive, very, very strong position and growing position, and we'll talk a little bit more about that. And then lastly, aftermarket service, sizable business, sizable opportunity, an opportunity to embed digital technologies that I described earlier to really go after this 6% annual compound annual growth.

So let me talk about the drivers in North American gas production. You can see on the slide here on the left, wonderful growth from 2018 and the projected growth through 2030 in the United States and Canada. And what that really translates to in terms of installed compression horsepower 18 Bcf a day of North American LNG export capacity through 2030, 15 Bcf a day of incremental gas takeaway capacity just in the Permian Basin through 2030.

And then lastly, an estimate of 8 Bcf a day for the U.S. gas power demand growth through 2030, including that of data centers is a very, very exciting, strong, constructive market for Enerflex. A little bit deeper on contract compression. It's quite remarkable. When you look at 2017, all the way to 2025, you see a business that has grown steadily year after year.

That's a 15% compound annual growth rate over a 10-year period. That's quite a story. We're excited. Last year, we grew 13%, just under 500,000 horsepower in compression in our contract compression business in the United States. We invested organic capital in 2024 and 2025. We're investing organic capital in 2026 to grow beyond the 13%. We're super excited. And you could see all the metrics here on the slide, typical contract length. You can see typical utilization north of 90%, 94% utilization is a very, very strong number. Really, really nice opportunity that we continue to stay focused on and lead with organic investment.

On the slide, you'll see the power opportunity. It's quite embryonic. It changes daily. We have had a beautiful opportunity to be engaged by the equipment, OEM equipment providers as well as the independent power producers that are providing solutions for the likes of the hyperscalers. We have been in this business for multiple decades, not quite around the technical needs of a data center, but we've been in power generation for quite a long while.

We've been very careful, very strategic in our approach. -- we've started with a very small set of opportunities to learn, to engage, to try to understand the technical requirements, to try to understand the operational needs to really scale this business opportunity. This behind the meter power generation opportunity today and what we see and what Enerflex sees in the market is over 5 gigawatts.

Five gigawatt of opportunity through which we've put through a very strategic filter. So we're approaching this market in a very disciplined and a very long-term return-focused way. Let me touch on Latin America. Latin America, Enerflex has a very, very strong market share position. Let's start with what has history provided Enerflex a very, very strong market share position.

A very, very strong aftermarket service and technical depth position our Net Promoter Score would tell us, we're leading in field service in some of the faster-growing regions in Latin America. It's strategically important to Enerflex, strategically important to Enerflex to leverage this installed base.

We see opportunities to optimize. We're optimizing our equipment. We're driving higher utilization. We're driving depth with our customers. Our customers are desiring more and more engagement with us. So we're being very disciplined in our investment. We're looking for accretive opportunities. We're optimizing our fleet. And we also were reminded of the realities of the region, the macroeconomic realities of the region and all of the political elements as we consider pursuing this growing wonderful asset in Argentina and the Vaca Muerta.

Vaca Muerta is 1 of the world-class unconventional reservoirs. You can see record production. I've had the wonderful opportunity of working on Vaca Muerta since 2012, and 2012 were the first 10 wells. And from 10 wells to what it represents today is remarkable. You could see the investment that Vaca Muerta with YPF is making -- you could see the quality of the reservoir.

You can see the estimated gas recovery of the Vaca Muerta relative to some well-known Permian Montney, Eagle Ford and Haynesville basins. We remain focused on disciplined growth and execution as the market continues to develop in Argentina.

Let's move to the Middle East. But first, I do want to recognize our employees of the Middle East. They've been resilient. They've been focused. They've been centered on our customers. We have 17 unique locations in Oman and Bahrain, 17 different facilities that we operate, uninterrupted, uninterrupted. Our teams remain connected collaborating, communicating and taking care of 1 another. And I just want to say thank you to our employees for that.

As we look at what does this really mean? What are the considerations given the conflict -- we are engaging in some opportunities for our aftermarket services capabilities. As the area looks to debottleneck, as the area looks to recover, as the area looks to invest -- we have been engaged with customers. We do see some incremental opportunities on Engineered Systems, energy, infrastructure and our aftermarket services.

When we dive deeper into the Middle East, I mentioned we have 17 facilities in Oman and Bahrain. The brand equity of Enerflex and Exterran from a legacy standpoint is quite strong. You could see our estimate of market size and our addressable markets in Bahrain and Oman and others, but you'll also notice focus.

Focus in Saudi Arabia and the UAE. ADNOC and Saudi Aramco offer a company like Enerflex, a really nice opportunity for meaningful long-term value creation. And so building relationships, building this opportunity set is a key piece of our strategy as we go forward.

So now I'd like to turn it over to Preet Dhindsa. Preet Dhindsa, our Senior Vice President and Chief Financial Officer, and we'll talk about some of our financial stability and flexibility as well as our capital allocation framework.

Thanks, Paul. Let me speak about our financial and capital allocation framework focused on additional shareholder value creation. Over the last 3.5 years, we've solidified our financial foundation. We've delevered with excellent operational execution, which creates an environment where a resilient business model that produces 65% of adjusted gross margin from recurring revenue sources. We've generated strong free cash flow over the last 3 years, $562 million, primarily focused on debt reduction.

And we've executed a disciplined capital allocation framework that puts us in a position of financial flexibility from a leverage and liquidity perspective, also demonstrating high-quality attractive returns.

Since the end of 2023, we significantly reduced debt from about $800 million down to about $500 million as at Q1 2026. We've also improved leverage from 2.3x to 0.9x during the same period with significant liquidity that provides optionality and flexibility to continue to grow in key markets. In addition, return on capital employed has improved from low single digits 3 years ago to 17.3% as recently reported in our Q1 results. And overall, we've done that through significant debt reduction. Since the beginning of 2023, $562 million of free cash flow is generated largely focused on debt reduction, which puts us in a position with a strong balance sheet to pivot towards a growth agenda.

2026 growth capital largely earmarked for the U.S. contract compression fleet with highly constructive economics. We continue to be active in the Middle East focused on organic opportunities that have excellent long-term economics. In our Latin America business, we continue to put capital into that business, which is allocated to our maintenance capital buckets.

Our capital allocation framework is disciplined, deliberate and long-term returns focused. We have focused over the last few years on improving our balance sheet, solidifying our financial foundation, and now we're at 0.9x levered, and we'll continue to maintain a healthy, prudent balance sheet.

Inorganic growth spending, as Paul mentioned earlier, we are looking for opportunities with strong life cycle economics in markets where we continue to have a competitive advantage. Our U.S. contract compression fleet is where we're allocating 2026 capital. However, we have many more opportunities as referenced earlier. Inorganic bolt-ons, tuck-under acquisitions to increase scale and capabilities and provide a strategic focus on expansion in the North American market across our main 3 product lines.

In addition, direct shareholder returns dividend increases in a sustainable, growing manner to give returns to further returns to shareholders and opportunistically repurchase common shares in an accretive manner relative to other uses of capital. With that, let me turn it over to Paul.

Thanks, Preet. Recovering our financial details as well as our capital allocation framework. I'd like to turn our attention to driving value and the value creation formula for Enerflex. Our core objectives for value creation around improving profitability, growing the business in a thoughtful and accretive way as well as protecting our balance sheet while allocating capital in a disciplined manner. I'd like to highlight our planning period objectives and metrics. Our adjusted EBITDA margin with at least 200 basis points of improvement, similarly, 200 basis point improvement on our cash flow conversion.

Investing in growth at least 6% market CAGR above market growth without fully contemplating the impact that data centers could have or any inorganic activity or bolt-on acquisitions. Lastly, strong financial position provides our flexibility to improve and to advance our ROCE over 200 basis points. We intend to have a sustainable dividend over the planning period and opportunistically repurchase common shares.

Our investment is to sustain and strengthen the core business while funding high-return organic growth opportunities. Excess free cash flow will be allocated thoughtfully between debt reduction, selective bolt-on opportunities and shareholder returns. Enerflex is entering its next phase from a position of strength.

I'd like to reiterate what you've heard today. Enerflex is positioned as a leader in attractive and growing markets. Our business model combines resilient recurring revenue streams with differentiated technical capabilities and operational excellence. We have a clear strategy focused on profitable growth operational execution and disciplined capital allocation. I'm confident in our ability to translate this momentum into long-term value creation for shareholders. With that, I will now turn the call over to the operator for Q&A.

[Operator Instructions] While we compile the Q&A roster online, I would now like to turn the conference over to Mr. Jeff Fetterly, Vice President of Corporate Development and Capital Markets for any on-site questions.

Thank you, Howard. Good morning, everyone. We'll start with a couple of questions that were submitted through the webcast. First off, believe for Paul. Can you speak to where you see the greatest opportunities at Enerflex. You touched on this on an earlier slide, but also what types of milestones are you looking at to achieve the strategic and financial objectives that are laid out.

Yes. Thanks, Jeff. As you've mentioned, we see several avenues specifically in 5 different directions. One is 1 that is near and dear to my heart, and that is the integrated scale of One Enerflex, really working hard on leveraging our scale and finding opportunities to drive productivity and efficiency is a project that's well under its way. It's been in place now for well over 6 months.

The second area I would focus on is continued optimization of our business. I mentioned the metric of Flexi, economic profit, utilizing economic profit in line with other key KPI metrics such that we can evaluate accretive opportunities in our business demonstrate that discipline that we've talked so much about here today.

Thirdly, which which I believe is kind of a new direction in some respects, is to harness all of the digital data that we have in operating and maintaining these complex machines. There's a beautiful opportunity with, with the subject matter expertise that our company has to harness the power of service technician nodes to real-time live data measurements and coupling and building good, solid prospects on AI and ML to drive productivity and maintenance and real-time optimizing of the machines.

The other area which we've been very strategic and careful is to really position ourselves with our strength in the power generation markets. One being the industrial power space as peaker plants and things like that, that we normally have participated in, in the past, but also to build the competency set operationally, strategically, financially, around the whole AI boom, let's call it.

The data center market offers us a really exciting green shoot opportunity for growth.

Second question on the Engineered Systems side, can you provide some color on the outlook for this business line and also touch on how the company is managing through the increasing lead times for major equipment.

Sure. I'll open up with a few comments, and maybe, Preet, you can kind of add some color here. Engineered Systems is an area that we have worked very hard in building our playbook. -- having good, solid cost controls, cost measurements, productivity programs around CI Lean affords us the opportunity to participate in this market. We do have a really nice -- we've outlined the market here today.

We see the compound annual growth rate in the 6% range for gas processing, whether it's compression or other gas processing capabilities that our company engages in. And so really, we've built an operational model, supply chain model to secure 2026 as well as 2027 in light of the extended lead times that we do see from some of the equipment vendors.

So very robust environment, nice environment in Engineered Systems. I believe it's 1 of those areas that may not be fully understood -- and we have been hard at work at driving costs, driving efficiency and having a good clear line of sight in managing this market. But maybe, Preet, you could add a few.

Sure. Thanks, Paul. Yes, what I would add is at the end of Q1 2026, we had bookings of $483 million, which is about 40% greater than the 8-quarter average of $340 million. We ended the quarter with $1.3 billion backlog, which generally converts to revenue, most of it over the next 12 months and our book-to-bill ratio at 1.5x. So still very constructive markets on the ES side of the business across North America.

And we have been talking a lot about investment in working capital. The working capital specifically for long lead time items like engines, we've got spots in line for '26, '27 and '28. -- for those engines and now booking into '29. So our ability to execute is also going to be a function of our strategic investment in working capital and getting long lead time components as we see a very constructive market as we move forward through this year and next.

We'll turn the call back to the operator for questions from the phone line.

Our first question or comment comes from the line of Aaron MacNeil from TD Cowen.

Questions. Maybe I'll just add on the last 1 here. But can you help us connect long lead time items ordering and what's committed in the Q to near-term revenue? And specifically, how much growth can be achieved by the long lead commitments that you already have in place today? And is that the constraints on your ability to grow? .

Yes. First off, Aaron, thank you, and good morning. Thank you for joining us here today. Look, this lead time element around engines has been in place for some time now. It's grown over time, probably over the last 12 months in terms of where it is today. And it is definitely an area that needs a strategic approach. We have made a strategic approach decision. We have secured spots and manufacturing plans. We do have a solid line of sight to our '26 plan, our '27 plan. As Preet had mentioned, -- we're out securing positions in the manufacturing cycle that align with 2028 and beyond. We've put the numbers out there in the value creation slide. It supports that 6% compound annual growth rate. .

Okay. Fair enough. And then how should we think about build multiples on incremental U.S. compression in the context of your 20 basis points return on capital employed target through 2030. Are you seeing any improvement to build multiples on new horsepower? And can you frame how organic CapEx competes for capital across the other opportunities like the buyback or bolt-on M&A within the portfolio.

Just to repeat the question, there was some muffled on the phone line. The question relates to organic investments, the return expectations for U.S. contract compression and also how organic investment returns would compare or be stacked against other opportunities to deploy capital?

Yes. Let me open up, I guess, with the contract compression question. We target an upper teens type of return. It's been out in our discussion for some time now. We're maintaining that. Certainly, over an 18 month-ish type contract period, you have an opportunity to evaluate price every 18 months on contracts. Having stability on price, having a point of view to maintain and keep strong utilization as well as an upper teens return has been the focus of that business.

Our company has worked quite hard on building models. We talk a lot here today. We'll talk more probably in the Q&A around discipline. And the discipline around competing factors for capital, discipline around accretive opportunities. So we've built some models -- and maybe Preet you can explain the whole football field analysis that we do. We treat all opportunities competing for cash equally and we evaluate it as objectively as we can, but maybe you can explain a little bit about the work that we've been doing.

Yes. Thanks, Paul. Thanks for the question, Aaron. And so I mean we're a very different company today than we were, call it, 3.5 years ago as that Exterran deal closed Q4 2022. We're levered at 3.3x back then. We're now at 0.9x. We are now in a position of financial and operational strength. We've got ample liquidity, very good debt stack. -- good cost of funds. And from a balance sheet perspective, I mean, first of all, from a capital allocation perspective, we look at a number of factors. Visibility into our broader revenue streams are high-quality recurring in nature revenue streams, whereby we have about 2/3 gross margin before D&A from the EI and AMS business. .

Highly recurring and highly predictable as well a very strong balance sheet, which allows us flexibility and optionality to pivot towards the growth agenda, as I mentioned earlier. From a balance sheet perspective, we've got the flexibility. We've got the optionality. We like 0.9x where we're levered and we'll watch this through cycles during our plan period and just make sure that we stay prudent as we have been for the last several years.

And then from a growth capital perspective, organically, we put out a midpoint about $95 million for 2026. We increased the fleet size of the U.S. contract compression fleet in '25, but 13%. And opened the year at about 483,000 horsepower, expect to grow in '26 at a similar pace, call it, close to 13% also with good economics, meaning revenue dollar per month as well as utilization still very constructive.

Also inorganically, as Paul mentioned, bolt-ons, tuck-unders, manageable nature, not large global transformational acquisitions in markets that we're comfortable with and in asset classes that we like either an enhanced scale or introduce new capabilities in our 3 product lines, primarily in North America.

From a dividend perspective, we continue to increase the dividend last 2 years in euro as at Q3, most recently 13% increase. And we do look at the dividend as a very important core priority for direct shareholder returns and sustainable growing dividend will continue to be a priority of ours.

Share buybacks, we bought back $23 million in shares in 2025, and we continue to look at those shares, share buybacks as an important vehicle when we believe our shares are undervalued, when we have a strong balance sheet and when they're accretive in nature relative to many other capital allocation priorities.

And then from a debt perspective, we will grow methodically in a very disciplined and rigorous manner. We may pay down debt a little bit further, improve free cash flow by improving our interest costs and our tax expense. But we look at all capital allocation priorities, organic growth, inorganic growth, 2026, organically, largely the U.S. fleet. However, we still continue to stay active and explore opportunities in the Middle East, Oman and Bahrain primarily, where we have current assets.

Also Latin America, an important market for us, 3 core countries: Brazil, Argentina, Mexico. Latin America accounts for about 20% of global EBITDA, so a meaningful portion of our contributions towards our organization's EBITDA and earnings. And so the growth capital or the capital for the Latin America business is largely embedded in our maintenance capital.

So we'll look at different returns. We'll weigh the different levers against each other. We've got a very rigorous disciplined process -- and when it comes to inorganic growth, we will make sure that grow those growth targets adhere to strict diligence criteria financially, operationally as well as from an integration and incorporating into our organization perspective.

Great. Thanks, everybody. I'll turn it back. .

Our next question comes from the line of Tim Monachello from ATB Cormark Capital Markets.

I'm not sure everybody can hear me clearly. But I'm curious about what types of bolt-on acquisitions you might be looking at? And if you can provide any, I guess, time lines on when you think you might start looking more closely at these type of bolt-ons that would be helpful.

Yes. Thank you, Tim, for the question, and thanks for joining us here this morning. First off, bolt-on acquisitions is something that we've been working on for probably 6 months in earnest, building a pipeline. But I'd tell you the upfront discipline around strategic fit -- as Preet mentioned, does it expand our capability set, does this enhance our current business? Is it along the lines where we can have accretive returns to the business expand our business in a responsible manner.

We've really worked hard on the strategy of staying focused on natural gas, power and water, modularized solutions. We do have this emerging green shoot, if you will, like I had mentioned in data centers. So really looking at complementary type adjacencies in that space is another area for us.

So timing-wise, look, this is an imperfect science. When you're disciplined in your approach you really want to make sure that you're taking timing into consideration, you're taking strategic fit into consideration, and you're doing the best you can to ensure that you're getting attractive returns. So -- we've got a funnel that we've been working, building relationships, understanding fit, trying to really do the homework and the discipline on these businesses.

Today, we're probably looking north of 10 types of opportunities, it's hard. When -- it's an imperfect science. We will walk into it with the mindset of a real strong line of sight in terms of its return. We'll have a very disciplined approach to strategy, to post-merger integration to the talent required to execute so on and so forth. So I would be surprised if something was to fall through in the near term, based on our disciplined approach, but something strategic fit close accretive in nature, advancing our main strategic thrusts.

Where in your North American portfolio, do you see gaps in I guess your ability to execute or potentially in markets you're not in is that nature?

Fundamentally, Tim, we believe our core markets are quite attractive. So compression, gas processing, could there be some tuck-in opportunities to round out some gas processing capabilities. That's an area that we constantly discuss and debate internally. Are there opportunities to expand our compression fleet. We've been very disciplined in our approach in terms of horsepower utilization and how we want to compete on the compression space.

So I would say those 2 areas come to mind -- and again, the operational side, we keep very close to our planning efforts on on the data center world. That would be an area depending on scale up requirements and things like that, that we would be looking at.

Okay. And then last 1 for me. Just -- in terms of the growth outlook, it looks like you're probably going to be leading into higher capital spending as we go through the next few years. Can you help us understand maybe some bookends on where you think CapEx will land on an annual basis? And am I correct in believing that it will be within your free cash generation? .

Yes. No, that's correct. Maybe Preet you want to kind of walk.

Yes. Thanks, Tim. Clearly, I often say we want to make sure we maintain a very healthy strong balance sheet with optionality and flexibility to pivot towards our growth agenda. So we can count on a good leverage metric on or about the range we're here today and throughout a number of cycles. .

And so we will not lever up, whether it's organic or inorganic growth. And overall CapEx in '26 increased by about 60% versus 2025. Let's call it, midpoint $185 million growth maintenance in PP&E versus $1.15 in the prior year 2025. But we'll continue to methodically grow. We'll look at good asset classes in good markets. And as I mentioned, continue to explore the Middle East.

Obviously, LatAm, we've been putting maintenance capital but currently earmarked for the U.S. contract compression fleet, and we'll also be very disciplined in watching the economics, utilization and revenue not to get ahead of ourselves, but we do believe that's a good asset class to invest in this year and beyond. So hard to specifically say what the growth capital looks like year-over-year during the plan period, but methodical disciplined growth in context of the other capital allocation levers that I discussed earlier.

All right. Great. Thanks so much. .

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

I just wanted to clarify, I'm not sure wrong. But I think you said growth around the 6% CAGR doesn't include additional power gen or data center wins. So would this be over and above what's already on here? Could you maybe just kind of clarify maybe just to it wrong.

Yes. John, thank you for the question, and thanks for joining us here this morning. We do have a small level of industrial power, let's call it, built into our business. We've been in the power business for well over 30 years. And we do continue to participate in that. I would delineate what I've used in the past is term embryonic around the data centers. That's a very fast-changing market.

We're very disciplined and strategic in our approach. And so we're treating that as such. We do have 1 order, obviously, in our backlog. We did capture a really nice data center order here in Q1, along with some of the other elements there. But we have not included that in that 6% compound annual growth rate, to your point. So you're correct.

I really appreciate that. I guess, second 1 for me, 1 of your slides talk about being the #6 player in U.S. contract compression, which I think is up from what I've seen before. Have you gained market share here? Is it based on just your fleet growth? Or are there any other market dynamics going on in the U.S. space right now?

Yes. Great question, John. We did move up, arguably, maybe even 1 more, to be honest, a 7 position up to 6. We did have a nice 2025. I think Preet had mentioned that our horsepower had improved well over 13%. And if you layer that on top of a marketplace that we believe is in the 5%-ish range, you would say that we've gained market share.

We believe we gained market share when we analyze the marketplace. We go through individually who by who in the top 3, 4, 5, 6, 7 and 8. We do believe we've gained market share in 2025. We're aiming to continue that trend in 2026 with our capital investment in contract compression -- and so yes, we do believe we've moved up a spot and maybe, again, earmarked for another

Okay. I appreciate it. Last 1 for me. looking at your goal post for growth into 2030. To me, this implies roughly $750 million of adjusted EBITDA. Is this a number you're comfortable with by 2030? And also, I guess, as we think about the margin accretion will most of it happen sort of the latter portion of those 4 years? Or are there -- is there some low hanging fruit that could get you there a little sooner?

Yes. I mean, your number is right in the ballpark, John, for sure. We've stated what our objectives are, I would say, those are objectives with the 200 basis points on growth, profitability and ROCE and cash conversion through cycle. So I don't see an abnormal shaped curve, slow to high back-end loaded type of an approach. We do have the element of engine availability in the near term.

I think we've got that well accounted for in our commitments here. But that's something that is we deal with it daily and something that would maybe mute the front end a tad, but nothing to disrupt the commitments that we've made here on the objectives. Preet, if you'd add anything to. Yes. Thank you.

Two additional questions from the webcast. First, on the power generation opportunity. Can you speak to the potential earnings impact from the 5 gigawatts of opportunity set that Enerflex has identified or talked about? .

Yes, that's a great question. out there. Look, 5 gigawatts, if you still maintain this ratio that we've often talked about is a quite sizable see, I want to make sure people understand, it's a C in the market -- that's where our commercial teams are engaged with good counterparties. That's what we see. What percentage of wind that comes from that and what makes it through the strategic rigor of our process is still yet to be determined. I've mentioned many times quarterly and subsequent that we're playing this as a purchase phenomenon, number one.

Number two, that it is accretive. And so it's an ever-changing environment. I would tell you that 6 months ago is very different than today. We still are playing it conservatively from a counterparty standpoint. We want to be working with the high-quality hyperscalers. We want to work with folks that are well funded, that have good engineering depth and scope behind it, and we are participating today in an accretive manner.

A follow-on question from the webcast on Power Gen. Is Enerflex looking at power gen opportunities in the scope of the Engineered Systems and AMS business or also within the energy infrastructure side of the business.

Great question. I attempted to answer that right there. Today, the data center element would have an engineered system in a purchasing commercial construct as well as a really nice longer tail opportunity in the aftermarket services business. So presently, data centers do not have a funnel or activity and discussions under a commercial construct in our energy infrastructure business line.

And back to U.S. contract compression. How does Enerflex look at organic growth relative to inorganic growth opportunities in that business?

On contract compression, there's almost a constant evaluation of fleet. And Enerflex has worked quite hard around where we engage the quality of our fleet, the percentage of higher horsepower applications, the age, the maintenance records, really, really, really diligent approach to evaluating assets that go on in the industry.

So we'd like to stay close to that. If there are opportunities there. We're certainly engaging and evaluating, but waiting for the right opportunity would be my answer.

Another question from the webcast on the Middle East. Can you speak to the opportunities that you're looking at or seeing in Saudi Arabia and the UAE specifically?

Yes, great question. In the presentation, we state -- we have 17 facilities, boom facilities where we build, we own, we operate and maintain both in the gas processing space as well as the water technology space. Those reside today, those 17 plants reside principally in Oman and Bahrain. And so we have been engaging on different types of sales cycles around Abu Dhabi, UAE, ADNOC as well as maybe longer term with Saudi Aramco on some of their unconventional gas developments.

And a follow-on question on the inorganic side. Can you provide an update on the disposition of the APAC business that was announced? And with disposition? Are you content with your current geographic mix? Or do you envision potential rightsizing or further simplification of the company?

Yes. Maybe Preet, if you want to give an update on our Asia Pac divestiture, I think it's going quite nicely. It's advancing as per our schedule and maybe even a little bit faster. So that's good. Maybe you can comment on that, and then I can talk about optimization of our footprint. .

Absolutely. We announced earlier this year, monetization of a noncore asset. Asia Pacific, 3 countries in an accretive manner relative to our trading multiple at the time. And we're working through the carve-out activities, a fair bit of process and systems work that we're doing in the next a couple of months. The expectation is we close in the back half of 2026. And then we'll have the proceeds and we'll determine where to redeploy those proceeds in the capital allocation filters that we've discussed also but that brings us down to 14 countries of, call it, 27 countries 3.5 years ago, down to 17. That will be 4, and there are 7 core countries we often talk about. .

Yes. Thanks, Preet. The only thing I would add is we've evaluated country by country, our position through this economic profit lens, we continue to evaluate opportunities to optimize. We do see some further opportunities where taking into account local risk-adjusted returns risk factors and so on and so forth. So it's an area that we'll constantly evaluate in an area that we continue to put a lot of discipline and rigor to.

We'll turn it back to the operator for additional questions.

Thank you. Our next question or comment comes from the line of Dan Payne from National Bank Capital Markets.

Jeff asked my question, but I might press on it a little bit more here just around the data center opportunity. And can you provide any rules of some as it relates to what your expectations around revenue and margins would be for the data center opportunity, like dollar per gigawatt from a revenue standpoint or any margin profile?

I'm just trying to build out towards what the impact that John was asking about as far as the increment to the stated 6% growth number.

Yes. No. Thanks, Dan, for the question and joining us here this morning. Look, we have a range within the funnel of size. Let's just start their 20 megawatts to 500 megawatts type of range and then some 1 megawatt. Typically, we would scale that 1 megawatt -- 100 megawatts, $100 million type of revenue opportunity. The 6% in the objective metric includes industrial power, but does not include data center just for clarity there. And like I said earlier, we are participating in a purchase commercial construct as well as participating from a constructive, accretive manner on our Engineered Systems business line.

One last question from the webcast on Argentina. Can you speak to the opportunities that the company is seeing in the Alberta -- and how is Enerflex pursuing those opportunities? .

Yes. Great question. I was recently visiting our teams and many customers in Argentina here recently. And I would tell you, first off, that Enerflex and its heritage has a very, very strong market share position in country.

The brand equity of the legacy Exterran and Enerflex is quite high in Argentina. And that's evidenced in several different ways. We have a very robust AMS, aftermarket service business, it's valued. It has technical depth. It does have capabilities to do retrofits and things like that.

The other quiet element, I would tell you is that we educate and train in the local market for field technicians. And it's an interesting way to slice this -- we do well over 10,000 hours of technical training for field techs in the Argentinian market today. And that's been going on for decades. So -- when you think about the 200 or 225,000 horsepower of installed base that we have, a really, really nice, well-recognized aftermarket service business and the technical training and the depth that our team has implemented there.

We're excited about the Vaca Muerta. It's a high-quality asset. -- and we're working to participate while keeping in consideration all the risk factors from Argentina there, but it's an exciting play for us. We're being very disciplined in our approach, being careful and mindful around the risk, but we do have a nice position to leverage.

We'll pass it back to the operator for another question from the phone line.

Thank you. Our next question comment comes from the line of Tim Monachello from ATB Comark Capital Markets.. .

Follow-up. On the Engineered Systems business in North America, I'm curious if you can talk a little bit about where your market share is today? And then given the 200 basis point improvement in margins do you expect across the business, how much of that do you think is in Engineered Systems? And if you're able to reduce your cost structure structurally there, what do you think that does to your market share? And I guess, your competitive positioning? .

Yes, great follow-on question, Tim. First you asked a question about market share and then the productivity gains that we're driving towards. I would tell you that, first off, the gas processing business itself is quite varied in terms of its discipline across the spectrum of capabilities. If we start with our cryogenic business, very, very disciplined marketplace. We believe we have a really nice market share position, somewhere in the order of 20-plus percent, a very disciplined marketplace there.

And we're focusing on cost, efficiency, continuous improvement in lean supply chain optimization and so on and so forth that you've seen in the presentation there. To really manage the playbook of a business that has some volatility potentially to play it to be more competitive.

Obviously, to win as well as have incremental margin. So we'll see. I mean this is an earnings quality game over time. I'm quite excited about the early prospects of supply chain optimization, leveraging 1 Enerflex and some of the overhead costs and things like that. So we'll see how this plays out. But I think it's going to be an opportunity for us to grow. But it is a very disciplined marketplace. We do carry somewhere on the order of 20% market share. .

How about in gas compression packaging? .

Again, similarly, we're -- we've mentioned this beautiful opportunity to commercially rent or sell in the compression space. And so often, and it was reflected here earlier in the questions you've moved up to a #6. Well, that's in the contract compression space. We believe combined for compression market share, whether it's purchase or contract that we're somewhere around 19% market share. So a much stronger element when you consider the purchase element -- we are a fabrication shop. We do have internal vertical integration, and that affords us some flexibility to commercially rent or to sell.

Okay. And then do you think you have a cost advantage in the packaging for gas compression on a purchase basis in the U.S. versus your competitors?

It's a great question. It's 1 I've asked many times over, Tim. We're studying it. I would tell you, and that's a good marker for us when we think about lean, continuous improvement, productivity. So I'd be hesitant to say we believe we should have the right, and we're studying it quite hard, and we're working hard on improving that cost element. .

Thank you. I'm showing no additional questions in the queue at this time. I'd like to turn the conference back over to Mr. Paul Mahoney for any closing remarks. .

Thank you for everyone joining us here this morning. We spent an hour in 15, 20 minutes on Enerflex, and we really appreciate your attendance here this morning. Hopefully, you've been able to pick up some strong snippets of our strategy, our commitment to performance and earnings health as well as the discipline behind our capital allocation framework. I would like to thank all of the Enerflex employees around the world for all of their hard work. I mean, we have a compelling story to tell.

We've evolved as a very strong provider of technical modularized solutions and gas, power and water, energy infrastructure. It's built on well over 100 years of specialized engineering and capability and competence as well as innovation with a clear vision towards our strategy with constructive markets with commitment and energy from all of our employees.

I believe Enerflex is poised to have continued earnings health improvement and continue to drive higher returns over time. With that, again, I'd like to thank you for your time and hope everyone has a wonderful day. So thank you.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day. Speakers, stand by.

Good day, and thank you for standing by. Welcome to the Enerflex First Quarter 2026 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, Senior Vice President and CFO; and Ben Park, Enerflex' 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 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 disciplined 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 aftermarket 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 $483 million during Q1 '26 compared to a trailing 8-quarter average of $344 million. ES book-to-bill ratio was 1.5x during Q1 '26 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. 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 aftermarket services support with our current scope of opportunities now exceeding 5 gigawatts. Turning to aftermarket 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 $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 remained stable at 94% across the 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 Slides 17 and 18. 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 touch briefly on our operations in the Middle East. Enerflex is closely monitoring the conflict and 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 and our engineered system solutions enable rapid replacement, debottlenecking and temporary capacity in the reconstruction of energy infrastructure. Enerflex's move 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 2 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; and 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 and 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 27. 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 $584 million compared to $552 million in Q1 '25 and $627 million in Q4 '25. Higher revenue compared with the 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 aftermarket services product line. Gross margin before depreciation and amortization was $179 million or 31% of revenue compared to $161 million or 29% of revenue in Q1 '25 and $177 million or 28% of revenue during Q4 '25. Energy Infrastructure and AMS product lines generated 65% of consolidated gross margin before depreciation and amortization during Q1 '26. ES gross margin before depreciation and amortization increased to 19% in Q1 '26 compared to 18% in Q1 '25 and 18% in Q4 '25, primarily related to product mix. SG&A was $79 million for the 3 months ended March 31, 2026, up $22 million from the prior year period due to higher stock-based compensation. On a sequential basis, SG&A decreased from $83 million, primarily due to lower core SG&A for cost savings initiatives, partially offset by higher stock-based compensation expense. Adjusted EBITDA of $137 million compared to $113 million in Q1 '25 and $123 million in Q4 '25. Cash provided by operating activities before changes in working capital or FFO increased to $95 million in Q1 '26 compared to $60 million in Q4 '25 and $62 million in Q1 '25, a function of higher adjusted EBITDA and lower net finance costs. Cash provided by operating activities was $32 million, which included net working capital investment of $63 million. This compares to $96 million in Q1 '25 and $179 million in Q4 '25. Free cash flow decreased to $15 million in Q1 '26 compared to $85 million during Q1 2025 and $141 million during Q4 '25 with higher FFO offset by investment in net working capital. Return on capital employed was 17.3% in Q1 '26, a new record for the company compared to 14.2% in Q1 '25 and 16.9% during Q4 '25. 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 $43 million or $0.35 per share in Q1 '26 compared to $24 million or $0.19 per share in Q1 '25 and a loss of $57 million or $0.47 per share in Q4 '25. Compared to Q1 '25, profitability benefited from higher gross margin and lower net finance costs, partially offset by higher SG&A expense. Enerflex exited Q1 '26 with net debt of $505 million, which included $47 million of cash and cash equivalents, a reduction of $59 million compared to Q1 '25. Since the beginning of 2023, Enerflex has repaid approximately $550 million of long-term debt through Q1 '26. Enerflex's bank adjusted net debt-to-EBITDA ratio was approximately 0.9x at the end of Q1 '26, down from 1.3x at the end of Q1 '25 and 1x at the end of Q4 '25. Let me shift to capital allocation. We invested $16 million in the business comprised of $7 million for growth, primarily allocated to expand the company's contract compression fleet in the U.S. and $9 million for maintenance and PP&E. Despite the slower start in Q1, we continue to target organic capital expenditures of $175 million to $195 million during 2026. This includes growth capital of $90 million to $100 million, maintenance capital of $70 million to $80 million and PP&E infrastructure investments of approximately $15 million to support the company's ES business and activity in adjacent markets, including electric power generation. Enerflex returned $4 million to shareholders through dividends during the first quarter, and 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 on 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.

[Operator Instructions]

Our first call comes from the line of Aaron MacNeil with TD Cowen.

When you think about opportunities in the Middle East, can you give us a sense of what sort of boxes you 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?

Yes. Aaron, thanks for the question. First, staying extremely close to our knitting, meaning 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, but the digital element being on top of that. We also participate, as you know, in the water business. And so we do have a nice installed base. And 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 breakeven periods and then some. So more opportunities, a little bit different in today's environment, more audit assessment, AMS focus as we look at potential debottlenecking. But prior to conflict, there was a growing opportunity list, like I said, that was very, very close to our knitting in gas processing, treating and compression.

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

Aaron, it's Preet. I'll touch on both those points. Number one, you're right. We have -- as we've mentioned, Paul mentioned to 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. And so we secured our place in line well into '27, '28, and we're looking forward to '29 also. We've got the capacity capability through our plants to execute, but we want to make sure we're not stalled by any supply chain constraints. So 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. And 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. So managing very carefully our obligations, managing our place in line, so we continue to execute effectively going into next year and the following year. And on working capital, if you look at Q4, we had a harvest of $119 million. Q1, we had $63 million use or investment of working capital plus AR inventory primarily. And this is aligned to obviously the lead times that we just discussed on some of the inventory and putting deposits down, but 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. And 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 3 quarters, approximately flat. And so that's what I think that would be the best estimate as we look at the rest of the year. But Q1 was a little more normalized relative to Q4.

The next question comes from the line of Keith MacKey with RBC Capital Markets.

Paul, as you've gotten to learn different parts of the business over the last 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 maybe don't get the same attention as the power side of the business does now that you found have been very good parts of Enerflex that you'd like to highlight?

Sure. Keith, thank you for the question. Look, there are several areas that are exciting within the portfolio, whether it's product or geo. We're quite pleased as I learned about our gas processing capabilities. Our cryogenic processing capabilities are quite strong, very, very encouraging. The other elements, our aftermarket service business, especially those tied to our energy infrastructure in our international markets are quite strong and very, very well positioned and differentiate, I believe, Enerflex in the marketplace. When it comes to maybe underappreciation, I'm just coming back recently from the trip to the Southern Cone, Brazil, Argentina. I had a chance to meet several of our employees, visit all of our facilities, visit 6, 7 customers and 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. So 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 a world-class asset, but bringing all of the right controls, treasury controls, financial discipline is important.

Got it. Appreciate the comments. And Paul, just 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 implement the system?

Yes. Great question, Keith. Simply, think of Enerflex as a $2.6 billion enterprise. And so the integrated capabilities of a $2.6 billion enterprise give us a lot of opportunity. 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. So that comes from structure, design, things like that. The business procures well over $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 clean data to take advantage of that across the different value streams in the business. So really excited about what we can do on this front. The company has demonstrated quarter-to-quarter now many quarters of improving margin. And we'll be talking more in depth about those commitments here coming up in our virtual Investor Day on May 27.

And our last question will come from Tim Monachello with ATB Cormark Capital Markets.

It strikes me that you're working in a fairly strong demand environment and lead times for critical components are extending. So within that construct, your preorder behavior somewhat dictates your capacity to -- for throughput over the next couple of years. So 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 Services business, Engineered Systems business?

Sure. Tim, I'll start and then 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. So we've watched lead times on equipment extend. We've seen a pretty robust ordering environment. And I would say that this comment or question around productivity, 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 well out -- I mean, well beyond '26, '27. We're talking about 2028 type negotiations for equipment. And that position in a constricted environment is quite strategic. It affords us opportunities in the marketplace as well. So I would tell you, '26 is secured '27. A lot of these relationships as the capital deployed by the equipment vendor starts to take hold really come into play in 2028.

Okay. So how do I -- how should we think about the growth profile for, I guess, power gen is probably the one where you're seeing the most inflection? So maybe start there and then maybe if you have a comment on gas compression processing as well along those same lines, that would be helpful.

Yes. Great question. Maybe I'll start backwards here. Commitment on growth capital in our contract compression business has been there. We expect another 13-plus percent year-over-year growth in contract compression. We are also seeing a pretty favorable environment in our Engineered Systems business, non-power. And so that's a place where we see above-market type of position on growth. And 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 gigawatts of visibility to over 5 gigawatts of visibility. That does line up with the ability of equipment there. So look, I think it's hard to say. We are ready to participate. We have the capacity. We have the operational bandwidth. And so as we close some of these opportunities, we'll be able to talk more firmly about that at that time.

Okay. That's helpful. And then 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?

Tim, it's Jeff. Splitting those apart. So on the Energy Infrastructure side, we did have some margin benefit in the first quarter as it relates to our performance bonuses and KPIs as part of our infrastructure contracts especially in the Eastern Hemisphere. We don't necessarily expect that, that will 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. And we're seeing fairly stable pricing environment today. But as Paul referenced, the efforts around continuous improvement and operational improvements and continuous or lean is also an ongoing initiative within the company.

I'm showing no further questions at this time. So 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 27.

Thank you.

Thank you for joining.

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

Ladies and gentlemen, welcome to the 2026 Annual and Special Meeting of Enerflex Limited. Please note that the meeting is being recorded.

I would like to introduce Kevin Reinhart, Chair of the Board and Chair of today's meeting. Mr. Reinhart, the floor is yours.

Thank you, and welcome to the Annual and Special Meeting of the Shareholders of Enerflex. My name is Kevin Reinhart, Chair of the Board of Enerflex and it's my privilege to chair today's meeting.

We are pleased to host the meeting through this virtual meeting platform, which is accessible to all our shareholders regardless of physical location. I invite our shareholders and proxy holders to submit questions and vote on each of the matters of business as they are raised.

Before we proceed with the formal business of today's meeting, I would like to introduce the other directors of Enerflex. Fernando Assing, Ben Cherniavsky, Joanne Cox, Celine Gerson, Jim Gouin, Mona Hale, Tom Tyree, Juan Carlos Villegas and Paul Mahoney, our President and Chief Executive Officer.

I would also like to acknowledge the members of our executive management team: Preet Dhindsa, Senior Vice President and Chief Financial Officer; David Izett, Senior Vice President and General Counsel; Carina Lovato Gillenwater, Senior Vice President and Chief Human Resources Officer; Robert Mitchell, Senior Vice President, Strategy and Productivity; Greg Stewart, President, North America; Phil Pyle, President, Eastern Hemisphere; and Mauricio Meineri, President, Latin America.

The meeting will now come to order. In order to ensure this meeting efficiently covers all of the business for which it was convened, we have prearranged with persons attending this meeting to move and second certain resolutions. This procedure is not an attempt to discourage participation, but merely a way to expedite proceedings.

The chair will accept questions from registered shareholders and duly appointed proxy holders on each formal resolution as they are raised. I encourage registered shareholders and proxy holders to submit questions as early as possible so that we may address them at the right point during the meeting.

Questions during the meeting should relate to the items of business being considered at this meeting. Questions with respect to our first quarter results or the operations of Enerflex are best raised with management at the Q1 conference call scheduled for tomorrow morning.

If you have a question on an item of business being considered at this meeting, please use the messaging feature of the TSX Trust virtual interface. In asking your question, please identify whether you are a registered shareholder or proxy holder and which matter of business your question relates to. We will address questions that directly relate to a particular matter of business at the appropriate time of the meeting.

Justin Pettigrew, the Corporate Secretary and Associate General Counsel of Enerflex, will act as Secretary of the meeting; and Kristine Calesso, a representative of TSX Trust Company, will act as scrutineer.

A package containing the notice and access notification to shareholders, a mailing list, request form, a form of proxy and a proxy return envelope were mailed on April 1, 2026, to all shareholders of record as of March 13, 2026. The declaration of mailing is available for inspection by any shareholder.

I ask that the Secretary file a copy of such declaration with the minutes of today's meeting. A quorum of shareholders is present for the transaction of business at this meeting if at least 2 persons are present in person and holding or representing by proxy, not less than 10% of the shares entitled to vote at the meeting. I've been advised by the scrutineers that there is a quorum present. I would ask that the Secretary file a copy of the scrutineer's report with the minutes of today's meeting.

I would also note that under applicable corporate law and the bylaws of Enerflex, the company is permitted to hold this meeting by the electronic means that we are using. Accordingly, I declare that this meeting has been regularly called and properly constituted for the transaction of business.

We will conduct each vote by way of an electronic ballot. You will receive a message on the TSX Trust virtual interface once the polls are open. Registered shareholders and duly appointed proxy holders may vote on the online platform throughout the meeting. You may vote at any time until the last item of business has been put to a vote, and I declare the voting closed.

If you have previously voted and do not wish to change your vote or you have appointed a proxy holder and do not wish to change your voting instructions, then you do not need to do anything. Your vote has been recorded. If you wish to change your vote, then voting online will have the effect of revoking your previously submitted vote.

Each item of business to be considered today requires that a majority of the votes cast be voted in favor of the resolution in order for the resolution to pass. Following the meeting, a news release will be issued announcing the final voting results.

As a reminder, only registered shareholders and proxy holders are entitled to participate in the meeting as it pertains to voting and asking questions. We will now run through each of the items on the agenda, including responding to any questions on the particular item while it is before the meeting. I now declare the polls open on all resolutions.

The first item of business is for shareholders to receive the financial statements of Enerflex for the year ended December 31, 2025, and the auditor's report thereon. The financial statements were previously distributed to shareholders posted to our website and filed under our electronic profile on SEDAR+ and EDGAR.

There is also a direct link to Enerflex's 2025 annual report, which contains the 2025 financial statements and related management's discussion and analysis located on the information screen for this meeting. Are there any questions on the financial statements or the auditor's report? We have received no questions on this item. I declare that the annual consolidated financial statements of Enerflex as at -- for the year ended December 31, 2025, together with the report of the independent auditors thereon have been presented to the shareholders and received.

The next item of business is fixing the number of directors at the meeting at 10. The motion to elect directors will follow by way of a separate item of business. I now ask for a motion that the number of directors to be elected at this meeting be fixed at 10.

My name is Preet Dhindsa, Senior Vice President and Chief Financial Officer of Enerflex, and I'm a shareholder. I move that the number of directors of Enerflex to be elected at this meeting be fixed at 10.

Thank you, Preet. Is there a seconder?

My name is David Izett, Senior Vice President and General Counsel of Enerflex. I'm a shareholder, and I second the motion.

Thank you, David. We will now address any questions from registered shareholders or proxy holders that are directly related to fixing the number of directors to be elected. We have not received any questions on this item. The voting is now open, and we invite shareholders and proxy holders to submit their votes on fixing the number of directors to be elected at 10.

As I mentioned earlier, if you have already voted or sent in a proxy, your vote has already been recorded, and there is no need to do anything unless you wish to change your vote. Please complete your voting on this matter.

[Voting]

The next item of business is the election of the directors of Enerflex. Information about each nominee is included in the management information circular. I confirm that all nominees are eligible for election.

Enerflex did not receive notice of any director nominations in connection with the meeting in accordance with its advanced notice bylaw. Accordingly, the only persons eligible to be nominated for election to the Board of Directors of Enerflex are the management nominees. The nominees are Fernando Assing, Ben Cherniavsky, Joanne Cox, Celine Gerson, Jim Gouin, Mona Hale, Paul Mahoney, Kevin Reinhart, Tom Tyree and Juan Carlos Villegas. I now ask for a motion that each of the nominees be elected to serve as a director.

My name is David Izett, Senior Vice President and General Counsel of Enerflex, and I am a shareholder. I move that each of the 10 persons nominated be elected as a Director of Enerflex to hold office until the close of the next Annual Meeting of Shareholders of Enerflex, their office is earlier vacated or until their successor is duly elected or appointed.

Thank you, David. Is there a seconder?

My name is Preet Dhindsa, and I second the motion.

Thank you, Preet. We will now address any questions from registered shareholders or pr holders that are directly related to the election of directors. Once again, we have not received any questions on this item. The voting is now open, and we invite shareholders and proxy holders to submit their vote for each nominee if they've not already done so. Please complete your voting on this matter.

[Voting]

The next item of business is the appointment of auditors of Enerflex. I please have a motion as the appointment of Ernst & Young LLP as auditors of Enerflex.

My name is Paul Mahoney, President and CEO of Enerflex, and I am a shareholder. I move that Ernst & Young LLP, Chartered Accountants, be appointed auditors of Enerflex until the next annual meeting or until their successor is appointed and that their compensation be fixed by the Board of Directors.

Thanks, Paul. May I have a seconder?

My name is David Izett, and I second the motion.

Thank you, David. Are there any questions from registered shareholders or proxy holders on this motion? If not received any questions on this item. The voting is open, and we invite shareholders and proxy holders to submit their votes, they have not already done so. Please complete your voting on this matter now.

[Voting]

The next item of business on the agenda is the nonbinding shareholder advisory vote on our approach to executive compensation. We trust that you've taken the opportunity to review our compensation discussion and analysis in this year's management information circular, which explains our approach to executive compensation. And now I'll ask for a motion on this matter.

My name is Preet Dhindsa, and I move that the nonbinding advisory resolution concerning Enerflex's approach to executive compensation as set forth on Pages 4 and 5 of Enerflex's Management Information Circular dated March 20, 2026, be approved.

Thank you, Preet. May I please have a seconder?

My name is Paul Mahoney, and I second the motion.

Thank you, Paul. We will now address any questions from shareholders or proxy holders that are directly related to our approach to executive compensation. Once again, we have not received any questions on this item. The voting is now open, and we invite shareholders and proxy holders to submit their votes have not already done so. Please complete your voting now.

[Voting]

The next item of business on the agenda is the approval of Enerflex's new Omnibus Incentive Plan and ratification of the annual normal course awards to the officers and other eligible participants under this new Omnibus Incentive Plan as more particularly described management information circular banner of Enerflex dated March 20, 2026.

Importantly, the Omnibus Incentive Plan does not represent a substantive change in Enerflex' executive compensation, policy practices or philosophy nor does it provide for any incremental compensation. I now ask for a motion on this matter.

My name is Paul Mahoney, and I move that the ordinary resolution approving the Omnibus Incentive Plan and ratifying the awards made to officers and other eligible participants under the Omnibus Incentive plan as set forth on Pages 5 to 8 of Enerflex's Management Information Circular dated March 20, 2026 be approved.

Thank you, Paul. May I please have a seconder?

My name is David Izett, and I second the motion.

Thank you, David. We will now address any questions from shareholders or proxy holders that are directly related to our new Omnibus Incentive Plan and the awards made thereunder in 2026.

And again, we have not received any questions on this item. The voting is open, and we invite shareholders and proxy holders to submit their votes if they have not already done so. Complete your voting on this matter now.

[Voting]

For those of you that have not voted on all the resolutions, please do so now as I will close the polls in about 30 seconds. As a final reminder, if you have already voted or sent in a proxy, your vote has already been recorded, and there is no need to do anything else unless you wish to change your vote.

The polls are now closed, and we will take a short break to allow the scrutineers to tabulate the results.

I have received the preliminary results of each ballot from the scrutineer, and I declare all resolutions carried. As noted earlier, the news release will be issued announcing the final voting results and will be posted to SEDAR+ later today.

This now concludes the formal items of business to be dealt with at this meeting. As there is no further business, I declare the meeting terminated. I will now turn the meeting over to Paul, our President and CEO, for his brief remarks.

Thank you, Kevin, and thank you to all our shareholders for participating in Enerflex's Annual and Special meeting. We will be releasing our 2026 first quarter results before the markets open tomorrow and hosting our quarterly earnings call tomorrow morning at 8:00 a.m. Calgary time.

I encourage you all to tune in for an update on our financial results and how we are progressing our strategic priorities for the year. Details on how to participate are on our website. Thank you, and have a great day.

Thank you for attending today's meeting.

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.

Good day, and thank you for standing by. Welcome to the Enerflex Third 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 speaker today, Jeff Fetterly, Vice President, Corporate Development and Capital Markets. Please go ahead.

Thank you, Gigi, and good morning, everyone. With me today are Paul Mahoney, Enerflex's President and CEO; Preet Dhindsa, our CFO; and Ben Park, Enerflex's Controller. During today's call, our prepared remarks will focus on 4 key areas: one, the continued strong performance of Enerflex' business, two, our outlook going into 2026; three, capital allocation, including an increase in Enerflex's dividend; and four, some initial commentary from Paul and strategic priorities.

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' 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 our prepared remarks -- 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 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'm pleased to join Enerflex at a very exciting time for the company. The Enerflex team has made significant operational, financial and strategic strides in recent quarters. And I want to start off and thank the team across our global operations for their energy, their commitment and all of their efforts. We are pleased to report another strong quarter of financial and operating results. The energy infrastructure and aftermarket services business lines continue to be the foundation of our results, contributing 58% of gross margin before depreciation and amortization during the third quarter. The Engineered Systems business line benefited from a favorable project sequencing and strong execution to generate the highest quarterly operating revenue in its history.

First, I'll start with a few strategic and operational highlights. Enerflex's U.S. contract compression business continues to perform well led by increasing natural gas production in the Permian. Utilization remains stable at 94% during Q3 across a fleet size of approximately 470,000 horsepower. Enerflex remains on track to grow its North American contract compression fleet to approximately 485,000 horsepower at the end of 2025. We expect to continue expanding this business in 2026 and we'll provide more specifics early in the new year. In the U.S., Enerflex was awarded a contract to construct a 200 million cubic standard feet per day cryogenic gas processing facility and associated natural gas compression. The project will be executed by the Engineered Systems business line and scheduled for delivery during 2026 with a strategic client partner in the Permian Basin.

The company continues to broaden and strengthen relationships within the midstream client partner base in the U.S. which includes strategic alliances and further developing relationships established through the acquisition of Exterran. During Q3, this resulted in Enerflex securing multiple orders for large compression equipment. In Oman, Enerflex successfully completed the construction and start-up of the Block 60 Bisat-C Expansion Facility for its client partner, OQ Exploration and Production. The project was delivered ahead of schedule and achieved first crude oil in less than 18 months. Enerflex's investment is supported by a long-term contract and reported as a finance lease.

In Argentina, Enerflex delivered a state-of-the-art all electric gas compression station for a long-standing client partner in the Vaca Muerta shale play.

Lastly, Enerflex received the prestigious Export-Import Bank of the U.S. Deal of the Year Award for its collaboration on a gas-to-energy project in Guyana. First of its kind in Guyana, Enerflex provided the natural gas conditioning and cryogenic infrastructure for this project. We will generate 300 megawatts of power, reduce the country's dependence on imported fuels and expand access to power in underserved communities.

And now a few comments on each of our business lines. Engineered Systems backlog as at September 30 of $1.1 billion provides strong visibility into future revenue generation and business activity levels. Bookings of $339 million during Q3 compared to a trailing 8-quarter average of approximately $320 million. The book-to-bill ratio calculated as bookings divided by revenue and normalized for accounting treatment associated with the Bisat-C Expansion project was 0.9x during Q3 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 Engineered Systems is supported by healthy bidding activity and backlog visibility that extends into the second half of 2026.

Notwithstanding, Enerflex continues to closely monitor near-term risks, including tariffs and commodity price volatility and will proactively manage this business line. Activity levels for the ES product line during Q4 of '25 are expected to reflect a pull forward of certain projects into the third quarter. Enerflex continues to expect gross margin for the ES business line in coming quarters to align more closely with historical averages reflective of a shift in project mix. We believe the medium-term outlook for ES products and services is attractive, supported by anticipated growth in natural gas and produced water volumes across Enerflex's global footprint.

Results for the aftermarket services business line benefited from increased activity levels and customer maintenance activities during the quarter. We expect these trends to continue into 2026. The Energy Infrastructure business continues to perform well, supported by approximately $1.4 billion of revenue under contract. Our U.S. contract compression fleet is an important part of our energy infrastructure asset base and the fundamentals for this business remain strong. Operational KPIs for this business are highlighted on Slides 15 and 16 of our investor presentation.

Slides 17 and 18 highlight our international Energy Infrastructure business, which includes approximately 1.1 million horsepower of operated compression and 24 build, own, operate and maintain or BOOM projects in Bahrain, Oman and Latin America. The international Energy Infrastructure business has a strong contract position, with a weighted average term of approximately 5 years and is expected to provide a steady foundation to Enerflex's financial performance in the coming years.

I would like to comment briefly on strategic priorities. Since joining Enerflex at the end of September, I've had the wonderful opportunity to visit the key parts of Enerflex's North American operation and interact across all levels of the company. The strength of Enerflex's people, culture and position and as a global leader, have been evident. We expect to provide further insight into strategic priorities including capital allocation in coming months following continued strategic clarity and discussion with our Board of Directors. I would like to emphasize that our go-forward approach will, one, focus on Enerflex's strengths and areas of excellence; two, stay true to the values that have guided the company for decades and three, continue to emphasize discipline, providing meaningful direct shareholder returns and making investments that support long-term shareholder value creation.

In the near-term, Enerflex' priorities are unchanged and include: one, enhancing the profitability of core operations two, leveraging the company's leading position in core operating countries to capitalize on expected increases in natural gas and produced water volumes; and three, maximizing free cash flow to strengthen Enerflex's financial position, provide direct shareholder returns and invest in selective customer supported growth opportunities.

Before I turn it over to Preet, I would like to briefly touch on emerging opportunities we are seeing in the electrical power generation part of our business, including opportunities associated with data centers. The delivery of modularized power generation solutions is a core competency of Enerflex. The Engineered Systems business line has been delivering these types of solutions for over 30 years, and our international energy infrastructure asset base includes upwards of 100,000 horsepower of modularized power generation assets. The microgrid power generation market in North America is very much in formation stage. But recent announcements from OEM suppliers and industry participants provide an indication of the potential opportunities. Although power generation represents a modest portion of Enerflex's current Engineered Systems backlog and overall business, we are developing solutions that we believe can address a range of applications and are excited about opportunities in 2026 and beyond.

For context, we are currently executing FEED studies for existing and potential client partners and evaluating over 500 megawatts of opportunities across our Engineered Systems and Energy Infrastructure business lines. We look forward to providing updates as Enerflex continues to develop this market opportunity.

With that, I'll turn it over to Preet to speak to the financial aside.

Thanks, Paul, and good morning, everyone. I'll start with highlights from the third quarter. We generated revenue of $777 million in the third quarter compared to $601 million in Q3 '24 and $615 million in Q2 '25. Higher revenue is primarily attributable to the Bisat-C Expansion project that Paul highlighted, which contributed $116 million in revenue to the Engineered Systems product line, and strong execution of ES projects alongside a high level of operational activity, which led to certain project milestones being achieved earlier than expected. This results in revenue being realized in Q3 that was originally anticipated in later periods.

Gross margin before depreciation and amortization was $206 million or 27% of revenue, including $14 million related to Bisat-C Expansion project compared to $176 million or 29% of revenue in Q3 '24 and $175 million or 29% of revenue during Q2 '25. As Paul referenced, the EI and AMS product lines generated 58% of consolidated gross margin before depreciation and amortization during Q3 '25, lower compared to 65% during Q3 '24 and our guidance for the full year 2025 as a result of contribution from the Bisat-C Expansion project and strong ES activity. Energy Infrastructure performance continued to be strong with gross margin before G&A of $95 million compared to $91 million in Q2 '24 and $86 million in Q2 '25.

Aftermarket Services gross margin before G&A was 21% in the quarter, benefiting from strong customer maintenance programs. SG&A was $71 million in the quarter, down $11 million from the prior year period, driven by cost-saving initiatives, improved operational efficiencies and the absence of onetime integration costs incurred in Q3 '24, partially offset by higher share-based compensation.

Adjusted EBITDA of $145 million is a new quarterly record for Enerflex that compares to $120 million in Q3 '24 and $130 million during Q2 '25. Adjusted EBITDA benefited from higher gross margin before depreciation and amortization, cost-saving initiatives and operational efficiencies. Cash provided by operating activities before changes in working capital or FFO, increased to $115 million compared to $63 million in Q3 '24 and $89 million in Q2 '25, a function of higher adjusted EBITDA. Free cash flow decreased to $43 million in Q3 '25 compared to $78 million during Q3 '24 due to working capital investments relating to the execution of projects in the ES business line and higher growth capital spend, offset by -- offset partially by proceeds from the sale of EI assets in Latin America.

We saw a build of $41 million in net working capital during the third quarter, principally related to strong revenue recognition during the latter part of the quarter, which temporarily increased accounts receivable, strategic inventory investments to support future projects, including purchase of select major components with increasing lead times and continued investment in the Bisat-C Expansion project with $12 million spent during the third quarter. Return on capital employed increased to 16.9% in Q3 '25, a new record for the company compared to 4.5% in Q3 '24 and 16.4% in Q2 '25. Higher ROCE is a function of the increase in trailing 12-month EBIT and lower average capital employed, predominantly due to a decline in net debt.

Net earnings of $37 million or $0.30 per share in Q3 '25 compared to $30 million or $0.24 per share in Q3 '24 and $60 million or $0.49 per share in Q2 '25. Compared to Q3 '24, profitability benefited from higher gross margin, lower SG&A expense and lower finance costs, partially offset by $16 million unrealized loss on redemption options related to senior secured notes.

Now we'll touch on our strong financial position. Enerflex exited Q3 '25 with a net debt of $584 million, which included $64 million of cash and cash equivalents, a reduction of $108 million compared to Q3 '24 and $24 million compared to the second quarter of 2025. Enerflex's bank adjusted net debt-to-EBITDA ratio was approximately 1.2x at the end of Q3 '25 down from 1.9x at the end of Q3 '24 and 1.3x at the end of Q2 '25. In early Q3, Enerflex entered into an amended and restated credit agreement with respect to a syndicated secured revolving credit facility. The maturity of the facility has been extended by 3 years to July 2028, and availability is unchanged at $800 million.

Let me shift to capital allocation. First, on our CapEx plans. We invested $47 million in the business consisting of $33 million in capital expenditures, $15 million for growth and $14 million primarily related to the Bisat-C Expansion in the EH region. Enerflex continues to target a disciplined capital program in 2025 with total capital expenditures of approximately $120 million. This includes approximately $60 million for maintenance and property plant and equipment and $60 million allocated to growth opportunities. Disciplined capital spending will focus on customer support opportunities, primarily in the U.S. market.

And now direct shareholder returns. Enerflex returned $11 million to shareholders in Q3 and $35 million during the first 3 quarters of 2025 in the form of dividends and share repurchases. The company repurchased 777,000 common shares at an average price of CAD 12.98 per share during Q2 '25 and a total of approximately 2.7 million common shares and average price of CAD 10.93 since its normal course issuer bid commenced on April 1, 2025, to September 30. 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 approximately 5% of its public float as at the application date for cancellation.

Enerflex' Board of Directors increased the company's quarterly dividend by 13% to CAD 0.0425 per common share, effective with the dividend payable in December 2025. The Board's decision to increase our dividend for a second consecutive year reflects confidence in our business and Enerflex a strong financial position and aligns with our priority to provide meaningful direct shareholder returns.

Going forward, capital allocation decisions will be based on delivering value to Enerflex shareholders and measure to get to Enerflex's ability to maintain balance sheet strength. In addition to disciplined growth capital spending, share purchase and dividends Enerflex will also consider further debt reduction to strengthen its balance sheet and lower net finance costs. Unlocking greater financial flexibility positions the company to respond to evolving market conditions and capitalize on opportunities to optimize its debt stack.

I want to thank Enerflex employees for their efforts to continuing to deliver strong operational and financial results.

With that, I'll turn the call back over to Paul for closing remarks.

Thanks, Preet. Let me reiterate that I'm pleased to join Enerflex at an exciting time for the company and appreciate all the efforts of the Enerflex team and making significant operational, financial and strategic strides. We believe the long-term fundamentals driving our growth, including global energy security, and the continued increase in demand for natural gas remain firmly in place that Enerflex is well positioned for those fundamentals.

We will now hand the call back to the operator for questions.

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

Paul, congratulations on the new role. I can appreciate you're going to give us an update in the coming months. But I guess I'm just curious to know what the team is telling you throughout the early days of your tenure in terms of what they think Enerflex does really well and what they think needs to be improved? And how does your prior experience sort of inform your perspective?

Yes. Well, thank you, Aaron, for the question and the comments. First, let me start that the openness and the transparency through my visitations for the first 30 days have been wonderful. I've probably met well over 1,300, 1,400 people in 30 days. And so what I would say has been confirmation of really focusing and seeing the benefits still in front of us around ruthless focus on some execution levers. Being able to drive cost, price opportunities and gross margin, along with driving working capital efficiency and the efficient use of capital remain priorities as Enerflex has demonstrated. I do see opportunities to enhance our core operation with digitization initiatives and efforts all while staying focused on our investment discipline, that being around investing in core competent areas, core countries and having a very strong specific line of sight for customer activity.

Okay. Great. You mentioned mobile power in your prepared remarks. I was hoping you could dive a bit deeper into that. How do you think about the BlueSky potential for Enerflex, what would 500 megawatts of opportunities translate to in terms of potential revenue opportunity? And given the sort of immediacy of the demand of this sort of product, does the return or margin profile differ versus other products in the portfolio?

Great question. This is a very, very embryonic state, I would say, in power, and it's changing quite rapidly. It's clear that speed is a key differentiator and a key need. 500 megawatts could easily grow to well over 1 gigawatt is what I'm trying to say, using behind the meter need an application is seeing strong, strong dialogue activity, quoting activity, balancing OEM delivery dates and really being able to make committed opportunities coming forward. It's very dynamic. It's very much in an area that Enerflex has experienced. As I've said in my opening remarks, with 30 years of power experience. So we're very excited about the opportunity, very cautious, very disciplined, but it's a pretty dynamic situation at the moment.

Our next question comes from the line of Keith MacKey from RBC Capital Markets.

Welcome to the call, Paul. Maybe just to continue on the power angle. I know you noted it was across Engineered Systems and Energy Infrastructure. Can you maybe just detail a little bit more how you think you might be able to participate in both of those areas. And then as a follow-up would just be what your readiness would be to capitalize on some of these opportunities. And certainly, as you mentioned, speed is of the essence. And the market appears to be moving at a very fast rate with a lot of announcements out from various types of companies these days. So any incremental color you can give on that would be appreciated.

Yes, sure. So as I mentioned, I think speed being directly correlated to some of the OEM delivery pieces is what we're working through at the moment. There's opportunity around the recip engine space, natural gas being cost efficient, speed being a differentiator and Enerflex having a history and ability to execute are all coming together. It's very, very dynamic. I see opportunities in Engineered Systems. But what we haven't mentioned is there's a strong opportunity for a follow-on aftermarket services play for operations and maintenance. So it's very exciting, and we're working very hard to build those partnerships. Partnerships here are going to be vital not only with the supply base, but also the power-related folks that are out there trying to solve this challenge or behind the meter activity and microgrid activity. And those partnership meetings and events have been occurring at a high pace.

Okay. Very good. And just more broadly on the OEM engine availability. Can you just comment on your inventory levels to support or execute existing projects as well as your ability to continue to book new work? How do you feel about the supply chain both in Engineered Systems and aftermarket services from that standpoint?

Yes. Maybe I'll open up with some comments and maybe turn it to Preet here. But I've had the opportunity to meet with our major OEM suppliers in the first 30 days and get a really good understanding of what we could expect over the next 12 months. We have started to invest in some strategic inventory. That being tied specifically to customer activity, customer commitment. And so we've started to be able to manage what our '26 commitments will be and what the lead times in our inventory position is. So...

The only thing I'd add is you see the investment in working capital, largely that's focused on the ES business, whereby long lead time equipment requires advanced bookings for that. So we've been doing that quarter-over-quarter. We feel good about customer-supported activities that will clearly procure these items as and when they arrive. But the longer lead times are area of focus for us. And once again, starting to invest in inventory in order to meet the customer support demand down the road.

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

Congrats, Paul. First question, I just wanted to follow up on the power gen portfolio. You mentioned in your prepared remarks that you might be developing some additional product lines that you think maybe are better suited. My understanding is you have a pretty wide breadth of, I guess, megawatt packages that you can package for the market, but perhaps more suited to the smaller end of that. Can you talk a little bit about what the demand looks like in terms of package sizes and where your product lines fit in and what you might be developing?

Tim, it's Jeff. As Paul referenced in the prepared remarks, modularized is a core competency and focus for Enerflex. And there is a very wide range of potential applications, both size that you referenced as well as configurations. I don't think it's appropriate for us to get into the details of that in any specific nature on the call. But as we talked about, we see a wide range of applications and significant opportunities that could align with those as well.

Okay. I understand there's probably some competitive dynamics there. Can you talk a little bit about, I guess, where you are in that process, if you're going to have the product suite you think is optimized for demand right now? And when do you think that might be available?

And as Paul referenced in the prepared remarks, this is business on the Engineered Systems side that we participated in for over 30 years. We continue to be active in delivering power generation solutions, both domestically and internationally. And we continue to be responsive to the customers and engage with the OEMs and the customers to continue to customize those as well. So from our perspective, we believe it's real time, but as Paul also referenced this is an emerging developing market that's moving quite quickly, too.

Yes. Okay. That's helpful. In terms of, I guess, the natural gas compression market, can you talk about leading edge demand a little bit and where we stand for lead times on key components like Cat engines and compressors.

Yes. Good question, Tim. Clearly, in the production -- oil and gas production space, let's focus maybe on the Permian a bit. You do see a constrained capital disciplined environment that's impacting, right, drilling and completions and things like that. But what you're also seeing is operators really trying to get the most out of their dollar spend. And so production optimization, production efficiencies are very, very high on the agenda. What that looks like from a compression standpoint, you still see the centralization of compression happening and occurring you're seeing growth rates in perhaps different production technologies that would utilize the gas, the available gas in gas lift production technologies. So the demand doesn't necessarily correlate with what you may think on drilling and completions and things it's correlating to more centralization and leveraging gas for production optimization efforts.

Okay. And lead times for the engines and compressors, where we think we're at there.

Tim, it's Jeff. It's obviously been fairly widely publicized the increases in lead times associated with certain engines and configurations and we certainly are seeing that. And as Paul and Preet highlighted in their earlier remarks, we've been responding to that with inventory investments and engagement on the OEM side. But we're certainly seeing certain engine configurations where deliveries are now extending into 2027, and in some extreme cases, 2028 and it's really reflective of the convergence that you've seen in recent quarters between what have been traditionally more compression-oriented applications with power gen on the reciprocating engine side.

Okay. That's helpful, too. And then just on the outlook, in particular, for the Engineered Systems business. When you back out the Oman project, margins were really strong in the quarter. And you guys have been guiding to margins coming down for a few quarters now. We haven't -- I think that it's probably outperformed your expectations and ours. I guess, why do you think you can't keep that outperformance going because I would have imagined that your backlog and the mix in that backlog had been shifting towards negative or towards lower margins over the last number of quarters here?

Tim, you're right, we've been guiding towards historical Enerflex averages for a couple of quarters now. The Oman project, obviously, that contributed $14 million to gross margin, $116 million came out of backlog for that into revenue. And we still feel, given mix, product mix in our backlog and bookings company in we still feel it's prudent to guide slightly to the mid-teen level historical averages. We feel that's still the right spot to be in. And we're pleased with our results to date. As Paul mentioned, look at operational efficiencies where we can. So over time, if we feel we're trending in an even more constructive direction, we'll advise. But right now, we feel good about the historical average gross margin, which is still something you should probably peg to.

And then last one for me. Can you help quantify how much was pulled forward from Q4 into Q3?

Tim, I think the easiest rule of thumb is when you look at the average revenue of the ES business over the last couple of years, it's been between $300 million and $325 million per quarter. If you look at what we reported close to just over $400 million or close to $400 million, you back out the Bisat-C Expansion that we referenced I think that would give you an indication of the strength of Q3 and the execution we saw in Q3 relative to normal cadence.

Okay. And then you think that much of that comes out of Q4? Like the amount that you're above that cadence in Q3, you should be below it in Q4...

I don't know if we can give you a direct correlation. But as was referenced in the remarks, there was definitely some pull forward and accelerated execution that happened in the third quarter.

Thank you. At this time, I would now like to turn the conference back over to Paul Mahoney for closing remarks.

Before we close today's call, I'd like to take a moment to acknowledge the upcoming Remembrance Day in Canada and Veterans Day in the United States. We honor the courage and sacrifice of those who served and continue to serve in our armed forces, including many employees now part of the Enerflex family. Their dedication has safeguarded the freedoms and piece we enjoy today. Thank you for joining today's call, and we look forward to sharing our fourth quarter and year-end financial results in February.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Enerflex Second 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, Marvin, and good morning, everyone. With me today are Preet Dhindsa, Interim President and CEO; Joe Ladouceur, Interim CFO; and Ben Park, Enerflex's Controller. During today's call, our prepared remarks will focus on 4 key areas: one, the continued strong performance of Enerflex's business; two, our outlook and Enerflex's strategic positioning; three, capital allocation, including our refined capital spending program for 2025 and direct returns to shareholders; and four, our progress on near- and long-term strategic priorities. Before I turn it over to Preet, 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 updated investor presentation, which is available through a link on this webcast and on our website under the Investor Relations section. I'll turn it over to Preet.

Thanks, Jeff, and thank you all for joining us on this morning's call. We are pleased to report another strong quarter of financial and operating results that translated into a quarterly record for adjusted EBITDA. These results reflect solid performance across our geographies and business lines as well as our ongoing efforts to optimize and streamline our business. Our Energy Infrastructure and After-Market Services business lines continue to deliver steady performance and reinforce Enerflex's ability to generate sustainable returns across our global platform. Energy Infrastructure and After-Market Services contributed 65% of gross margin before depreciation and amortization in the second quarter of 2025, and we expect these business lines will continue to represent the core of Enerflex's profitability.

We also maintained solid visibility in our Engineered Systems business, supported by a healthy $1.2 billion backlog at the end of the second quarter. And now a few highlights from each of our business lines. The Energy Infrastructure business continues to perform well, supported by approximately $1.5 billion of revenue under contract. Our U.S. contract compression fleet is an important part of our Energy Infrastructure asset base and the fundamentals for this business remain strong, led by increasing natural gas production in the U.S. We're also pleased with the operational performance of our U.S. contract compression business, reflective of utilization remaining above 90% for the past 14 quarters and solid revenue per horsepower per month and profitability.

These KPIs are highlighted in Slides 18 and 19 of our investor presentation. Demand for new contract compression equipment in the U.S. remains strong. We exited the quarter with 456,000 horsepower and expect to be over 475,000 horsepower by the end of this year. New units are being deployed under multiyear contracts in core operating regions with a focus on larger horsepower natural gas and electric drive applications. Slide 16 and 17 highlight the international Energy Infrastructure business, which includes approximately 1.1 million horsepower of operated compression and 23 Build, Own, Operate and Maintain or BOOM projects in Bahrain, Oman and Latin America. Our 2 produced water projects in Oman continue to perform very well, and we commissioned an expansion of one project in early Q3, which is highlighted on Slide 20.

Our international Energy Infrastructure business is supported by approximately $1.3 billion of contracted revenue and an average contract term of approximately 5 years. Turning to After-Market Services. This business line benefited from increased activity levels and customer maintenance activities during the quarter. We expect these trends to continue throughout the remainder of 2025. On the Engineered Systems side, we maintained our backlog at $1.2 billion at the end of the quarter, consistent with the 8-quarter average ES backlog of approximately $1.2 billion. This sustained level of backlog over a 2-year period reflects stable demand for Enerflex-ES solutions across global energy infrastructure markets.

Enerflex recorded ES bookings of $365 million during the 3 months ended June 30, 2025, compared to $331 million during the same period of 2024 and the 8-quarter average of $329 million. The ES product line maintained a book-to-bill ratio calculated as bookings divided by revenue of 1.1x during the second quarter of 2025, indicating that new bookings are generally keeping pace with revenue recognition. The current balance between bookings and revenue supports near-term revenue visibility and reflects a stable demand environment. We expect ES revenue to remain steady in the near term and for gross margin from this business to align more closely with historical averages, reflective of a shift in product mix. Demand across the ES product line remains constructive as we continue to actively monitor near-term risks and uncertainties, including the impact of tariffs and commodity price volatility.

We believe the medium-term outlook for ES products and services is attractive, supported by anticipated growth in natural gas and produced water volumes across Enerflex's global footprint. Enerflex's priorities in 2025 include enhancing the profitability of core operations, leveraging the company's leading position in core operating countries to capitalize on expected increases in natural gas and produced water volumes and maximizing free cash flow to strengthen Enerflex's financial position, provide direct shareholder returns and invest in selective customer-supported growth opportunities. Before I turn the call over to Joe, I'd like to comment briefly on our leadership transition.

On March 19, Enerflex announced that Marc Rossiter stepped down as President, CEO and Director. Concurrently, I assumed the role as Interim President and CEO and Joe as Interim CFO. The Board is undertaking a comprehensive search to identify the company's permanent CEO and has retained a leading global search firm to assist with this process. The search process is making good progress and will not be -- and we will not be commenting further. With that, I'll turn it over to Joe to speak to the financial side.

Thank you, Preet, and good morning, everyone. I'll start with highlights from the second quarter. We reported consolidated revenues of $615 million compared to $614 million in Q2 '24 and $552 million in Q1 2025. Gross margin before depreciation and amortization was $175 million or 29% of revenue compared to $173 million or 28% of revenue in Q2 2024 and $161 million or 29% of revenue during Q1 2025. As Preet referenced, the EI and AMS product lines generated 65% of consolidated gross margin before depreciation and amortization during Q2 2025, and we continue to expect similar results for the remainder of the year. Energy Infrastructure performance continued to be strong with gross margin before D&A of $86 million compared to $77 million in Q2 '24 and $86 million in Q1 '25.

After-Market Services gross margin before D&A was 23% in the quarter, benefiting from strong customer maintenance programs. SG&A was $61 million for the 3 months ended June 30, 2025, down $14 million from the prior year period. This is driven by cost-saving initiatives, improved operational efficiencies and the absence of onetime integration costs that were incurred in Q2 of 2024. Adjusted EBITDA was $130 million, which represents a new quarterly record for Enerflex. This compares to $122 million in Q2 '24 and $113 million during the first quarter of 2025. Cash provided by operating activities before changes in working capital or FFO increased to $89 million in Q2 2025 compared to $63 million in Q2 '24 and $62 million in the first quarter of 2025.

This is a function of higher adjusted EBITDA, lower net finance costs and lower current tax expense. Free cash flow was a use of cash of $39 million in Q2 2025 compared to a use of cash of $4 million during Q2 '24 and a source of cash of $85 million during Q1 2025. Compared to the second quarter of 2024, an increase in FFO was more than offset by an increased growth capital spending and a build in net working capital, notably strategic inventory investments to support future projects, including work in progress related to EI assets and purchases of select major components with increasing lead times, income taxes payable and finally, executive transition costs.

Compared to the first quarter of 2025, net working capital was also impacted by an increase in accounts receivable, which related to strong revenue recognition during the latter part of the quarter, which we expect to normalize. Now I'd like to touch on our financial position. We exited the quarter with net debt of $608 million, which included $71 million of cash and available liquidity of $630 million compared to $672 million in the first quarter. Enerflex's bank-adjusted net debt-to-EBITDA ratio was approximately 1.3x at the end of Q2 '25. That is down from 2.2x at the end of Q2 2024 and consistent with Q1 2025. Further details are included on Slide 13 of our investor presentation. In early Q3, Enerflex entered into an amended and restated credit agreement with respect to its syndicated secured revolving credit facility, the RCF.

The maturity date of the RCF has been extended by 3 years to July 11, 2028, and availability is unchanged at $800 million. Now let me shift to capital allocation. First, on our CapEx plans. We invested $71 million in the business, consisting of $34 million in capital expenditures, $23 million of which was for growth and $37 million for expansion of an EI project in our Eastern Hemisphere region that was commissioned in Q3 2025 and is now accounted for as a finance lease. Full year 2025 capital spending is now expected to approximate $120 million compared to our previous guidance of $110 million to $130 million. This includes approximately $60 million earmarked for growth initiatives compared to the previous guidance of $40 million to $60 million.

Growth investment will focus on customer-supported opportunities, primarily in the U.S. contract compression business line, where the fundamentals remain strong. Maintenance and PPE capital expenditures are now expected to be approximately $60 million compared to our prior guidance of $70 million, and this is reflective of our continued efforts to realize efficiencies across our operations. And now I'll turn to direct shareholder returns. Enerflex returned $18 million to shareholders in Q2 through dividends and share repurchases. Our NCIB commenced on April 1 and authorizes the company to repurchase up to approximately 6.2 million shares through the end of March 2026. Enerflex repurchased 1,899,200 common shares at an average price of CAD 10.08 per share during the second quarter.

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. Unlocking greater financial flexibility positions the company to respond to evolving market conditions and capitalize on opportunities to optimize its debt stack. I want to thank Enerflex employees for their efforts in delivering strong operational and financial results. We continue to prioritize profitability and operational resilience to ensure Enerflex delivers strong and reliable returns for our shareholders. With that, I will turn the call back to Preet for closing remarks.

Thanks, Joe. We made significant operational, financial and strategic strides in recent quarters. I want to thank the Enerflex team across our global operations for their efforts delivering these results. We believe the long-term fundamentals driving our growth, including global energy security and the continued increase in demand for natural gas remain firmly in place. We believe Enerflex is well positioned for those fundamentals, and we are focused on taking advantage of opportunities across our global platform. I look forward to building on our progress. And with that, we will now turn the call to the operator for questions.

[Operator Instructions] And our first question comes from the line of Keith MacKey of RBC Capital Markets.

Just curious if you can comment a little bit more on what's driving the tightness in utilization in U.S. contract compression. How sustainable do you think that is? And ultimately, what underpins your confidence in increasing your investment in that division now?

Keith, it's Jeff. As we've talked about in prior quarters, we're seeing a favorable supply-demand balance across the U.S. contract compression market. And the supply side is very much a function of the discipline we're seeing from the 3 largest competitors. Underlying that is the market continues to grow nicely in line with the supply growth from a natural gas standpoint in the U.S. as well. As we've talked about in previous quarters, the contract durations that we're signing for both new equipment and on renewals of existing equipment have continued to lengthen over the last year.

And our expectation is that we'll continue to see those fundamentals in place. So the increase in our guidance from a growth capital standpoint to the top end of the range is to support the continued demand that we're seeing from customers and opportunities across the U.S., especially in the Permian. And we believe those investments are derisked by the longer duration contracts that have been put in place to support those assets.

Understood. Can you just comment also a little bit more on the type of growth you expect to see out of that division over the next 2, 4-plus quarters to the extent that you can kind of map the investment and the market into your financial results?

So from a fleet side, we exited Q1 at just under 450,000 horsepower. We're at 456,000 coming out of the end of the quarter ended June. As we've talked about in guidance, the expectation is that the fleet will be over 475,000 horsepower by the end of the year. We do expect those additions to be more weighted to the fourth quarter than the third quarter, but those assets as they're deployed, go on contract and go on rent.

So we'd expect the financial performance of the business to move concurrently as the fleet continues to grow. As Preet talked about in his prepared remarks, our expectation and visibility is for utilization and pricing to remain stable and attractive across that business. So we don't expect any significant impact from that side in terms of the financial performance for our contract compression business.

[Operator Instructions] And our next question comes from the line of Tim Monachello of ATB Capital Markets.

I was just curious, press release mentioned expanding the North American manufacturing facility. Can you elaborate on what you're doing there?

Can you just repeat the last part of that, Tim?

Right. I'm just wondering if you can elaborate on what you're doing with that expansion.

Yes. So we took on a little bit more land adjacent to our U.S. facility in Houston. We had the option to take it. Our view is that given the constructive natural gas macro, we've got great production out of that facility and just want to keep optionality for future growth as and when appropriate. We've got a significant facility there as well as Broken Arrow and the opportunity came up to take the land. So we did it. And once again, it just positions us well for taking advantage of any further follow-on activity that we can execute on through that plant.

Okay. But are you running anywhere close to capacity in your current manufacturing facilities in North America?

We still have a fair bit of capacity, and we've got a great talent pool, and we can flex up and down as necessary with that talent pool in Houston as we're talking about primarily. But overall, we've got sufficient capacity, and that additional land creates optionality for future growth in the business, the ES side of the business.

Okay. Got it. Wondering if you can perhaps talk a little bit about what CapEx might look like in 2026 and beyond and I guess your longer-term expectations as they stand for growth of the U.S. compression fleet.

I'll start with it and maybe Jeff will lead into that. So this -- recently, we just announced $60 million growth that primarily earmarked for the U.S. contract compression fleet. We do feel good about the depth of the market and the constructive natural gas macro, as we mentioned, and continue to build to the end of this year in the U.S. fleet up around 475,000 horsepower from [ 428,000 ] at the end of last year. But overall, growth is a very important lever that we can deploy free cash flow. And we do feel the market in the U.S. fleet, highly constructive, good economics, meaning utilization and revenue per horsepower per month. So we feel good about what we've invested and plan to invest this year and will follow on in 2026.

Tim, as Joe mentioned in his prepared remarks around the working capital side, we've been making strategic investments on the inventory side reflective of increasing lead times on equipment, especially the engine side. And so we're starting to make commitments for CapEx and growth for 2026 to reflect the realities of the supply chain and also trying to align ourselves with the customers' planning cycle and our strategic partnerships that we have in that business. And so we're still formulating our formal plans for 2026, but we are certainly progressing quicker than in prior years associated with mapping out our growth intentions going into next year.

Okay. Got it. And I guess, given that you're a vertically integrated player in the U.S. rental compression space, what do you think your time to market is for new compression versus what it might be for some of your competitors that use third-party manufacturing?

A little bit of a subjective question because it depends on application, equipment and scheduling. But we still believe that our time to market is a competitive advantage relative to other players in the market and those especially that are not vertically integrated.

And you'd have a cost advantage as well, I imagine?

We believe so, yes.

Okay. Bookings number was really strong in the quarter. Was there anything lumpy in that? And can you provide any commentary on what you're seeing on the leading edge in the first sort of month or so of Q3?

As Preet talked about in his prepared remarks, we saw a much more normalized reflective order structure during the second quarter. As we talked about back in May, first quarter bookings for us were partly impacted by a pull forward into the fourth quarter, but then also some selective pauses on the customer side. We saw a much more normalized cadence for order flow in the second quarter. To your specific question, there's nothing significant and lumpy in the second quarter bookings that we don't expect to be normal course.

As we look forward into the third and fourth quarters, we continue to see good depth and good opportunities within the market. They touch on both the compression and the gas processing or deep cut side. And we expect, as we've talked about sort of when you look at the 8-quarter average for bookings at about $330 million, we continue to target a book-to-bill ratio of around 1x in coming quarters.

Okay. And you guys have been calling for a normalization in margins in the ES segment for a number of quarters now hasn't really come to fruition. How much, I guess -- can you talk about when you expect that normalization to start to hit financials?

You've seen some indications of it, but the team has done a fantastic job of executing and delivering margins that are higher than we've seen on a historical basis. The guidance that we're providing, we believe, is reflective of embedded margin, but also the mix that we're seeing and the shift more towards compression-based work relative to gas processing work. So we're still comfortable with margins trending towards the long-term average, but also very much reflective of the strong operational execution our teams have been doing as well.

So do you think it's possible that if your teams continue to execute, you can continue to maintain margins at or above the level that you've seen over the last few quarters?

We continue to challenge them to deliver strong margins, but our guidance is reflective of what we believe a good base case is today.

Okay. And then last one for me, I promise. G&A was a strong number in Q2, down from Q1. Where do you see G&A trending as we go forward in '25 and into the out years?

Tim, as we've been mentioning over several quarters, integration was done last year. We've got some synergies out of integration. Full run rate synergies are going to be achieved this year and next year. So we feel good about the level of G&A, and that's a high focus of ours as we continue to simplify our business, get out legal entities that are somewhat dormant and just look at our geographic footprint. So we're consciously looking at ways to simplify and optimize our business and G&A is a key metric that we continually focus on.

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

Since there are no further questions, thank you for joining today's call, and we look forward to providing you with our third quarter financial results in November.

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