Enterprise Group, Inc. (PEG) Earnings Call Transcript & Summary

Great [ morning ] and today with Enterprise Group. The purpose of today's presentation is to give our audience a better understanding of the business through a presentation and then questions with management. The presentation will be led by Len Jaroszuk, CEO, who is also joined by Des O'Kell, President; Warren Cabral, Chief Financial Officer; and Doug Moak, VP of Finance. I'd like to remind our audience that today's [ Bristol ] led webinar is to introduce the business to a large audience of investors that are not as familiar with the business. Management will cover highlights in the most recent Q, but our purpose today is to educate investors less familiar with the business. We'll break for questions at the end of the formal presentation. When we do break, we encourage questions. As a reminder, we're only going to take questions through the webinar portal. If you're listening over the telephone, please access the web link sent earlier to ask a question. You can submit using the text box within the portal at any time. I'll ask the questions on the air for everyone to hear and then Len, Des, War or Doug will answer. I'm not going to reference any names, but simply read the questions asked. As we have a very large audience today, if I can't get to your question online and has not yet been addressed during the call and can't be, I'll come back to you by e-mail. I'm not going to read the forward-looking statements, but I do state that they apply, and I reference them for you in this presentation. With that said, once again, thank you for joining us. Remember, this is fairly informal, and we do encourage questions to help you better understand the business and its growth path. And now I'll turn the call over to Len to start his part of the discussion and presentation.

Well, thank you very much, Glen. Thank you for all of you attending our webinar. This is going to be a nice update for the position of the company, passing through this last spring breakup quarter and moving forward to our expansion of the business. I would like to introduce Desmond O'Kell, President of the company. He will be doing a presentation for you. We've got Warren Cabral, our CFO, who will go through our past numbers and our future numbers going forward. And we have Doug Moak, Vice President -- sorry, Vice President of Finance for Corporation, who will go through the amalgamation of the recent acquisition we made of Flex U.S. into Canada. So I'll turn it over to Des now. Thank you very much for attending.

Thanks, Len. Well, we'll just go through a bit of a condensed for the new people for -- that are with us on the webcast. We'll go through some slides here to get everybody understanding what we're doing in our segment of the business. Here, you've got a few indicators. I'd like to draw your attention to some of the increases in revenues over the past few years that we've been building out our power division. We have a significant management and director insider ownership and we are producing very, very good solid cash flow. In the last few years, it's been an increase in activity, developing some very, very desirable margins especially when competing with other energy services businesses that are in the equipment heavy side of the business. You'll see that as we move forward in consolidating our numbers at the end of the year, you'll see that margins are very healthy. These are a few key considerations we want to start off with. We are a leader in site infrastructure to the Canadian energy sector, and we're uniquely positioned as a sole provider of short- and long-term low emission site electrification systems for industries such as energy, mining and so forth. We're highly profitable with the industry-leading margins and rapid expansion trajectory that I explained earlier. We're a provider of the most reputable and sizable clients in various sectors, especially, of course, in our energy sector. We're in favorable trends in the energy market with avenues to venture into some new markets, which are going to foster considerable expansion organically and via M&A. We have a very healthy balance sheet and liquidity, and this will backstop our strategy for continued growth. I mentioned management ownership right around 20 -- actually a little forward of 27%. So we do have a history of significant insider buying and share buybacks. Our NCIB program that we initiated many years ago, we bought over 20% of the company at the time. We've reinstituted NCIB program earlier this spring. And so far, we've purchased about 130,000 shares under that new program. So we're guided by a seasoned leadership team with a track record of effective strategic implementation, prudent management through downturns and the dedication to surfacing value for investors. This gives you a bit of an indication. It's not a complete list of our clients, but these are folks that we're working for in the field most every quarter. Many of those names you'll recognize. There's other names that are maybe less recognized or maybe private. So we're looking at really the macroeconomic trends that we're operating in. And of course, some of the big leading trends are -- we have a good bipartisan support in Canada to double LNG capacity at our Kitimat, which is the LNG Canada project to 28 million tonnes per year. Right now, they're producing on train number one they are liquefying approximately 1.8 Bcf a day that will double when they decide to build their train 2 or their second phase, and that will be another 1.8 Bcf a day. Just so everybody has an understanding, the Canadian gas production all of Canada is right around 18, 19 Bcf. So when LNG Canada started with their first phase, that's about 10% of Canada's production being offloaded through the liquefaction process and advancing into markets that we've never accessed before, which is the majority in Asia. Other macroeconomic trends. The North American power grid is experiencing widespread decline due to inadequate maintenance and expansion even as societal and industrial demands for electricity continue to rise. I'll touch on this a bit later, but it's a very important attribute to our growth ahead. And this will lead to more frequent power disruptions prompting industries to seek opportunities to self power their operations. So we have many energy experts widely acknowledged that natural gas will be a critical power source for North American industries and energy-intensive application for commercial industrial and manufacturing sectors. So a little bit about our Flex Canada acquisition that we announced a few months ago. We've -- the name has been changed to Evolution Power Solutions, Inc. So we are essentially the Canadian OEM representative for the Flex Turbine technology and their entire platform. So in May, we acquired FlexEnergy Power & Service, which is Flex Canada from the U.S. OEM, unifying two leading providers of clean, reliable, on-demand power and fixed power and generation. So Enterprise will expand exclusively the exclusivity, sorry, for FlexEnergy Solution Turbines across Canada, across all industries. Those of you who have been with us for more than a year, you'll remember we had negotiated an exclusivity. But I think we announced September last year. And it was mostly to Western Canada and for temporary power applications. Of course, with this acquisition, that exclusivity has no more boundaries. It's Canada-wide across all industries, both short-term and long-term installations. So it's a highly accretive transaction, a $20 million purchase price. Fully funded from cash on the balance sheet and our new credit facility that Warren will explain a little later. Pre-synergy, the acquisition multiple is right around 4.3x. And the highlight of this transaction, we expanded our fleet with 17 additional turbine generators currently in the field, at an average term of about 23 months in contract lengths. It enhances our market offerings reducing earnings volatility, now providing both temporary project-based solutions and permanent installations with lease financing options for clients. This has immediately enhanced our ability to scale our natural gas to electricity solutions across Canada in multiple industries and an augmented client base with additional -- the addition of new top-tier customers and new industry vertical. Our Flex Care contracts that we brought on with the business acquisition, this provides exposure to a steady stream of recurring revenue, takes away or helps with the lumpiness of what we experienced in the energy sector. And this strengthened combined position to capitalize on accelerating shift to mobile natural gas power solutions. So you can see here, this is an overview of the acquisitions FlexEnergy Solutions is a globally recognized original equipment manufacturer of turbine and microturbine power generation equipment. The company has developed a very, very advanced turbine technology. And one of the reasons why it's been so well adopted, especially in the energy sector over the last -- over a decade is because its ability to combust very, very unrefined natural gas fuels. And that is very desirable when we're dealing with the energy sector where many of our clients in these remote areas, have access to their own field gas. It hasn't gone down the stream to further refining. So because the fuel tolerance of this particular unit is so vast, it has been widely adopted by the energy sector in very early stages. We're going to talk about a little bit later, what other opportunities that the Flex Turbine was built for, but also to know that the Flex Turbine loves the cold weather. So it can operate past 40 degrees C where many other turbine generators or even piston fire generators, they just simply cannot operate in that extreme cold. So these are the reasons why the Flex turbine is such a desirable unit, especially in the Canadian North. So as I mentioned, the turbines are engineered to deliver high-efficiency, low-emission power for on- and off-grid industrial, commercial and remote applications. Focused on long-term and permanent turbine installations providing leasing options to empower clients to secure reliable, scalable, energy-efficient cost-effective energy solutions. And this will generate stable recurring revenue to reduce exposure to industry cyclicality, like I mentioned before. So talking about our Evolution Power Projects business, which is our existing power operation, which is focused on temporary project to project style activity. We established the company in 2022, but, prior to that, we have been perfecting the natural gas to electrification in these project, temporary sites. And in that pursuit, we've created a bit of a moat. We really don't have any competitors in our energy sector that are directly competing with us with these types of methods. So we've -- and of course, because the -- the Flex Turbine is the most -- has the most desirable uptime in these northern conditions, it really is the unit to build your fleet around. And that's why we were so very interested in the exclusivity and, of course, the eventual acquisition of the Flex Canadian business. But right now, we're in the energy sector alone, we're at a very, very thin edge of the wedge of our total market addressing. We have a long wide road of expansion even in the energy sector. So this is the very early stages of developing that, let alone before we start talking about the other applications for permanent CHP, which is combined heat and power application that this unit was actually designed for. So there's a large untapped market comprised also within our existing customers to even expand the activities with them. So I'm going to move along to just a couple of quick charts here to give you an indication of the difference between the incumbent, which is diesel. Diesel has been utilized in remote project sites for obviously decades. But the opportunity to utilize natural gas or compressed natural gas on site, you can see the cost variations here, a typical 350-watt kilowatt diesel generator at full load will consume about 2,400 liters a day at about $1.60 a liter, you'll see that a daily fuel cost to the client is just short of $4,000 a day or across a 3-month project, $345,000. With our similar-sized gas turbine, utilizing almost $75 Mcf a day at compressed natural gas prices coming into the site at $21 an Mcf. You'll see the total fuel cost to the client is right around $1,570. So a total over a 3-month period, $141,000. So there's still a massive 60% savings in fuel cost even when we bring in compressed natural gas to the site. But the majority of our clients in the energy sector were utilizing their own fuel out in the field. So of course, they pay nobody for that fuel. So that opportunity to save an expense line on that project by eliminating the paying for third-party fuel obviously provides a very, very desirable case for moving to our methods of electrification. Now on the emissions side, this is very telling. The same 350-kilowatt diesel generator along with our turbine. You can see these are the harmful pollutants, particulate matter 2.5 and 10 SOx, NOx, you'll see volatile organic compounds and carbon monoxide. You'll see the reduction when we move to our gas turbine and natural gas as a fuel. These are not 20%, 30% reductions. They're massive. And these are very, very valuable to -- especially to our many of our Tier 1 clients that are bound to not only monitor, track and report their emissions, of course, they're charged on their threshold. So there's industrial carbon penalties or credits they have to purchase to get back to a threshold. So these are very, very valuable emission reductions to these clients. So in summary, trying to condense this, of course, we've achieved the leadership position our Canadian energy sector with new acquisition to diversify growth exposure to its clients in new industry verticals such as mining, industrial prime power, CHP, et cetera, boasting significant profitability with substantial margins resulting in robust cash flow. Our Canadian energy landscape is experiencing rapid expansion with investments in LNG serving as a significant driver of growth. The escalating demand for equipment, skilled labor and expertise has also improved our pricing over the last few years. So our robust balance sheet fortified by a new credit facility with a Tier 1 bank and a healthy cash flow underpin our current expansion strategy. I'll leave that there for the condensed presentation. For the newcomers, I hope that gives everybody an indication of what we're doing. I'm just going to change screens here and talk a little bit about some of the opportunities that are in front of us. Of course, this is our Evolution Flex Turbine as we see it. This little background, this particular turbine technology was developed by a Fortune 500

The screen for the audience has not changed. So maybe start -- again. Yes.

Let's do this. Thank you. How's that?

Nothing yet. There we go. Okay. Now just make that full screen, and we're good to go. Perfect.

Sorry, folks. So this is the Evolution Power Flex Turbine. I want to give you a little quick little history because it's very important to understand where we're going with -- in the pursuit of some of the new markets other than the energy sector. This particular unit was developed by a Fortune 500 company before it was spun out to the current ownership of FlexEnergy USA. And this particular turbine was developed specifically for the commercial and industrial CHP, which is combined heat and power. So this unit is specifically designed for prime power purposes as well as harvesting the heat from the unit to utilize for either full heat combined heat and power. And of course, heat and cooling exchanging can happen with this. So there's a good example of over the past decade of permanent installations for CHP, combined heat and power in permanent installations. Unfortunately, here in Canada, this has been lightly pursued by Flex Canada prior. So it leaves a wide open new opportunity to develop these permanent installations for CHP application. And we're in a situation here where as I mentioned before, the reliability of the North American power grid is declining even as demand from industry and societies continue to grow. This dynamic presents significant opportunities for industrial operators to implement self-generation solutions. And our Flex Turbines are purpose-built to meet this need offering exceptional performance in both prime power and combined heat and power CHP applications. Our Flex Turbines offer advanced capabilities and we're actively pursuing a range of applications to capitalize on their versatility. Our business development initiatives are expanding to unlock new revenue streams to these emerging opportunities here in Canada. As the company advances its focus to optimal power solutions, it's increasingly positioned to be recognized as a power solutions provider potentially leading to a market reevaluation at maybe higher multiples than those typically assigned to traditional energy services sector. So here's a selection of some prime power and CHP permanent installations that have been successfully delivered into recent years. This is a few photos from CHP application. This is at the Grande Prairie rec center here in Alberta. This is a rec center that has four pools, three ice-skating rinks, a running track. It's a big, large rec center. And this was installed 4 years ago. We're just coming up to the 4-year anniversary. So it required as prime power, two of our 333 turbines to be installed here. And -- so basically, this is -- the rec center is hooked up to the grid, the power grid, but prime power is being supplied by these two 333-kilowatt units. So 666 kilowatts, which is properly matched to the buildings load. So if it ever needs more than that, it will get it from the grid, the prime power substantially operated by these two units. And of course, it's a CHP application, so we're also harvesting the heat and to heat all the pools and the boilers and the entire building. As you can see the photo on the left, that's all the ducting that's coming off of the turbines and moving into the building. The photo on the right is all of the connectivity from the electricity in real time, of course, being developed as prime power from the two units, as you can see. So this is an example of the possibilities of the Flex turbine. And it's really important to know that here in Canada, the Flex turbine has only been really pursued in the energy sector where it's been well adopted, but these applications for prime power or even backup power or CHP applications are very much what the unit was designed for. So enterprise is going to be pursuing more and more of these CHP applications. Here's another CHP application in Canada, but it's right here in our in our energy sector. So this is Seven Generations, which has now been acquired by ARC Resources. And ARC has a total of 22 of these units. And a few of these locations like this, they are actually operating not just in prime power, but their power and heat. So they're harvesting the heat of the units to be utilized in their facilities right at this particular gas plant. In some other areas, Southern California, this is Applied Medical, a medical manufacturing facility in Lake Forest, California, utilizing three of the 333 units and, of course, the CHP application as well. Also in Southern California at the University of Redlands, another three units are powering and CHP application at this particular university. Also in Southern California, at the Paramount Studios, there are four of the previous model, a 250-kilowatt unit, and that was commissioned back as far as 2012, that Paramount Studios. In Ohio, wastewater treatment center, a singular 333 is being utilized. There's gas collection, heat exchangers and gas compression happening. This was an install that has been working there since Q2 of 2019. Another three units in Pennsylvania, at Pennsylvania General Energy. And of course, these are very, very low volume units. So these are meeting all sorts of local sound regulations and so forth. If you remember those photos at the very early Grande Prairie location at the rec center, when we were walking around the units, we could talk at a regular volume. The sound -- the volume of the units are actually very, very quiet. Very desirable. I hope that gives everybody a little bit of an indication of the versatility, the capabilities of the flex unit. And at this point, I'm going to move it over to our CFO, Warren Cabral to talk about our financials.

Thank you, Des. I'll just go back to a little bit of an overview of where we are with Q2 and what's Q3 looking like for the rest of the year. And as we mentioned before, Q2 was what we are calling a traditional spring breakup quarter where we do see our customers reduce their activity and for those that are new to this, our company and new to this industry is this is common during the spring because of the thawing from the winter season. It becomes very difficult to access sites, road bands get put on by the various provincial and local authorities. And really, the industry and our customers take the time to assess their operations for Q3, Q4 and Q1 of 2026. They get all their permits in place and really provide us as suppliers an idea of what's coming in the next quarters ahead. So we also had a couple of really, really important things happen in the quarter. We did have a new banking facility that we put in place. It's with Bank of Montreal. It's a $40 million facility. And the advantage of the facility is that it provides us with much, much lower borrowing costs and full cost as a whole to maintain the facility and keep it going. And also, the facility is really set up to work with us and manage our growth plans for the future. So we're happy with that. And developing a relationship with the Tier 1 bank is something that we've been working towards over the years, and we're happy that we're able to put that in place. The second significant thing that happened this quarter is the acquisition of Flex Canada. Des mentioned a little bit about the details over there. And I will ask Doug Moak in a few minutes to give us a little bit more color on that acquisition. I mentioned that Q2 was seasonal for us. It was a spring breakup quarter. But we have seen activity increase in quarter 3. July activity was up, August, activity has increased further, and we anticipate that's going to happen through September and into Q4. So we are looking at a significantly higher quarter 3 and quarter 4 than what we had last year. Doug, if you could provide us with a little bit more details on the acquisition, that would be great.

Thank you, Warren. Good afternoon, everybody. A lot of the things I'm going to mention, Des has touched on already, but it is worth reviewing. On May 7, we did close an all-share transaction to acquire Flex Canada from Flex USA for $20 million. This deal on the surface, even though it's a share transaction, looks like it's 17 natural gas turbines that adds to our existing fleet of those exact same units, but there's different levels to this acquisition as well. As Des mentioned, these turbines come with long-term rental agreements anywhere from 1 to 3 years. And typically, what we see is at the end of the contract, these customers renew and re-up. It's a good level of cash flow for us. Along with that, we've also have the Flex Maintenance program, which Des also touched on. This is really like your used car program that you get at your local dealership. We get paid a fee and these contracts can be up to 10 years. We get paid a monthly fee to service and maintain these contracts to maintain these units. We have the staff of turbine technicians that were factory trained from Flex Canada, Flex USA. They have the capability to maintain service and repair these units. And they are all OEM factory trained. With that, we also have the exclusivity for all of Canada. So this exclusivity agreement we expanded from BC and Alberta to across Canada. It includes the sales of the units. It includes the rental of the units. Includes the service of units. We can service every unit in Canada. We can rent anywhere in Canada, we can expand anywhere in Canada. With the -- one of the other parts that we got that's very exciting. We have an engineer on staff that came with the acquisition. He is a turbine specialist, he has over 20 years of experience in the turbine industry, both in Europe and in Canada. He's been trained across multiple industries and multiple applications of this. And as Des was talking about, he's very well experienced in the compound heating and power application. With the addition of these 17 units, we've been really able to expand the boat that we've had and increase those barriers to entry into Canada. The natural gas power industry is in its infancy. As Des mentioned, we've only got about 18% of the industry. We are looking to expand on that. Since the acquisition, we rebranded Flex Canada to Evolution Power Solutions. We have a really good history with the seller of Flex USA. We've been dealing with them for about the last 5 years, purchasing their units, deploying their units. That relationship has been really, really good relationship. They are very interested in seeing us grow this and expanding across Canada, which they weren't able to do. For us, Flex U.S., Flex Canada and Evolution Power Solutions, Evolution Power Projects, we share the same people. We share the same customers. We're able to cross-pollinate our industries and really see these synergies working well. With that, I'm going to turn this back over to Len. Len, do you have anything you'd like to add to this?

Yes. So thank you, Doug. Warren, Des. Guys, a great update on the operations, the way they stand, Warren, with the financials. What's exciting for us is that we're starting to see the opportunities that the acquisition of Flex Canada are creating for us to diversify away from just the oil and gas industry, which is basically where we've been. I mean, we've been here for 20 years, 21 years, we've gone through the ups and downs, and we finally found an opportunity that's going to allow us to diversify out of just the oil and gas industry. And we're pretty excited about it. There are some great opportunities, there's a lot of great news coming up in front of us here. So what I'd like to do in the webinar with is that -- we look forward to seeing the Enterprise move in a new diversified direction, becoming more of a power solutions company rather than just an oil and gas service company leading to a potential rebranding of the company to more show investors the business that we're in. Power is definitely taking over Enterprise's business going forward, and we like to show that to investors going forward. So you will see a potential rebranding of the company in the near future. We're excited about it. We're all investors. We own 28%, 29% of the company. And we're excited about where we're going. So we appreciate your time. We appreciate you guys taking the time to hear our story, and we welcome you to answer your questions for you.

Super -- thank you, We do have quite a few questions in the queue. A lot of them are repetitive, so I'll consolidate those and sort of give one question, and we'll get going. So first question is on the subject of modes. Can you just talk about what this proprietary nature is of these turbines? And why can't any other company with deep pockets produce a similar product? Maybe touch on competition that you guys go up against as it relates to natural gas.

Well, certainly, I'll take that. I guess, like I explained earlier, these were purpose built for this type of a CHP application, I guess in the world of micro turbines, which are 0.5 megawatt and under, I guess, your -- anybody would be free to, with deep pockets, to go ahead and develop that. There's really only three recognized microturbine manufacturers in the world. We've tried them. We've one of the other U.S. built units. We have six of them in the fleet. They simply do not perform in the extreme conditions that we are operating in. We chose not to build our fleet around that particular unit, and we started to build around the fleet of the Flex, which is the one that performs at 99.5% uptime. So the other -- one of the other microturbine manufacturer is from Europe, there's only 10 of them installed. They're heavy, they're overbuilt. They're not -- they won't operate equivalent to what we have here in the Flex unit in the extremes. There's no units in North or South America. So it's a pretty light crew. You got to remember, in this class, of a microturbine. This is very well managed, as I said earlier, for the commercial and industrial. People need to also understand that these can be paired together so we can have multiple of these units. If the client's power needs are a megawatt, then we would pair together 3 333 units to match that power load as you could see on some of the case studies that I alluded to earlier. Some are singular units, 2, 3, sometimes 4, depending on the power needs, they can be matched by the number of units operating in parallel. The class of unit when we're looking at Pratt & Whitney or GE or Mitsubishi or Siemens, those tend to be much larger turbine applications more of a utility grade or utility size of the unit. And there are two very different classes of turbines. I hope that answers your question.

I'd like to add that also you can go out there and buy the turbines, whichever one you want to try, but you still have to have the infrastructure to win the client. You still have to have all day the light towers and heaters and generators and buildings to everything else that they want. They don't want to just drop off a turbine at their doorstep. And away you go. So we welcome the competition.

Len brings a good point. getting any power generator is one thing. I mean, you could go to United Rentals or Cooper Rentals and pick up a generator. But you'll get any service from it, you'd have to go pick it up. It's a storefront. I mean we are -- when we put a mobile power system, whether it's a project or an emergency power situation, we deliver, setup and we make sure that it's operating at all times. That's our obligation. And that's a service level that is not found everywhere as well. Just a little indicator.

I've got a couple of questions, comments on this topic. So maybe you could just -- I'll say it this way, and you could address it. And especially given that some of the slides referenced case studies out of the U.S. was the FlexPower acquisition only for the Canadian operations of the company? And do you have the ability to sell or lease into the U.S. with this product?

Yes, it's Canada only. So we are the OEM representative, I think, as I and Doug alluded to. We've just taken over their Canadian business. Doug also mentioned the two management teams have developed quite a desirable working relationship. One of the reasons that it was a good opportunity for Flex USA to sell their business to Enterprise is that they realized that the attention the Canadian market required to really grow it, they didn't have the attention or the ability to pursue that as well as we were. We're well funded. We're very advanced in our operations and what have you. And we're very enthusiastic about the opportunity. The Flex USA business has a very robust market for themselves in the U.S. And this is often where there's an American mothership and there's a Canadian division. Canada is always seen as a sub-10% of the U.S. market. It usually gets less attention. This was an opportunity to turbo lift the Canadian market by Enterprise taking over the representation of Flex, and they can operate their global opportunities and their robust U.S. marketplace. So it really was a 1 plus 1 equals 3 for Flex USA. Now going forward, as I mentioned before, Flex when they own the Canadian division, they really -- they only pursued the energy sector that very well adopted this unit over the last 15 years. They didn't pursue these other combined heat and power and other types of industrial and commercial applications. They just simply were going for the low-hanging fruit. It's not a knock, it's just that was what they were willing to enter the Canadian market, and that's what they developed. It was just purely the energy sector. So we now have at our opportunity is the entire Canadian market across all applications which I tried to present that the Flex unit has way more installation opportunities than just the energy sector using it for power.

Can you talk about the payback periods on deploying a new turbine on a longer-term contract? Doug?

What we do is we don't talk specifics about a turbine or a contract or anything like that, but we kind of have a rule of thumb when we're looking at larger acquisitions of equipment as we want the payback to be I'll say, less than 3 years of the term. That does vary, obviously, with the equipment and the diversity of equipment we have. And we do also -- a lot of these units that we're talking about, these turbines go out as packages. They don't just go out as individual units. And so in the package, you'll have everything from distribution panels according to light towers to other supporting equipment all of which have various periods of payback time. So I think comfortably, it would be between 2 and 3 years.

Super. Thank you. A number of questions on this topic, but I think this one particular question summarizes it at all, and I'll let you answer the question. Can you expand more on what other industry you expect to diversify into? And what stages that these diversification efforts are at?

Right. We have spoke about the mining industry, just like the energy sector, it's a hand fits glove opportunity when they're building -- at the initiation of a mine when they're building out the mine, this is a tremendous opportunity to displace diesel would be no different in a build-out of a mine, be utilized with diesel generators and so forth. So the opportunity to displace diesel, bring in the nat gas turbine generation the microgrid opportunity at this location will be no different than the energy sector. Compressed natural gas would be brought into the -- on to site. We're going to talk, not today, but there's going to be more to talk about some synergies with the compressed natural gas suppliers that we're working with, more on that maybe next week. But the mining industry, we are having discussions. We've said this before. We're looking at an opportunity, both in Northern BC and Northwestern Ontario. But the mining industry is one we are pursuing, and we have had discussions, so we expect to have some advancement on the mining industry. Further than that, I think when you look at the expansion or the business development expansion that we're also going through, as I explained with the with the cogen operations, the combined heat and power applications of the unit, we are now drilling down on the build and design engineering firms. For example, just like that Grande Prairie rec center that 4 years ago, they installed the 2 units as primary power and cogen. Those are many more opportunities to be had. So the build and design firms that are hired or brought on to build a building or any kind of industrial or municipality building. They need to know that this CHP opportunity is a money saver and an emission saver. So we are -- our business development expansion is going out to the build and design firm so that they know they're educated that this is an opportunity for prime power and CHP. So that is one that we have started to develop more on that as we build it out. That those are longer lead time sales funnels, but we have started that expansion with the build and design firms.

Super. Thank you. Can you talk about the total number of turbines now in service after the most recent acquisition?

Warren, is that something you can touch on? Something we -- it's one class of our equipment, obviously. So we, for competitive reasons, we like to be a little reserved on that. But Warren, can you add to that?

Sure. I mean we do look at our systems more as power systems as opposed to selecting an individual piece of equipment like the turbine. So with the acquisition, I mean, we are in the range of pretty close to 60 power systems that we can deploy with all of the disciplines and all the different types of, I'll say, turbines and generators that we have on the natural gas side. That's just on the natural gas side.

Okay, super. And can you talk on how many of these that are deployed are rent versus own? Again, if it's something that you can't for competitive reasons, we understand.

Oh, I mean, as kind of what was mentioned with the acquisition, how many turbines we acquired plus our existing fleet, those are all units that we rent over different terms, whether it's shorter term or longer term. The units that are owned. I mean, they have been purchased by the individual companies to use those. And on many of those, that's where our Flex Care agreements come in. And so we have the long-term maintenance agreements on those units that have been individually owned. We're not kind of at the position to say how many there are out there as far as individually owned units, but all of our units are rented.

Okay. Can you talk about any challenges you foresee or you face as you intend to grow your customer base and the adoption of these natural gas turbines?

Well, I mean challenges right now. Obviously, we've got Canada as the boundary. And we -- all our infrastructure is located here in Western Canada. So obviously, some challenges are going to be regionally. Obviously, we, to capitalize on the opportunities that are in front of us. We are increasing our business development team. I don't want to say that's a tremendous challenge. I mean -- but we are building that out on an employee basis, but obviously, to develop business across the country, we're going to have to start to look at the opportunities to expand our office and yard infrastructure. And I don't see it as a monumental challenge, but growing outside the provinces that we're already in, we'll have -- there are some challenges. Warren, Len, any other challenges you see in your?

Well, just like you had mentioned earlier, is that natural gas in North America, it's the cheapest source of creating power almost in the whole world. So the opportunities are there for us. I mean you got to understand that it's only been a couple of years, and we brought on our brand-new process that the industry hasn't ever seen before. And now we're kind of getting out there and showing them. There's a little bit of a tutorial to show them how it works. And we constantly have site visits where we have new customers coming out to see what's going on. And after 2 or 3 months, they're in. The C-suite buys it. guys on the ground are the ones that fight back a little bit, but we're knocking them down. And like Des mentioned, there's a lot of news coming out in the next 3 months that we're pretty excited about. S.

A few questions around tariffs. Maybe comment on the impact of tariffs south of the border, if any, now or in the future? Did you foresee?

Yes, we've been monitoring, obviously, what to monitor really is the Canadian retaliatory response. They came out with -- there's a government linked for it. We look at it from time to time. There was -- the initial list that I think came out in -- I'm going to say, February, early March, it has been added to. But what I can tell you so far is that heavy-duty equipment or turbine units or what have you, are not on it at all. So the only thing I read into it is obviously, out of the U.S., you have Caterpillar, you have John Deere. So the construction equipment, agricultural equipment, or anything that would be in the heavy-duty equipment class has been neglected so far. There haven't been any tariffs put on it. And we all must remember that anything's U.S. MCA compliant still gets an exemption. So much of this heavy equipment is still U.S. MCA compliant. But as we know, that landscape can change from day to day, week to week. But at the moment, we can say that we -- anything we're bringing from the United States manufacturers so far have not been impacted by tariffs.

A couple of questions on this. Have you considered blending hydrogen with the natural gas?

First of all, our turbines can take a combination of hydrogen and natural gas. So the opportunity is there. I think what's more important is -- the hydrogen economy is -- it's not even at the thin end of the wedge. We don't have a hydrogen economy yet. If there becomes a more mature hydrogen economy, yes, hydrogen can be utilized in our turbine fleet.

Can you talk a little bit about your customer concentration percentage of revenue from your top clients and how the acquisition has impacted this?

We do disclose our regular MD&A and financial statements, some top customer concentration as we're required to. Those customers remain in the energy industry at this point in time. And although the acquisition has provided some diversification away from the energy industry. And as we've kind of alluded to in this presentation and directly said, we are also going to power route is that's where we see the growth of the company going forward. So we do see a shift towards our top customers being energy-based customers, and a move towards those top customers becoming power-based customers. But that shift is going to -- has started, and it's going to continue throughout our growth cycle going forward.

Des, on some of your slides, you referenced emission data. Can you comment on how you measure that data?

Well, there's -- and I won't be a very good explainer of this, but there are regulatory guidelines on emissions monitoring and reporting. So the emissions you would see on those charts would have been done compliant to those emissions, third-party, they come on to site. They take samples of exhaust and ambient at the ambient location, and they're properly reported. I don't know. Am I answering that question correctly? Is that the gist of the...

I guess the question was more specific to a specific piece of equipment, but it sounds like these are industry standards, and that's where those measurements come from.

Third party?

Yes, it is. And they're bound by governance in their particular industry. Let me tell you, the environmental sector in Canada or in the U.S. or what have you, is highly regulated and to certify any kind of an emissions result it's a mature regulatory or regulated service or I guess you know what I'm getting at. So it wasn't ours or Flex USA's numbers, it would have been a certified service provider of emissions. I mean we have our -- there is actually equipment that is certified specific for that. And I mean we own some of our own to do that, but you would always have to have a third-party certified emissions provider. We do it for all of our equipment in-house. So we know what's what and so forth. But anything that is advertised would have to be regulated by a third-party provider.

All the large companies, they need to have third-party audits for their financial statements for them to get their credits.

I mean that's an industry all on its own.

Yes. Exactly. And we're not in it.

Perfect. A couple of questions around this topic. So I'll combine them. Can you just talk about your current sales force and give your thoughts on how that sales force needs to grow in order to sort of meet all of the potential demand that's coming your way?

Well, the sales force as it is today, we have our own existing what prior to the acquisition of Flex Canada. We have a VP of Business Development that is situated in downtown Calgary. We have a very mature field staff that are on the business development side. Along with the acquisition came a business development leader that has been with the company, I think, approaching 10 years. Flex Canada was initiated, I believe, 9.5 years ago, and he was one of the first employees. So he's been with the company for the near decade. He's extremely knowledgeable and he's going to be adding the -- not only the energy sector long-term applications he will be handling much of the build and design interface that we -- I mentioned 10, 15 minutes ago. But we are expanding business development regionally as well. So Eastern Canada is going to be soon having its own representation of a business development personnel of the company.

Super. And I'm just doing a time check. I noticed we're just short of the hour. So I'll ask one more question, and then Len, I'll let you have some closing remarks. I think again, we covered a lot of topics here. Reminder, this wasn't an earnings call, so very specific questions related to earnings, please send me an e-mail, and I'll see if these could be addressed outside of this forum. And if you still have a question that's remaining, just again, reach out to myself or Frank, Glen or [email protected], and we'll be happy to get those answered for you. And your last question, guys. What's your strategy around capital deployment? How are you seeing further opportunities across acquisitions or fleet modernization? And how are you thinking about balancing the strategic growth path you're on with the continued share buybacks or debt reduction or your views on a dividend?

I'll just jump in. There's no talk of a dividend most of our capital is going to CapEx. The demand going forward here is actually showing to be a very robust for us. So we're not big debt people, so you won't see us leverage debt. There's no reason to go back to the capital markets for anything at this point in time. So it's growth by CapEx right now and moving the company forward without dividends for sure.

Super, Len, some closing remarks?

Yes. So thank you, everybody, for joining us for this webinar. I'm sure there'll be lots of follow-up questions. And as you know, we're always available to take those calls or e-mails whatever you like. But it's really important to know that we wanted to get across the fact that we are diversifying away from the oil and gas industry. And the opportunities are in front of us with the acquisition of Flex Canada, it gives us an opportunity to move in that direction, which is going to be very, very profitable for the company going forward. And there's a lot of very exciting opportunities that are in front of us that we're going to capitalize on and we're going to move things forward. And the other opportunity that's there is that we are moving into becoming more of a power solutions company that will lead us to a rebranding of the company in the future. And we're excited about that and we're excited about the opportunities that are in front of us that we can achieve.

Super. Len, thank you. Des, Warren, Doug, thank you very much. And to our audience, thank you for joining. This concludes this presentation.

Thank you all.

Thank you and cheers.

Thank you everybody.