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Enerflex Ltd
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Good day, ladies and gentlemen, and welcome to the Enerflex Fourth Quarter and Year-End 2018 Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Blair Goertzen, Enerflex President and Chief Executive Officer. Sir, you may begin.
All right. Thank you, Daniel. Good morning, everyone, and thank you for joining us this morning. And here with me today is James Harbilas, Enerflex' Executive Vice President, Chief Financial Officer; as well as Marc Rossiter, Executive Vice President, Chief Operating Officer. So prior to commencing the review of the financial results, yesterday, I announced my intention to retire as President, Chief Executive Officer of Enerflex effective May 3, 2019, and will not be standing for reelection to the Board of Directors. Marc Rossiter will be appointed President and CEO upon my retirement and will stand for election to the board at the meeting of the shareholders, and I'll continue with Enerflex on through to May 31, working alongside Marc, just to finalize any last-minute needs of the transition that's been going on for some time.So now moving on to the important part of the financial results. During the call, James and I will be providing our financial results for 3 months ended December 31, 2018, a brief commentary on the performance of the 3 business segments and a summary of our financial position.Approximately 1 hour following the completion of this call, a recording will be available on our website under the Investors section. During this call, unless otherwise stated, we will be referring to the 3 months ended December 31, 2018, compared to the same period in 2017. I will proceed on the basis that you have all taken the opportunity to read yesterday's press release.Enerflex' fourth quarter financial results were highlighted by record bookings and backlog, breaking the previous record established in the third quarter of 2018. Bookings of $677 million were driven by several major project wins in the U.S. and Canada segments. The USA segment continues to benefit from large international bookings for projects to be manufactured in our Houston fabrication facility, which totaled $200 million in the fourth quarter. Bidding activity for Engineered Systems remained strong, and the company continues to see interest for our Rental and BOOM solutions in the USA and Rest of World segments. However, after consecutive record booking quarters, Enerflex does expect quarterly bookings in 2019 to more -- to be more in line with its historical activity. Engineered Systems backlog has continued to grow significantly and stands at over $1.4 billion at December 31, 2018, of which approximately 80% is composed of equipment-only orders. This backlog provides good visibility for Engineered Systems revenue through 2019 and on into 2020. Enerflex continues to focus on opportunities to increase recurring revenue from our Rental and Service product offerings. In the USA, the company has concentrated on organically expanding the contract compression business. While internationally, recent successes with long-term Build-Own-Operate-Maintain projects continued in the quarter with the award of 2 additional 10-year contracts, bringing our recent total to 4. Now looking to our regions. In the United States, strengthening commodity prices, lower corporate tax rates and investment in shale oil and gas has resulted in significant increases in activity levels across the region. Enerflex is seeing steady demand for both compression and processing solutions needed to provide takeaway capacity and maximize the value of extracted gas. Continued development in key resource plays should translate into further demand for Enerflex' Engineered Systems products as well as contract compression solutions to improve performance in maturing fields.As we look forward, Enerflex remains focused on building its successes for Engineered Systems products in various prolific liquid-rich plays. The company is seeing significant demand in the USA over the past 2 years, and there continues to be a strong bid pipeline for future project work. Enerflex continues to monitor egress issues in the Permian for any potential slowdown in product inquiries related to the basin. Our optimism is reinforced by the anticipated resolution of these egress issues in the latter half of 2019 as well as increased activity in other USA basins where we are positioned to capitalize on opportunities.The acquisition of rental assets in 2017 added an established and growing platform that contributed to increasing recurring revenues for the segment. During the quarter, Enerflex invested $45 million in rental assets in the USA, continuing the organic expansion of the USA rental fleet which has grown 44% since the acquisition of Mesa, totaling approximately 210,000 horsepower. Enerflex remains focused on investing in these assets as production in West Texas and other regions continue to expand. The company sees additional potential in this high-growth market. Rest of World delivered improved results across all product offerings, resulting in increased profitability. Opportunities remained strong in many of the regions covered by this segment. Looking specifically at the Middle East. This region continues to provide stable rental earnings with a fleet that consists of approximately 100,000 horsepower. We are seeing opportunities across this diverse region, including in Kuwait, Bahrain and Oman, and we're successful in securing a 10-year Build-Own-Operate-Maintain project in the quarter. In addition, the company is exploring new markets and opportunities in order to enhance recurring revenues with a continued focus on Build-Own-Operate-Maintain projects.In Latin America, Enerflex remains optimistic about the outlook as customers recover from soft commodity prices. The company believes there are near-term prospects within Argentina, Brazil and Colombia and mid- to longer-term prospects in Mexico. During the quarter, Enerflex was awarded a 10-year Build-Own-Operate-Maintain contract and signed additional long-term service rental contracts with producers in the region. In Brazil, Enerflex secured a 10-year contract to provide a natural gas treatment facility in the third quarter of 2018 and significant progress was made on the project. As capital investments increase to develop Colombia's natural gas infrastructure, there will be further opportunities for Enerflex' products and services. In Mexico, a portion of the contracts in the company's fleet will expire in June of 2019, and Enerflex elected not to participate in the bid process to replace those contracts. The company expects to be able to redeploy these assets to potential projects in other regions where more project certainty and for stronger returns.The company's positive outlook, backlog and continued high inquiry levels, particularly in the USA and Rest of World segments, provides strong support for additional manufacturing capacity to meet demands in these segments. Given the current and anticipated future project requirements, the company is currently expanding the square footage of its Houston fabrication facility by 55%, adding approximately 100,000 square feet. Construction on the expansion has progressed well and is expected to be fully operational in the second quarter of 2019.In the Canadian region, the oil and natural gas industry remained somewhat constrained by a negative sentiment and a lack of consistent access to market. However, there has been an increased activity in the midstream sector to maximize the value of production. This has been reflected in the bookings in the quarter, which totaled $219 million, driven by multiple project wins. Despite recent progress and transportation issues and optimism for liquefied natural gas projects, these remain somewhat uncertain in the Canadian market as 2019 unfolds.For the first time in recent years, every region has a clear line of sight on revenue growth, a function of the company's healthy backlog and a robust bid pipeline for project work. We continue to monitor the impacts of volatility in commodity prices, political uncertainty, Permian egress issues and a lack of consistent access to the market in Canada, any of which could reduce demand for the company's products and services in the future. I will now turn it over to James Harbilas, Enerflex' Executive Vice President and Chief Financial Officer, to review our financial results.
Thank you, Blair. Revenues of $467 million for the quarter reflect improved results across all product lines. Service revenues increased by $13 million driven by strength in the USA segment. Enerflex' Service and Rental product lines benefited from the company's focus on increasing recurring revenue streams and from higher activity levels, while Engineered Systems benefited from increased bookings in recent quarters and a strong opening backlog. Consolidated gross margin for the quarter was $82 million compared to $84 million as a result of lower gross margin percentage. The fourth quarter of 2018 included higher estimated costs to complete certain equipment orders in the USA and an ITK project in the Rest of World segment. Selling, general and administrative expenses were $34 million, $4 million lower than the comparable period due to cost recoveries related to the OOCEP arbitration and lower third-party costs associated with this arbitration, partially offset by higher compensation costs and foreign exchange impacts. Higher compensation costs was a result of a larger workforce in the USA segment. EBIT for the quarter was $48 million driven by lower SG&A, which was partially offset by lower gross margin. During the quarter, Enerflex generated net earnings from operations of $32 million or $0.37 per share compared to net earnings of $27 million or $0.30 per share in 2017. Adjusted EBITDA was $65 million versus $68 million in the prior year. The decrease in adjusted EBITDA was largely driven by lower margins, as previously mentioned.During the quarter, Enerflex received the final ruling related to the OOCEP arbitration with the tribunal awarding Enerflex $13 million for costs and expenses incurred as part of the proceedings and dismissing OOCEP's claims for costs.Moving on to our regional results. In the USA segment, Enerflex' bookings of $451 million represented a significant increase of 181% when compared to the fourth quarter of 2017. We continue to see strong demand in this region for a variety of product offerings spread across numerous resource basins. Backlog at the end of the period was $931 million, which represents the highest level of backlog for this region, exceeding the record set in the third quarter of 2018. During the fourth quarter, revenue in the USA was $297 million. This increase of $92 million was largely due to higher Engineered Systems revenue as a result of the realization of strong bookings in recent quarters and continued progress on some large projects. Service revenue saw an increase due to higher activity levels, while Rental revenues improved as a result of the acquisition of the contract compression business and the organic growth of the fleet over the last half of 2017 and throughout 2018. Operating income increased to $24 million driven by higher revenues across all product lines and lower warranty costs due to improving warranty experience rates, partially offset by higher-than-projected costs impacting gross margin on certain projects as well as higher SG&A costs. Increases in SG&A were driven by compensation costs on a larger workforce and increased profit share on improved operating results.In the Rest of World, the $7 million of bookings relates to projects in Australia, MEA and Colombia. This segment's bookings are typically larger in nature, and as a result, are less frequent. We want to remind listeners that, in addition, certain equipment orders from -- totaling $200 million from the international region are included as bookings in the USA segment as they will be manufactured in Houston. Backlog of $75 million at December 31, 2018, decreased compared to December 31, 2017, due to Engineered Systems revenue outpacing bookings in 2018. Revenue in the Rest of World segment for the fourth quarter was $102 million. This increase of $17 million was attributable to higher Engineered Systems and Service revenues. Engineered Systems revenues improved due to projects in MEA, while the increase in Service revenues was largely due to higher activity levels in Australia. Rental revenue was consistent year-over-year with slightly decreased utilization rates in Mexico being offset by Rental revenues on the Build-Own-Operate-Maintain project in Colombia that commenced operations in the first quarter of this year. Operating income of $18 million represents a $5 million increase over the same period of 2017. This improvement was the result of higher revenues and a reduction in SG&A costs, partially offset by lower project margins in MEA on certain projects. The decrease in SG&A costs was largely driven by cost recoveries related to the OOCEP arbitration and lower third-party costs associated with this arbitration, which was offset by some negative foreign exchange impacts in Mexico. Turning to Canada. Several major project wins drove bookings of $219 million, an increase of $188 million compared to the same period in 2017. This market is seeing investment focused in the midstream sector where Enerflex offer solutions to maximize the value of Canadian production, and the near-term bid pipeline remains healthy. Revenue in Canada was $68 million as compared to $160 million in the fourth quarter of 2017. This decrease is primarily attributable to lower Engineered Systems revenue when compared to the stronger quarter in 2017, which resulted from weaker bookings in the first half of 2018. Service revenues increased due to part sales, while Rental revenues decreased from the prior year due to lower associated equipment sales. Operating income decreased by $6 million due to lower gross margins from reduced revenue, partially offset by improved project margins. SG&A costs were consistent with the comparable period in 2017. Turning to the balance sheet. Enerflex continues to spend capital on rental equipment to expand the fleet in the U.S. and Rest of World segments, which is consistent with our strategic objective of increasing recurring revenue. The company also remains diligent in managing working capital to retain flexibility to pursue opportunities as they arise.In managing liquidity, the company has access to a significant portion of its bank facility for future drawings to meet the company's future growth targets. As at December 31, 2018, the company held cash and cash equivalents of $327 million and had drawn $125 million against the bank facility, leaving it with access to $572 million for future drawings. The company continues to meet its bank facility covenant requirements with a bank-adjusted net debt-to-EBITDA ratio of 0.5:1 and an interest coverage ratio of greater than 12x.Demand for natural gas is growing globally, and stronger commodity prices throughout 2018 have allowed our customers to increase capital spending in production, which is reflected in record bookings and backlog on higher demand for Enerflex' products and services. Strong market conditions in the USA and Rest of World segments and midstream activity in Canada all contributed to exceptional bookings in the quarter. Bidding activity for the Engineered Systems remained strong across all regions. However, the conversion of those opportunities into bookings and backlog has slowed the start 2019. The third and fourth quarters of 2018 benefited from numerous multimillion-dollar project wins, which may not recur in future quarters. And as a result, the company expects quarterly bookings in 2019 to be more in line with historical activity.The company continues to see interest for rentals and Build-Own-Operate-Maintain solutions in the USA and Rest of World segments. Building off the success of adding assets which contributed to recurring revenues, the company remains committed to this strategy in 2019 and going forward.This completes the formal component of the webcast. Additional details can be found in our February 21 press release. We will now be happy to take any questions. Operator?
[Operator Instructions] Our first question comes from Greg Colman of National Bank Financial.
And, Blair, congratulations on the pending retirement, very good career and very exciting.
Thank you.
Getting into questions, starting with the backlog. I think you mentioned, Blair, at the beginning that 80% of the backlog is equipment only. Can you give us a bit of further color as to the composition of the backlog regarding, say, call it, lump sum or firm commitment contracts? And what I'm driving here at, and it's not new question for me, but trying to assess the amount of the backlog, which is exposed to in-the-field work and potentially at the risk of margin hits late in the execution stage on a go forward.
Greg, it's James here. I'll take that question. So the -- obviously, the 80% being equipment only means that we're manufacturing that equipment in our shop on a modular basis, in a controlled environment. So the balance of 20% is ITK or Integrated Turnkey projects that have some construction elements to it and gets executed in the field. So it's that 20% that's exposed to some of that construction risk.
Okay. So call it about $250 million, $300 million of the backlog is work that will be executed in the field?
That's correct.
Got it. Okay. Staying on the backlog for a minute. For the first time in your disclosure, I see some specific mention as to the portion of the U.S. bookings for international projects. I may be wrong on this, but I think it's a first time that you actually kind of called it out with a number, and it's just under $200 million. How does that compare to the portion of U.S. bookings in prior periods that were directed to international projects? And can you give us the color as to what kind of international projects are driving it, onshore, offshore, LNG, dry gas, small-number projects, big-number projects? Just trying to get some color there.
Yes. I mean, we used to disclose that back in 2013, '14 where we actually used to split out our bookings by international and U.S.A. We stopped that, but we wanted to call it out this quarter because we have had some very significant international activity that's going to go through the U.S. shop. We talked about it on our Q3 call that part of the reason that we expanded the Houston facility was the fact that it also serves the international markets, in addition to the Lower 48 and the opportunities that we're seeing there. In terms of how it compares to relative bookings, this is a very strong year from the standpoint of international bookings through the U.S. shop. In terms of the type of projects that it's related to, it's onshore projects, gas processing type of equipment that would be heading for the international regions.
Anything to do with LNG there?
No.
Okay. At $1.5 billion, your backlog is now bigger than a full year of Engineering Systems revenue if we use Q4 as a run rate. And that's even including small stuff that would start and stop within a quarter. I know you're expanding the Houston facility materially, but can you give us an idea of how far in the future that backlog currently extends?
Yes. It gives us, obviously, great visibility through the rest of 2019, probably into the first half of 2020.
Okay. So kind of an 18 month there?
Correct.
And just lastly on the backlog. We've talked a lot in the past about backlog margin versus trailing 12-month revenue margin, and the management team has consistently reinforced that the backlog at current stands at higher-margin work. You added about $700 million of new projects, so I just wanted to refresh that question. Is that still the view of management that the backlog's margin is higher than the trailing 12-month Engineering Systems revenue margin? And also, has that sort of even reinforced, i.e. there's even better margin that's being added or sort of detracted a little bit?
No. Look, we said on the Q3 call that we saw better margins throughout 2018 in the U.S. and Rest of World relative to 2017 if the Q4 bookings would be consistent with that pattern that we observed in the early part of 2018. So the margins embedded in our backlog are stronger than where they were in 2017, and the reason for that is that we've seen a shift in more processing equipment in the backlog. And that's driven some of that margin improvement in the international and U.S.A. regions.
So better than 2017 or would it be better than 2018 or consistent with 2018?
Well, I'm still talking about 2018 bookings, right, for Q4. So the margins heading into 2019 are stronger.
Got it. Than the 2017 bookings which would be 2018 revenue.
Yes.
Okay. So the view is with the addition of this close to $700 million in new bookings in Q4, you're just being consistent with that stance.
Correct.
Got it. And then this is last for me, and then I'll stop hogging the line. Can you give us any further details on the BOOM contracts that you were awarded in the quarter? Anything on size, either in dollars or horsepower, when you expect them to start? Are they repeat customers or new customers, that kind of thing?
So I can tell you that -- so it was ones -- so the 2 projects, one of them was announced in Q3, right, as a subsequent event. So we booked one new one to bring the total 10-year BOOM portfolio to 4 projects in total. We don't want to talk about individual projects because that gives away competitively sensitive information. But what we can say is that it's a new customer, and it's a 10-year contract. And it will be -- some of the capital that we're going to be -- or some of the equipment that we're going to be using on this project is going to be equipment that's being repurposed, idle equipment that will be put into this project and repurposed.
So can you give us an idea as to the aggregate size of the 4 BOOM contracts without detailing the individual ones?
Well, I gave you the 3 in the third quarter. If I give you the fourth one now, you'll just back into the fourth one in terms of information. So no shot.
And our next question comes from Aaron MacNeil with TD Securities.
Blair, I guess I'll join the chorus of congratulating you on your success over the years. And, Marc, congratulations on the promotion.
Thank you.
Thank you.
So first question. Over the last couple of weeks, we've seen several Permian E&Ps write down oil reserves based on well spacing and write up gas reserves based on higher gas/oil ratios. And so I guess I'm just wondering how you think of both the negative read-through for your customers and the potential positive read-throughs for Enerflex. And maybe I'll ask as well, has anything really changed in the basin for you over the last few weeks or months in terms of the bid pipeline?
Yes. So let me answer the last question first. And no, nothing's really changed. And I think that part of the commentary when we talk about both regions in North America about the conversion rates slowing, I think that's been a change that we'd want to recognize. But the bid pipeline still remains pretty robust in both Canada and in the U.S., and so the macro events that occur within -- certainly within Canada, there has been such a malaise in Canada for an extended period of time that 2 or 3 weeks doesn't really change. I think there needs to be a longer kind of runway to digest that information. And so for us, we haven't seen any change. And whether it does change or not, I think it will take just a little bit more time for that to trickle down. But obviously, with 99% of our business related to natural gas demand and production, any time there is an inflection where natural gas demand and production has an opportunity to increase, it has a good news story for us. And that's something that, from a marketing and a market research standpoint, that we're very aware of and what those impacts are. And even with respect to the 2 large plants that were announced, one recently with Pembina and Inter Pipe previously, those also have an opportunity for propane takeaway capacity and inputs in future months and years as well. So those are all kind of -- there's some good news, things that are happening out there, certainly in the Canadian region, but it's just going to take some, I think, time for that to manifest into a more positive and tangible result for us.
Yes. So just bringing it back, I guess, to the Permian and in terms of your customers with the reserves and maybe reduced growth as well, like, are you seeing there demand for compression or processing equipment change materially? Or is it still going along at the same clip?
Yes. That's where again conversion rates as well as in the Permian as well has slowed somewhat and certainly with gas lift in certain areas of the Permian as well, so -- but it's not material at this point. And so as they start to look at fixing the egress issues during the next 2 or 3 quarters, again it's common knowledge that this is a strong drive with purpose in the Permian Basin, then we'll just have to see how the next 1 or 2 quarters kind of play out. But we're not seeing anything material -- negatively material happen to us yet in the Permian.
Okay. And then maybe this one is for James. But when you suggest that bookings will return to historical activity, can you say what time period you're referring to? And I realize it's impossible exercise, but can you share any guidance for potential 2019 bookings that you might have internally?
Well, so the comment that we made was more directed towards the fact that we expect that key -- and just to build on Blair's comments that Q1 and Q2 would probably be more reflective of historical booking levels that were in the $250 million to $300 million range, if you look at it historically. That's where the -- the inquired pipeline remains strong. And if I compared it to where it was last year at this time, the quote log is very similar in the USA, Canada and Rest of World segments for equipment orders in terms of where it was last year. So Q3 and Q4 benefited from some very large bookings that were back-end loaded in Canada and the USA and internationally, so we would expect that the first part of the year would look very similar to where we were in 2018.
[Operator Instructions] Our next question comes from Jon Morrison of CIBC Capital Markets.
Congrats on the incremental BOOM contract. Can you talk about whether the magnitude of the recent 4 awards is a function of continuous growth in bidding activity as more long-term contracts are being tendered internationally? Or is there any noticeable change in your win rate that you've seen in the last, call it, 12 months?
Go ahead, James.
Yes. Sorry about that. So, Jon, I think it's a function of the former. I mean, we have seen an increase in opportunities internationally on the BOOM side. And when we started 2018, we did share with the markets that this is probably the most robust bid pipeline that we had seen internationally for these type of projects in quite some time. And we expect that these type of opportunities will continue to present themselves going forward, especially as markets like Argentina continue to build out the Vaca Muerta. We see more opportunities in Colombia. And then internationally, we continue to see opportunities in our core operating area for these type of projects. Now the one trend that we have seen is that they are becoming longer-term opportunities. What was typically a 5-year BOOM, we're starting to see more 10-year type contract terms being tendered by the market.
Yes. And the gestation period, Jon, for this takes so long that sometimes you're fortunate to get 2 or 3 in succession, but -- and which we were able to do, obviously, over the past 6 months.
Yes. But naturally, assuming 1 a quarter go forward would be a stretch. Are you seeing any -- have you seen any delays or cancellations of large opportunities that you thought were going to come that are now starting to be delayed or nothing at this point?
Nothing at this point.
Okay. As you look at more of these BOOM opportunities, which you've been trying to grow for an extended period of time, does it lead you to have an appetite to go into any countries outside and specifically in the Middle East, outside of the GCC countries where you traditionally operated? Or you'll really stick to the knitting of the countries where you're most active?
I think, Jon, we can develop this in the countries that we're most active. And again, as you mentioned, it's been an extended period of time, which, again, we get a really good education in terms if what we can do and how far we can push the profitability as well and the technical nature. So we really like the places that we're active in today that were mentioned here earlier on the call, and there is opportunity to continue to develop in those geographic regions.
Is there any major concerns about some of the contract rollover in 2019 that you could see on some of the legacy Axip equipment in terms of it not having a home to go to or ultimately the rates that you're charging on the rental side being meaningfully different than where they've been for the last 3 years and you guys have been realizing rental rates?
So we've experienced some of that rollover already in Mexico, which was a big part of the Axip business that we bought. And we're obviously moving some of that equipment into international opportunities that we've been awarded already, Jon. And with some of the assets that will be rolling off here as 2019 unfolds, as we approach the end of 2019, we're going to be moving some of those assets into the U.S. as well so that we can redeploy them into the U.S. rental markets. So we feel that we can increase utilization by deploying them to these BOOM opportunities and defer some new capital spend in the U.S. as we find a home for some of these assets in the U.S. as well at rates that are similar to what we've seen in the past.
Okay. Can you give a little more color on the magnitude of the cash CapEx that you had in the U.S. in the quarter? And ultimately, was any of that speculative or all long-term contract based? And James, can you give us any sort of a thought process around how we should be thinking about 2019 CapEx goalpost at this point? I realize it's contingent upon awards that are yet to come, but any sort of goalpost of base case high-case would be helpful.
Yes. So the CapEx that was spent in the quarter was obviously heavily weighted to the U.S., and it was -- with respect to expansion of the rental fleet, which we talked about in the script and in the press release. But we also obviously expanded the U.S. facility that will be -- that will start -- the expansion will start to be operational late in Q1 and continue right through to April and May of Q2. So that's what the focus of the CapEx spend in Q4 was. Going forward, given the 4 BOOM contracts that we have and the completion of the facility, we're expecting to spend about $150 million to $160 million of CapEx right now for commitments that we have in hand that we will be building out through 2019.
Okay. And just on the equipment side in the U.S., though, that was all contract based and there wasn't anything speculative from a build perspective to meet demand that you thought was going to come for contract compression work? Is that correct?
Most of that was kind of -- there is always going to be a little bit that we're building as a stocking-type program, but north of 85% of that CapEx has been allocated to contracts and will start to generate revenue once it's been deployed in the field.
Maybe this is a good question for Marc. But just on the U.S. margins, they came in a little bit lighter than we would have expected. And obviously, you're a bit counterintuitive relative to the growth in the U.S. rentals business that you had. So any color you can give there would be helpful. And again, was this quarter indicative of what we should expect in the couple coming quarters based on the bookings and throughput in the facility? Or is this perhaps a bit of a low watermark?
Thanks for the question, Jon. Like we said in the MD&A, we experienced higher costs in the quarter in that segment. It's busy, and it's difficult to say if we'll see that going forward, but it's really just the input cost of the Engineering Systems that made the difference.
Okay. Maybe just a final one. From a high-level perspective, were you guys surprised by the level of bookings that ultimately came through in the quarter? And again, going back to the hit rate question, are you experiencing a higher hit rate in any of the geographies where you operate relative to what you would traditionally think is your hit rate in the past?
Well, we weren't surprised because some of those larger projects take a long time to bring along. And as you -- it could take 2 or 3 months to kind of get the final Ts and Is dotted, so we weren't surprised. I think that, going forward, if we think about the strike rate, I would say that in Canada, we're doing better than we had been doing. I believe that to be true. I think in the U.S., we've been kind of around the same kind of market, I would say, percentage for the past couple of years. But I think that Q4, we probably had a bit more market share than we had traditionally as well. So a lot of good things are happening in the organization right now as it starts to gel around the people and the process that we've been working on for a long time.
Blair, congrats on retirement. Personally, I'm betting on you getting bored fairly quickly, but I genuinely hope you enjoy the next chapter and some more time with the family.
Yes. Thanks so much, Jon. I appreciate that.
So my money is on him getting bored, too.
Yes. I've got 6 hours is my guess but appreciate the color.
And our next question comes from Greg Colman with National Bank Financial.
Sorry, just a follow-up here, James, with some of your comments and then to one of the ones that Morrison was mentioning there. Can you quantify, at all, the excess cost in the quarter, the overruns in the U.S. and the international LSTK work you mentioned? If it had been sort of close to historic levels of execution, what would the EBITDA like if that had been the case?
Yes. Good question, Greg. And yes, I can quantify it. So if you look at the Rest of World segment, that ITK project, which is about 80% complete and we would expect would wrap up late Q2, the impact in the quarter was about, I would say, 4.5% to EBIT margins. And lastly, the EBIT margins in the Rest of World segment was about 4.5% impact.
Got it. 4.5% to that $80 million or 4.5% to the overall Rest of World segment?
No. So 4.5% impact to EBIT margin on Rest of World revenue, right. And then the impact in the U.S. was about 2% to 2.5% to EBIT margins.
And I'm not showing any further questions at this time. I would now like to turn the call back over to Blair Goertzen for any further remarks.
All right. Thanks, operator. And since there are no further questions, I'd like to thank everyone again for joining us on the call this morning. Marc?
Thank you, Blair. I look forward to giving you our first quarter results in May. Have a great weekend, everyone.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program, and you may all disconnect. Everyone, have a wonderful day.