Enerflex raises distribution 17% to $0.035 after free cash flow reaches $102 million
Key Facts
Enerflex reported results on October 29 for the third quarter ended September 30, 2026, and raised its quarterly cash distribution by about 17% to $0.035 per share after free cash flow reached $102 million. The company said net income was $55 million, or $0.45 per share, compared with $37 million and $0.30 per share in the same period last year. Revenue, meanwhile, fell to $623 million from $777 million a year earlier, but rose from $582 million in the second quarter. Adjusted EBITDA was $129 million, compared with $145 million in the third quarter of 2025 and $128 million in the previous quarter. The results show a divergence between year-over-year declines in revenue and adjusted EBITDA and improvements in cash and net income compared with last year.
The company attributed the year-over-year declines in revenue and adjusted EBITDA to project-phase timing and a higher level of operating activity in the engineered systems segment during the year-earlier period. The comparison included revenue from the expansion of the Piceance facility, recorded when it began operations in the third quarter of 2025, as well as the completion of phases of engineered systems projects at that time. Gross margin before depreciation and amortization was $176 million, or 28% of revenue, compared with $206 million and 27% a year earlier. In the second quarter of 2026, the margin was $173 million, representing 30% of revenue. The company said changes in revenue mix and project timing affected the quarter-to-quarter comparison, explaining why the margin as a percentage of revenue differed from its level in the previous quarter. Net income was higher than last year, benefiting from a gain on the Asia Pacific exit and lower financing costs and taxes.
Cash provided by operating activities rose to $147 million, compared with $74 million in the third quarter of 2025 and $89 million in the second quarter of 2026. Operating cash flow included a net working capital recovery of $51 million, which contributed to the increase in free cash flow to $102 million. Free cash flow was $43 million a year earlier and $32 million in the previous quarter. The company said higher operating cash supported free cash flow growth despite increased capital spending. Net debt was $312 million at quarter-end. Chief Executive Paul Mahoney said the quarter was marked by “strong cash generation, record bookings and backlog” and a notable commercial win in behind-the-meter gas-fired power generation.
The engineered systems segment recorded bookings equal to 3.0 times revenue during the quarter, compared with an average of 1.3 times over eight quarters. Enerflex said bookings included an award of about 450 megawatts for behind-the-meter gas-fired power generation, alongside strong demand for compression and gas processing applications. After quarter-end, the company won an award to supply more than 1.0 gigawatt of low-emissions gas-fired behind-the-meter power generation for a data center project in North America. With additional awards, backlog for this activity exceeded 1.75 gigawatts, with deliveries extending through 2028. The post-quarter win adds data center-related power projects to the company's future business base.
In its U.S. contract compression business, Enerflex's fleet totaled 521,000 horsepower on September 30, with a utilization rate of 94% during the quarter. The company said it is targeting 10% to 15% growth in its customer-contract-supported fleet in 2026, noting that gas production in the Permian Basin is supporting activity. As part of its business reshaping, Enerflex completed the sale of most of its Asia Pacific operations to the INNIO Group for $62 million in cash on September 30. The businesses sold were focused primarily on aftermarket services. The quarter's earnings benefited from the exit gain, while the company said the sale aligns with its focus on core markets and directing capital toward growth and cash generation opportunities.
The board approved an approximately 17% increase in the quarterly distribution to $0.035 per share, payable on November 25, 2026, to shareholders of record on November 12. The company kept its 2026 organic capital spending target at $185 million to $195 million, comprising about $100 million for growth and about $55 million for maintenance, in addition to $30 million to $40 million for property, plant and infrastructure. It lowered its maintenance spending estimate from a previous range of $70 million to $80 million, attributing the change to efficiencies and the deferral of some spending to 2027. It expects to spend about $85 million during 2027 on facilities and capabilities in the engineered systems segment, as part of investments it said are intended to increase the segment's revenue capacity. The company describes some measures, including free cash flow, bookings and backlog, as non-IFRS measures that may not be comparable with similarly named measures used by other companies.