CECO - Earnings call transcript Q1 2024 | CECO Environmental Corp.

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Operator

Good morning, and welcome to the CECO Environmental First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. . I would now like to turn the conference over to Steven Hooser, Investor Relations. Please go ahead.

Steven Hooser

Thank you, Howard, and thank you for joining us for the CECO Environmental First Quarter 2024 Earnings Call.

me Johansson, Todd Officer. Chief with Officer; Chief call Peter and Financial the today Gleason, is Executive On and Strategy

we the on help be Investor to a like along materials with call begin, can we presentation, webcast website. at Before provided which Relations cecoenviro.com. earnings have presentation is will note be the slide website our section accessed guide that to through our of discussion. our The presentation I'd The

investors XX, Form extent regarding events today's expectations caution based or publicly we including differ may statements. obligation statements. -- Any not I'd on number or the in revise quarter to to those of also estimates SEC from here are and We encourage to materially we are today, statements forward-looking result statements made to results a actual forward-looking Such of presentation based future and by undertake you like any otherwise. subject on implied future expressed March the certain make statements filings, Except new the are risks as our or securities whether that risks XX-Q update laws, results for by in that applicable a are XXXX. described Actual information, forward-looking and historical facts statements. to on no read forward-looking ended required the uncertainties.

financial the of supplemental also measures. the provided Today's GAAP slide provided the reconciliations and to today's non-GAAP non-GAAP in back We today's non-GAAP presentation will tables -- numbers release deck. press include certain references and comparable the in in

Chief Officer. call I'd over Todd? that, now turn with like to Todd the Gleason, Executive And to

Todd Gleason

related and Please our audience, first performance. and takeaways your for to #X continued quarter key highlight to Slide Steven, you thank I will as Thanks, to support. some turn our interest

year outlook. started terms of outlined on touch let in Later, these me us in a of but solid full delivering through this on go position of a quarter, in strong the release, will today's press a just by each As listed slide. which our in financials XXXX detail, highlights we first puts more we few

I approximately million near $XXX backlog record to that pleased levels. am is our of back

by the in which levels, first line to quarter with expectations book-to-bill orders was year. start driven in very our good Our was the

and for First about quarter were good so first how feel and sales record our bottom line top EBITDA off adjusted kicked at levels we line a XXXX. quarter,

gross further and which Importantly, the to our strategic diversifying quarter and excellence by believe operational quarter, overall steadily we record advancing portfolio. our programs margins was demonstrates any highlighted progress for drive

performance free Lastly, was to dramatically our working capital improve very performance. flow year-over-year strong, helping cash our

orders, turning transition with the And in to while about we record energy acquisitions We pursuits, pipeline, breadth and pipeline we especially be allocation. were which over are capital make coming with meaningful in this some didn't QX, sales. could active a QX XXXX and important we and exit excited any of sales balance the of Now years.

We now in announced share back dislocations stock. authorization repurchased May million of since stock the million of During have some we XXXX, took buyback which price XXXX. advantage that the price of million opportunistically stock and remaining leaves short-term $XX we of bought $X $XX -- on CECO quarter,

the activity very we evaluate. to opportunities environment have Turning said, Like a pleased of and not remain quarters, to few M&A we pipeline I we the M&A. the strategic with of any in while announced and transactions quality continue

CECO and to we posted. position focus, our move your to process about I continue thank for ability feel high always, in And as customer drive keep and our will great and all, M&A accountability to All our We meaningful with want forward Team you performance. performance.

to #X. turning Slide Now

bit a little financials. expand more our will on We

strong were approximately million, to were a approximately results $XXX QX timing with XXXX helped up sales into sales I start year. which start and These orders, sales XX% accelerated QX to mentioned, drive $XXX the little to XXXX. at forward that strong same fewer in we by just days the that essentially delivered book-to-bill with came Let's million, delayed project orders of modestly year-over-year. some revenue and of impacted seasonal into related recognition QX and this project aspects flat

points We to up of first near are $XX.X trailing approximately our up is Adjusted result basis, On a EBITDA very of and sales record EBITDA EBITDA growth. and a our sales XXX backlog basis, is strong XX%. visibility a in double-digit basis to year-over-year. On gives trailing XX-month growth, million upcoming XX%. highest XX-month million, history, almost are up quarter periods the EBITDA remain year XX.X% full margins us company committed our great $XX

and also to cash EPS related ability higher expense, offset capital tax flow interest and adjusted reflects Our items to growth. free our needs future working

with to start very these in that pleased and very great results, a position are XXXX. We us we are solid they give confidence

for additional outlook full provides I that, further our financials. of over it the Peter Peter. some provide to after on will hand review commentary With our year I'll

Peter Johansson

morning, today. thank Thank our you everyone. I attending want you, to Good for Todd. earnings call

our a the additional I financial second, of quarter, CECO the the very well performance positive I provide positioned on in year. first First, for key is remainder the X will CECO's objective to starting As year remains note; CECO themes: achieve reinforce color on and

Slide the start to quarter: to highlighting these metrics this strong turning QX X financial $XXX page, profit X% million start they from because On quarter Slide and are EBITDA. during a the X $XX gross and quarter of record level positioning at #X overall for backlog, cover key highlights X, indicators review our our at year-over-year million, for is year-end the by I'm and solid a the XXXX. This Let's remainder left any year. approximately from of end closed backlog the end. of Starting

months. backlog As Todd gives next key to is future the rising growth of and visibility us indicator a for period highlighted earlier, great revenue X-or-so

on on higher margins page. of Gross from XX% continued that level. approximately quarter, for up period deliver improvements, the to XXX profit the which really sequential points Margins above $XX basis higher resulting million ago center XX% and business the are starting in the Moving initiatives points of a are up mix basis, volume QX and basis excellence delivered operational nearing us. project year to from year-over-year a is and XXX

and all ending points. And these right basis this our EBITDA gross follows to to our the you page margins want on the up systems, believe to we ending support growth. as investments we quarter key approximately are organization in to after our margins the business business and are side, trajectory expanding investments year-over-year, add sustainable same that updating capabilities in the with and adjusted and XXX profit, remind that to are continue make resources making technical of commercial I XX% important

performance. leave was and slight I EPS operational to well. $X.XX want that of higher the tax this year-over-year headwind count EPS as Before as of was adjusted up is I $X.XX a expense highlight to we interest page, Share $X.XX overcame quarter in

air, transition. please Slide orders. for a industrial and year-over-year. we'll million And look across the flat were take would you quarter so Orders at X, They balanced water to turn $XXX energy industrial were of essentially

year-over-year that increase was orders Todd to delivered On strong. -- As of the quarter. orders from pushed XXXX we into $XX historically as into $XXX our of by some were a also first TTM almost increased QX booked million. QX an basis, QX million alluded, $XX million quarter in Sequentially,

the are QX, by orders million. We the $XX in with pleased to million potential $XX level be has of which to higher

order have However, anticipated convert than these and to orders formal in a verbal quarter. to for now award confirmation purchase will we realized or and have which be took second longer the been

the half exciting year underpinning incredibly jobs, of realization confidence transition number and our XXXX, many further generation a meaningful segment, and QX quarter, in forward the towards took large the the in of full power in Additionally, energy outlook. steps in second

fact, very view very off bookings already In our successful. reinforce will and to that pace April be QX were strong a

year-over-year XX%. TTM some Please a Sales a the additional now X for X approximately was million On or record over quarter in full full in sales which on is the basis, what was XXXX growth achieved increase to QX to sales. sales XXXX the turn XXXX. in period quarter, $XXX as quarter and company. color sales a by the is same XX% by Sales for sequentially quarter in for million the Organic and to year million year $XX Slide million. the for the same relative reflect outlook, the of $XXX increased $XXX up XX%

Year QX and the fewer locations And Ramadan have Asian revenue QX New be into QX, revenue both and This for can which typically Eastern days or fell quarters our impacting than customer Chinese Middle and the activities. XXXX, our quarter, first in either delivery. largest

of revenue the delays. pushed QX, reduction that sales. explain resulting with the recognition of Todd engineering QX Delays that quarter. the at revenue we the that occur higher recognition been and expense sequential some have approval acceleration now in X to days portion so experienced resolved The release now second helps revenue a step projects will in and down in highlighted

slightly backlog I'll sales conversion. X% ahead record which near concluded X, are revenue XX% sales continues with in highlighting levels. of Slide The of XXXX in our persisting levels our strong QX, record CECO turn backlog. XXXX. ask expect and a at million, position after we to backlog even in strength the of XXXX least backlog quarter you $XXX convert book-to-bill to and orders and a places a at CECO touch outlook. relative remain of we'll to to the year QX full in to representing record of to now on to us record delivered QX quarter opportunity increase CECO's The with in year-on-year, strong

XXXX we execution and of XX on our businesses volumes. the a were driven to higher EBITDA record our with quarter target Margins gross book discussion to the Slide margins mix improved some year-over-year Now that lot this also Starting period. short-cycle which mark. turn meet profit. path on to contributing us has of XXXX, a confidence level, gives let's brands and in with by Improving for project been margin right mid-teens additional contributed high XX.X%, are margins. in improving Improvement largely acquired

select We productivity the supply initiatives, are and chains. our benefit also across see starting of and to operations sourcing

the very early results but positive. these in initial stages are We are of initiatives, the

backlog prior for think closure December about the basis added year, despite the the basis XXX I points points. in sales accounting margins pleased in approximately Short benefit basis versus about of was When of And XX the of was a points XX the mix China cycle entities a further acquired approximately I quarter. driver, the margin from step-up to basis in see another Favorable lower XX of sequential volume. improvement. contributed quarter performance, points completed a last factory in

internal to million profit level to historical points supporting back gross long-term basis basis, TTM mid-teens levels XXX margin by and increasing XXXX, on approximately is a track to XXXX. EBITDA XX.X%. margins by of $XXX almost with targets, up On This XX% is our of target margin

leadership EBITDA. Moving sales for to through XXX from about a adjusted was QX in G&A $XX.X global on productivity investment initiatives. expanding of EBITDA project margins first launch any partially quarter our with leading Dallas, a million, the inaugural global which record offset XXXX and appropriately, record a meeting firm drop sales our by points higher held with quarter in and XX.X%. the to higher basis expenses, benefiting excellence delivered seasonally included X commercial an consulting in sourcing

in not benefit in XXXX year. the and expenses part EBITDA acquired G&A the KEMCO from and absence first businesses CECO the in nonrecurring the of favorable were Transcend impacting items in of a of settlement quarter customer quarter addition from last XXXX, a Other the which were

up increasing internal on targets, the supporting On points by in with to EBITDA EBITDA a track XXX XX% adjusted our XXXX, mid-teens is XXXX $XX XX% basis, target, basis well to million time of frame. and TTM of our again, margins

of I'll year-end Now from to $X $XX XX, finished X.X, cash period, lower and liquidity. XXXX. XX% debt -- year debt higher by with leverage from of our quickly year-over-year Slide ending and ratio and debt-to-EBITDA or gross let's unchanged debt quarter was year-end. million the well Net allowable a million, the $XXX of Net with from our $XX position million than move was levels. below the lower full from ago lower million point max by and was full CECO year-end turn ratio a review net $X X.Xx our by million of quarter our

fully to planned full million, XXXX. covers year Our by $XXX which million $X our capacity investments and increased sequentially for expenditures approximately

million $X and million stock the for Regarding up was million the quarter $X million investments million capital executed in payments. cash, year growth for $X and XXXX approximately ended we and $X $XX operations million Cash performance, of a funded strong seasonal debt million quarter with million our In of approximately million ago business $X made from and -- was the CECO year-end cash the period. system increase management of driven and decrease first $XX cash position, quarter, buyback year-over-year. global offset by from from which working $X CapEx our quarter upgrades, reduction strong Very a in IT $X obligations. an

Now a began, moment intentional business investing like when it about and capacity with Todd let's initially the allocation, Slide to capabilities, a to sustain our in to very capital would you creating capital our we and comes to update XX growth I please the approach opportunity growth. organic would CECO and processes transformation that stated capital brief Stepping thoughtful be enhanced to for back strategy. revisit deployment turn for when take this allocation. on

the will begin industrial air, layer industrial leadership energy results attractive, water would to and in transition. an additional maintain build and consider in complement advance create leadership we And value. with our economics we the to to the to Once lever shareholder comfortable as stock acquisitions leadership trajectory, growth if in buybacks finally, organic were organic and were we

we equipment the executed path will on leadership assess our making continue we we shareholder environment, product positions improve state to strategy past outcomes. further our our while work protect new potentially promise priorities and confident I all laid creating feel stating on results over As their customers' value the on can facilities customers' the -- our while years, industrial confidently our and I adding our delivered And employees this down ones, have that creating out. and to environmental and in protect X-plus protect that the good

at million and the over resources have XXXX, wheel core now page. drive the in side programs to growth starting want position the I XX:XX highlight $XX on of left addition of operational product and we of shown to accomplishments engineering some These investments Starting innovations. the into the to execution sales globally. resources commercial and and global project our include and expanding of commercial our targeted upgrade growth footprint organic including the and teams project in processes, and our across technology invested talented

Dean off support locations to and XXXX growth We on the investment steadily with our business capital expansions and position, pump in to increasing concluded to been and have Wakefield we improve expenditures, support leverage, and our initiative. systems. consolidation high-impact planned current of Fiberock to X:XX tools high targeted Continuing global and our spend and an capacity level ERP and that company-wide Xx Acoustics our kick our XXXX to

and further We consolidations of and XXXX acquired our and sourcing expand as initiatives, productivity increase are planning in and strengthen a we extend our businesses. globally. recently Further launch our upgrade migrations defenses, facilities cybersecurity scale ERP and

the the the at around arrive wheel to M&A Continuing creation value position, X:XX we lever.

our with EV EBITDA over trailing M&A X-plus the X range a been transactions have an years. tightly X We basis. to and selective multiple with to aligned efforts, Xx Transactions programmatic playbook, the paying in executing on past our

balanced our been build can transition assure announced XXXX million focus fund advanced over we very with With close on and industrial $XXX advanced the not comfortable and are complementary half and attractive support plan a can strategy. quarters, of number retain with year. is cushion. of approximately second we that we M&A deal assets active, has believe which a well comfortable the capacity, past X I a are energy and across capital available have we opportunities, can of our I water in you cash Whilst organic for that deployment Our maintain the the still the pipeline air, industrial

remaining briefly stock to our buybacks, moving option. position. I X:XX on And deployment will comment finally, the

XXXX, first $XX quarter, repurchased stock since of $X current purchase our have we of average XX% executed million the million an at million leaving share, approximately in authorization. $XX value, per market price $X.XX below current the on With the

While when did to in as we continue remaining we be quarters, expecting in we QX a not share execute dislocation. in company are opportunistic short-term step balance identify price will and to we the

first strong high-quality his And commentary to a quarter for start heading Todd? remarks. concluding summary setting second outlook to results. my some and our financial XXXX. and CECO's table remaining XXXX take strong of the back concludes through over you quarter now momentum A Todd the additional That with into on

Todd Gleason

respect regarding insights Thanks, financials including with our of there details our recent capital Peter. allocation. the and good performance, you. to lot slide into most Thank

We're going to summary the then to turn go final to slide. Slide our section and Please #XX.

overall we just morning, outlook. November and our produce times we of last could believe we a we guidance are As initiated a guidance, press annual our said, a our reminder, in increased outlook. We mentioned we that have represents over XXXX back month our little XXXX in a which areas That we Today, several ago our year provided QX full full when this strong maintaining see today guidance year release additional earnings. to XXXX as year. upside do our

portfolio, Of arise, issues and and course, challenges, growing conservative to macro end remain chain potential even some to balance could with supply better cetera. extent et that our market we well-diversified

these by confidence We industrial not industrial QX largest enter are air as water in build-out. pursuit which backlog pipeline, as feel the have positioned for well but the we sales high opportunities, mega large programs. additional transition data We as center and transition we for energy some our energy well programs, including only hyperscale includes the jobs ever driven near-record aforementioned

Peter strong a Additionally, sheet, M&A just and a very mentioned, pipeline. we as robust balance have

year. throughout updates as the to forward our So and look we quarter outlook we the providing forward to move any

Now slide. had please high our summary, which year. turn a In quality the to CECO start is to Slide last XX,

our are upside. signaling while reaffirming potential guidance We

the the to at operational look our which updates looking We we opportunities are the the air, are delivering transforming gross order as large into outstanding We QX, industrial year. water show proud our CECO transition throughout a results sales balance. providing to and shareholder remain We excellence. progress we on to in financial respect committed forward well ongoing record industrial across that our of pipeline And especially love steadily energy as with delivers when company the has balance value. geographic high-performance margins,

And with with that, up concluding Operator? to questions, I'll of now I'll it remarks. then couple wrap just a open up and

Operator

comes question Aaron Capital of from [Operator Craig-Hallum first comment Instructions] line or Spychalla Group. Our the from

Aaron Spychalla

be? those the First some how driver emissions a kind energy you that? order on might to more EPA little just recently, opportunities order for could opportunities, here on detail of so better what's a business? How then give wanted me, the of driving rules can big be transition that And for your understand

Todd Gleason

Yes. is to start Todd, a to and well. This EPA make that, as Thanks. transition good with then his additional comments I'll can the as over to get it color orders, and we'll then I'll hand on it few sure we answer a add who energy and Peter, topic relates especially the

particular So order, huge there's number energy with trends, say headline would respect power to one, I no driver in on globally. a but known

a there capabilities started So is globally. new upgrade has or mega power to to investment that add

we'd is long been time, We in a energy. that of seeing America, And to and in wind hole over natural backup it's in at power but to we've seen in solar, building. all transition grid positioned power that North for that if we've ever. some looking And you're investments the regard. think, serve be supply, gas, the in well if the of and always a may like opportunities are continuation larger So from new headlines also, where conversion in I

well others. are in even. these, phase of again, be And advanced we're could $XX in million, a of that But some the jobs of of early these of and million, we're phase multiple $XX potentially of the $XX north Some a few million.

power. it's Now not not of think or oftentimes what just just it is if power people power, it's is

we mentioned, maximizing a power that and centers, throughout as As in with more are I urban centers data and significant already there's the are U.K. data built Europe, areas. potentially backup opportunity those

Wakefield, than suggest have also are geothermal. months themes I opportunities. about acquisition that ago for growing of noise So more XX quite capture were management carbon years order we made an solutions And terms in in position has and might prime and backup active to we are even well now that power we're doing with and ago. energy see in we're nuclear that we attenuation

frankly, basket, of energy large So to centering the around say, It's a is transition mega would energy to still Peter, it's that? I a of power theme topic. opportunities. add you the transition. probably But array want pretty

Peter Johansson

form Aaron an energy. all of today, about the very if a We're generation. electron point. of a interesting inflection source flowing isn't here for Sure. Nothing gather fuel provided us isn't and rest or some it's in power happens to

over on an doing supply are EPA. there's seen What way, that region We're demand. years global actually stake the numbers hit of lead is years, company EPA new. help aspirations about their doing technology have chains eliminate we're They thinking experiencing flat codifying catch to inflection for growth not a converging doing last surprise. a substantial is in We can generation. now all up limited will remark power ground. the the polluting deliver every with put drivers. a my of now most There's And they've that those demand, isn't deliver EPA it. that of many to power the the But prepared point in of form and one lot and major as of XX is They into only and isn't that the companies. many, is and But EPA power just is that to clean the energy after

won't be customers linear climb, a be are It's exciting to Our prepared It an to but be interesting. ride. for it. going very it's going

are we is to The renewables, about interest it's big be what hydro not and entire just of of forms going have of thought to be other historically it's and regard, mix. nuclear renewed to date geothermal out the this because going might see going energy, beneficiary in

essentially target, signaling change. is So their EPA the is mix but although energy has our signaling, is to coal they're

Aaron Spychalla

operational It margin pretty color. the initiatives. sounds that maybe on the performance, like Great just Understood. second then great commentary. appreciate across progress balanced was And I there.

that's progress It and kind just you're year? as rest look towards of sustainable margins Just the like here thinking we sounds from wanted of the to more. understand how

Todd Gleason

our like margin We Yes. story. expansion sustainable

said, back up just of margins the execution, So normalize some I'm The would in associated terms period going me That remove the those have for with because of roughly quarter in to good benefits I the weren't XX.X% just sustainable. use gross and second. or period word modest let if but the did in course, but that, they of that events. were mix in say, execution. sort timing they also And one-timers, you a beneficial

our margins normalized you of margins for near If still great, on XX normalize record that, would and -- our of that, kind certainly than to gross XXX more out levels. a basis run quarter margin rate first gross still are probably coming lower basis, right, the be points

been for on be we've talking well Now introducing with work a over et doing year a done off. paying The portfolio, side. of we've operating products that some there's off. M&A the efficient excellence, of paying been The supply said, as our improve lean, a that to here both margin bit breakout going on regions excellence we've that period we chain a to us new as anticipate for long quality, about our more cetera, work and with in

internationally, stable is growing and growth now, think, off. very which is we Our paying

that years. outlook. in -- the we margin a over continues just in we're company. mid-teens we just guidance, believe really this to we're I feel -- quarterly like path on well confirm to EBITDA go I'll few We to back next a multiyear the again, So believe not annual

Operator

from or Street comment of Brown the from Our Rob Lake Capital line Markets. comes question next

Robert Brown

see sales Just and of wanted order again the on color data that to kind guess, DC in activity you around area. the just the what follow pipeline, up some I -- and on the what's center area pipeline air large do there? Maybe

Todd Gleason

we air of teams great our of continued a isn't job across -- to have Yes. the Well, a do on industries just that stopping. side, diversifying balance, blend

and a have ebbs bit. flows little quarter-to-quarter, We it

handful of then the You faster lull maybe investments of that that up really now of I continued you and air, semiconductor, accelerate, and a even picking they strength a back industries. represents as when across different down replenish know example, times a there sometimes anticipate. it number But in they're industrial slow pipeline. than have of And win are a And jobs, little like for you bit we then again. things

lot but and a be plants We're infrastructure involved news if example, to infrastructure, think about those talking and Air, solar energy capital even sustainable those side industry. be to that starting going you discussions, seeing the energy wind making fabrication for about new in are of that winning and as components the for government You're Industrial contracts energy is for build-outs. you're

has the Industrial other And added. Same balanced of It's se. Not and X the X per with acquisition other and X from Middle in or or industries Air, industrial industrial it water of and real so isn't because DSXX set. a done capabilities. businesses, Very East growth with but regions our water. the global now just just organic that we've

of variety different And applications of becoming investing recent to big to in industrial teams in leadership Compass and we're a and known we We're And of so have potentially excited there that to capabilities. organically are grow. help to And findable, industrial we're those Kemco about as expansion. organic as big, speak, and to companies have water. their well up water. invest huge opened with partners businesses course, markets help them that we strong continue more inorganic also growth looking water industrial Just pipeline really now the acquisitions of are

in It's at And almost And -- excuse I've talking -- years then now across pipeline here. would energy about. my pipeline infrastructure, been as and probably gas that the and all around a almost the since we already solar in talked transition, the about the board, the or X had me, it's whether Peter been of around power, largest CECO. terms natural energy big you're certainly renewables, exciting probably pipeline said, applications I say we've look, energy most energy, as legacy

Robert Brown

operating the leverage Great. then what sort of great here, are gross drivers going from you the margin Okay. targets to the had see Or here? of And go? long-term of do well? in as But expansion you more results Is mostly main kind quarter. here, from on it mid-teens EBITDA from

Todd Gleason

margin to we're did quarter. first I we see year-on-year, Well, just gross expansion the think like going in

that. -- margin strong QX benefit, gross we can anticipate the margins, expansion. temporary And had gross if mean was said that a maintaining but We doesn't maintain so period that we it a quarterly slight might in have

So and a QX, QX jobs, margins as volumes I we QX of the from sales our be work our to as are just quarter Certainly, a bigger period we guess, going like to year-over-year more, globally. which. mentioned, go timing gross up larger few And the we expanding. a sequentially is

we're to the see line going So as well. on conversion volume SG&A

think year-over-year see I And on margins And are expansion. below X to next So really volume be gross over SG&A leverage years. margin. the balanced balanced good consistent to going going gross few you're those

to growth expansion. see that into going EBITDA margin translating You're

to gross and you going X gets we'll and those see the get first You're better to and we -- year got mix translate operating of a then to -- to full get to The excellence to XX% higher margins. XX%. XX% combination for

that of it's a bit stair-step a I anticipating. we're motion think

Peter Johansson

flat -- It's next of of quarters. the you're line. margins -- the as the be sequentially would somewhere that's kind about XXX to the some I If used through to we mid-XXs you're not -- to going X sequential talking and improving earnings X of of step solidified. margin to XX an point TTM out operations you're margin expect would going you we we're calls a improving. organization, really improvement and then expect the we in the showed look components think transforming -- What a -- see as level you or that progress, gross X really We you get processes between waves about up to are chart expansion. rolling doing a gross to see across that to improving ago, the up continue basis things and over We points here the results we're the

and volume get portfolio changes. we full on the the the So benefit G&A of flow-through

the mid-XXs, call you we'll areas So up. But mid-teens a get if other an this plateau Gross we component. not of important see X will, in is once It's -- margin on the is a, to we're in catch gross just margin. dimensions, EBITDA. to I'll rapidly it, improvement just working getting

Operator

Gerry comment Sweeney Our from next or the comes ROTH. from of line question

Gerard Sweeney

board? the the markets. I cetera. strength order areas? any even there there additional year? book, are you year some around where into maybe are other through turning Are you go more excited a think pipeline, importantly, you're very areas see Just even that we as question Or the about on seeing next strength Obviously, across Are could weaker et

Todd Gleason

it's Look, a Gerry. good Yes. question,

still times cycles, investors. us, say seen A we're aluminum industrial certainly So diversified for think look, right? used -- many at this few so ago, we XXXX, I So years bev having to at have was we've I'd is layer, can it benefit example home with see and because being great we categories. maybe a was in a it at more people from beverages year, product fingertips aluminum And market that's canned a important us lot often. of our one a their of

and industries of part making one cetera. in no in a lot it kind of was saw turned was because year. there a said of a XXXX, recovery was XXXX good large because have associated then industry year, COVID slowed we it claims expansion then was over, understood we so Ironically, a wouldn't recovery. where was in a of following in we that publicly capital lot example, that. weaker restrictions, and a way, that because in saw And very and in cycle XXXX, infusion a because capital temporary And And of that the a a et a I have the travel Aluminum metals. that that. next reset down market with then those

are in ISMs in we've but they're a energy, industrial from We're there's weakness PMIs, lot we look, up as we've for have interesting time sure lot using market, been at in and point I not energy and industrial, both come a that's I not midstream, think that like energy we lot we're -- end that know of that down. maintain and energy of since of and et et just cetera, We to term. the frankly. picking cyclical EV think inquiries energy back legacy very, energy years up, of strength production CECO visibility and term. ago, and that talking And balanced. I we're energy of reasons the rich. are remains could significant a people seeing think But a battery short-term of would I a similar probably those would When a would weaknesses now and we're the down that it's of kind still new seen But markets, slowed in energy seeing are balanced areas there. types has year of cycles occur new ones seen ebbs industries. strength that XX flows of in but very cetera, ago the seeing. sort seeing markets look And that of investment that long some those of not about lot consistency transitions, a but there's them, now to use spaces semiconductor, of the to of but some lot seen out only the that upstream, that we're I So consumption. industry, be a said, very still I'm for variety a general across legacy that a have are think But for pockets for I to energy, our downstream, demand say lot of and overall, we a say, very we too, very,

Gerard Sweeney

generation industries. it through -- Got the of everything, different AI, on early cycles? a How front, I probably uptick mean, the in mean, I But innings. lot it. we're permeating are as How long these energy obviously, just though feels energy it's

Todd Gleason

be and AI I'm we asked to app going our So and was stay. long here AI I AI, morning, we into how said to here, this went

pretty feels see sure. out energy that turns aside, in it going Look, that Jokes isn't anywhere. and cycles it fakes not means. they're these they're AI Gerry. We'll strongly head what So are not --

Gerard Sweeney

all. No, at not

Todd Gleason

This right? of relatively multiyear we're the X-year not say a my to in game mean phase. cycle, I early investment innings play, have an we would

Peter Johansson

doesn't XXXX. cars. supplying electric seeing we're gigawatt It to does crypto. by That of of doesn't signposts industrial charging have include order means in data demand electrifying does That quadrupling is AI, The centers. to It order manufacturing. include the have include processes. include amount It from in --

data of months process anywhere to gigawatts current gigawatts. It demand, same quadrupling and to build on get it's the the XX a takes a from center install put [ to X to Just depending in. from select through permit ] XX what you

of there. future be the from if at you is down out least, to believe years today, you disposed. have is would back electrically not your powered, X So else what seeing X favorably But including what we're years,

Todd Gleason

be as been enough that strong to going not we've to long appear. Gerry, at all and they around things appear as to know also as going aren't as bad they times, be they're

chase want don't there our cycles, new regulations game some theme. ourselves without met will as is and view where be be be organically, strong variety well overextending some to to We it could not, on a will some be a the is as Because are new as going to to as to entrants, benefit be be here these necessarily are So things. could high and to they positioned and could and appear, of Our want we organically -- play think overinvest theme it, to we right? support very

We're we're play but for -- balance, out. playing going us, all that the it to get balance our to So right, going to not best it's right? try

Gerard Sweeney

fair. appreciate it. depth. the Got really Totally I

flow year. just terms of generally the Just metrics... question. -- you year. stronger sort better cash in we other of QX should as this Cash imply one much I flow know improving quick you're last than flow go Should cash through XQ was

Todd Gleason

QX on a it's they're we sustainably, the I at more not away a management. better, that all for well over teams capital We that it. we're bang work continuing Well, it. think year are working implies The teams, once at quarter business -- finance to very it focus just

better processes. have we So

it have better incentives well. as We around

So we like like -- results. the we

it start start speaks had great the we year. poor think year more, I last it this Gerry, to had was than the we

news So good each the we're year. is just better

Operator

the or next Needham comes Our question Jim from line Company. from of Ricchiuti comment &

Chris Grenga

Chris on actually is Grenga for Jim. This

looking the Looking which your are customers are at pipeline projects able at whether it's of characterize even the nature a mandated level to healthy, that high quite growth are the that sales regulation? you is by at discretionary more versus projects pipeline, type between

Todd Gleason

good Chris, Jim a thanks order what's Like, would a for no ask we my of that fingertips. too. other and at Yes, you question, don't jumping for important is importance. or questions, say particular have I and into for in it's question and

just it Our well years was X pipeline $X.X billion ago. from so where X, or up is over Xx

installed to that have So relationship balance base, does still it's a very lot the with do big with we fact have of large that great a A pipeline. customers.

us talk very in the aged to coming replacing high-performing, they're constantly marketplace. but there to So out about equipment

and aftermarket had. more we've have ever services that We well as

of to as of So we super do there's in feel a that's would blend our very well. that there And backlog say discretionary little I the what customer. out

fairly to for about known of customers. that they've already, we've these X, project XX of X, studies So year, energy a if a been are We've us, been over approved are usually the dialogue that all over been club. $X their the design the transition in medium- member capital months. X, in These hard regular things looking qualified. we've about speak. these aren't -- not priority very -- We're budgets. well quick very them, come them jobs, to we've working million These -- it allocation large, a to we've at, projects done been long-term list, so with we're engineering It's or most known either that well vendor become on of to -- for

projects, of infusion or new something of a think area looking capital I balanced it's so it's pretty not of bamboos, shoots in because the really growth one this balanced. And greenfield isn't because we're at -- huge

Chris Grenga

in And early defense be innings the the base Great. involvement radar investment Europe. program, the CECO's about in seeing in ramp we that could -- past, in you've in for with and And Perfect. significant spoken example. the B-XX signs of industrial some we're here

from seeing your for -- you indications, of stand? where if defense-related tailwinds from potential are you curious view, Just any any you point applications early

Todd Gleason

balanced pipeline. Yes. that really we We there. pipeline And -- DDG, participate naval of ships good more nature. destroyers. a It is -- different and naval things are classes a seeing on like of FFGs,

good business certainly form we're in it a product respect of there separation uptick well and we as also positioned, strong to our Our et categories, seen would as time. say Back those defense with as of year-over-year. portfolios well filtration XXXX, seeing other it currently budget but some cetera. as some We in strong looking was silencers, an XXXX, haven't

Operator

Our next Bobby of the Markets. comes Northern or line comment from Capital question Brooks from

Robert Brooks

mentioned Or slides, you So that you energy $XXX that potential following those up is are the those confirm, want XXXX on I revenue? on million. the -- size And Is certainly know record any impact think record-breaking the transition deals potential of just in is, that or a impact there chance opportunities. fourth on XXXX? could of following -- follow-up the that the those it is I I transition almost framed potential just at up deals? large the kind you to quarter

Todd Gleason

ability our some would cetera. go revenue to being impact be that a There's percent to of It potentially and complete and order designs the might start modest materials accepted, fourth quarter. receive from contract which some we signifies et contractors, to

So there really talking about revenue. to orders. upside is potentially We're some

clear that. be a I it's good want question, on Bobby, and So to

We exaggerate point. million not had order If we we if had going revenue make get a us, I'll that a XXXX. lot in a -- we're to $XXX in to mega August, we acceptance said, a we For probably money, of we nature that sensor to get would the can and because be milestone I like with as could imagine. of project, respect first things -- the might some be engineering you of

a employees, team a of that CEO us portfolio shape a help our really and that's I'm that be in short-term that, wave aftermarket a about visibility pipeline and sustainable will would would of yes, I XXXX. but all first execution. But we're And lucky and there beyond balance, for Again, board, great So with think repeatable that a across of project percent that balance and our have and outlook talking backlog overall building. XXXX. world. long-term I associated a the of and also the growing be

can with that to right of CEOs one high but could can model look could truly like investment, modeling think look at that like of and about start XXXX. only market do I with of few that look the what not that also and a what I'm almost to short a degree the start for have accuracy So XXXX and term backlog dynamics

that do orders a So XXXX to put to of want be. lot success for position it work us make these great would in to the we But we have XXXX.

how CFO Here's talk lucky to The our CFO. about wants

Peter Johansson

in projects the where in we These focus, more they're same we and are discussed the here. in are coming other accelerating -- concerns around clean into renewed We're the they're as have same that the just addressing past. they're not and geographies We're just getting U.S. seeing interest power

Robert Brooks

color. then That's give Todd just been guys color just Could building And have bit it. that that a little just into terrific of aftermarket the gave maybe more just how building little more Got bit pipeline. maybe the installed a on having the short-term Is diving you that? that that has growing are Or a comment about one out just XXXX dynamic guys or that did thing have been a done and replaced been that where some you are from like it you the in that's that? it is something to needing that specific you growing cycle in or it? put M&A guys growing? filters for the Or base --

Todd Gleason

I short-term Yes. Yes. progress. methodical It's all, call would it,

we've what shorter-term replacements. our they are the cycle been say, first all adding more like revenue, That's down short with aftermarket getting Sort as services, of move our downs them important or to -- field. doing

one. that's exactly company. piece now for it's million, them, year is an that's Transcend XX-ish when of strategic an a really revenue right? $XX when first a portfolio, aftermarket a Transcend, acquisition of filter as make $XXX the million So So acquisition of Because million, almost $XX take of mix now, us you're in company $XX million company, uptick ago. terms smaller the a we but a and of right? you important acquired a our But for the percent acquisition media, revenue the

more similar a each also aftermarket organic we And in whether and that a company's industrial order. with us, with components the for whether made has Now doing last year, that some largest cycle other been the with aftermarket that things be in strong investment our million since the with it mentioned I've was services, which those. produced projects it like water. Compass areas aftermarket Industrial of Water that the That a revenue Transcend order we associated $X which arrived has dynamics million Kemco, including of or associated is X-year one we're have for history, $X M&A play

smaller out really down, us all these it's of first balance build first that to are are methodically. about but some continuing So just somewhat downs, larger

Robert Brooks

terrific center really that -- last the being on European with maybe ask industrial more Acoustics Got power Acoustics making that's by and see urban that? to Or for comments is a there sure here build-out, broader jobs the opportunity communities? is last color. with those any about still just air in it. the to spurred And That's Or prepared your data in one water from U.K. confirm, that's revenues generation remarks you like is piece quiet a just might some really where the opportunity? opportunity

Peter Johansson

as demand their They for outgrowing to us grows -- the they base. potential We're Ireland. supplier. supplier Today, opportunities that our out as evaluating U.K. customers and in point and same gen the work do their and for areas is the same U.S. the as they're data view a urban in centers sets most packaging direct business U.K. in you in in benefit

from there are large in of So growing center these buildout, of here direct this data we're domestically. as center a evaluating other CECO investments growth. gas a that result power the supply. Baseload turbine-fired lot are power benefits is opportunity overall But power to data

that for We demand lot And data benefiting water. also dynamic. a dimension, from so There's center we're consume a of water. that

some of the You as East the the in not a in are We've beginning inquiries it's outside once lot treat their but we've got and necessarily infrastructure. there consumed. as U.S. well, water own that Asia U.S., Middle invest to seen seen to

facilities steps to scrubber facilities. Whether the centers. we treatment produced requires fab it's or a one they're build. going And semiconductors water got then ultra-pure or of what there servers, it's go those a it's water the data produced supply you've I power Any whether that away, the say, semiconductor at X silencing to into the systems on produce

think multiple about dimensions, in multiple So you can investment places. data and center us a in impacts it

Gerard Sweeney

lot growth jump guys terrific. the into It's That's of queue. and going color, propelling a back appreciate prongs. forward. it. you I I'll Definitely Got the

Operator

question next Amit H.C. comment of Dayal from the line from or Wainwright. Our comes

Amit Dayal

to of for year respect for any Is a revenues could out? how of see larger one with to outlook that for quarter want cadence the XXXX. guys? the through the with rest might you outlook to where Just play portion there particular Just understand the coming respect you

Todd Gleason

quarter the Peter the of maybe be we QX step-up little was going just into nice little kind a we internal bit Look, it's on our quarter. mentioned from give look, going bit to terms QX. I'll We our to to say materially, already project smaller looking more on the things knew I of knew color Yes, almost we the call, are of respect And smallest the well. a the orders would cadence. just was kind at with how let be always always a fairly in lighter time coming -- as in

been it's bit historically challenging then a to sort range within a quarter. be our going And of can relatively QX, But actually, QX has this of quarter. stronger QX year, overall. little just be QX consistent, Sometimes, the with

have I give and thinking. looking second the little year, as at half in quarter point of a we'll updates exit second the that any bit color at color think more the how we'll probably we we're which of terms on

models given of are remaining your where be final at and be in looking with you're you start would that of QX sort to the dynamic we're larger equally of the if normal sort and a year. coming could fairly XQ X But probably being quarters, QX sized saying the

Peter that. is think I confirming

Peter Johansson

the half and more than second Yes. year. We'll of sales half generate total the in the earnings

Amit Dayal

backlog is higher Okay. you just the that. towards that the the mix more assessment? but one, fair last it Is looks in that mix the revenues. And margin of leaning I guess is indicated already, a like -- appreciate guess, around I I

Todd Gleason

think not for kind number I been just overall. seen been said, just Obviously, not of pointing we've step a certainly a benefits. up. that of That, now. that, it's quarter was in a timing big like backlog, quarter been expansion consistently. mix positive our this past for But but was We've in seeing, gross benefit margin this and Yes, but quarters I to we've portfolio our demonstrating some overall, that

that's So right.

expect we And it the Our year-over-year, in benefit our see backlog, to margins and we backlog. be. mix to it's and continue

Operator

Ladies to session. question-and-answer for Todd would gentlemen, turn closing I any concludes our over like now remarks. Gleason and conference this to the

Todd Gleason

the conference. to going June East the to for people, focus your questions as we our global Conference well by, then New and our being value interest incredible at and later in their to equipment. and the deliver York, Chicago environment, today. continue continue in in protecting Coast A our Conference customers' Thanks thanking Minnesota, customers the Fargo industrial teams in information again, couple London to in of this the presenting Craig-Hallum start the protecting IDEA's a in Wells at updates investments month we're Industrials as Conference as ROTH be of protecting leader to

we contact, want available at any connect with as meet, contact meet please glad there, Obviously, So and to and you time first conference to if you look to your forward representative to we're be well. that. we'd

results. be And will quarter our so we second releasing

end July. great then, the you, We a And have and until of of rest expect we day. towards thank your

Operator

conference attending you has thank We and the Ladies for now today's presentation. concluded. gentlemen,

disconnect. now may You

CECO Environmental (CECO) 30 Apr 242024 Q1 Earnings call transcript