Ceco Environmental Corp. · NASDAQ:CECO
Ceco Environmental — Q1 2020 Earnings Presentation
25 slides from Ceco Environmental's earnings presentation, May 6, 2020
Slide 1: Q1'20 Earnings Call
Q1’20 Earnings Call May 6th, 2020 1
Slide 2: Forward Looking Statement and Non-GAAP Information
Forward Looking Statement and Non-GAAP Information Any statements contained in this presentation other than statements of historical fact, including statements about management’s beliefs and expectations, are forward-looking statements and should be evaluated as such. These statements are made on th
Slide 3: CECO's 4-3-3 operating strategy has been a successful blueprint for growth
CECO’s 4-3-3 operating strategy has been a successful blueprint for growth 4 Value Creation Enablers 3 Compelling End Markets 3 Core Growth Platforms Nimble & Responsive Low Carbon Economy Solutions Oriented Organization Tightening Emissions Application Development 3
Slide 4: CECO's 4-3-3 operating strategy has been a successful blueprint for growth
CECO’s 4-3-3 operating strategy has been a successful blueprint for growth Offensive Formation PORTFOLIO MGMT. OUTSIDE-IN Engineered Industrial Equipment Air Quality SIMPLIFICATION Specialty Pumps INNOVATION Grew Orders ~30% since 2017 Net Debt < 1X Eliminated 20+ Entities and 7 ERP’s Improv
Slide 5: Adapting the tactical execution to 4-4-2 for the current world in pandemic
Adapting the tactical execution to 4-4-2 for the current world in pandemic Re-Balanced Formation HEALTH & SAFETY MARKET SHARE PORTFOLIO MGMT. GROWTH IN FURLOUGH ENERGY PROACTIVE COST MARKET SHARE MEASURES SIMPLIFICATION OUTSIDE-IN GROWTH IN INDUSTRIALS CASH ON BALANCE SHEET INNOVATION Wage Cuts &
Slide 6: CECO Q1 execution delivered results in rapidly changing environment
CECO Q1 execution delivered results in rapidly changing environment (a) • $76 Orders are +12% sequentially but (22)% Y/Y as larger energy project decisions stalled • $80 Revenue (10)% sequentially and (6)% Y/Y as lock-downs drive customer & vendor delays • 35% Gross Margins up +2pts sequentially
Slide 7: Outlook uncertain as pipeline of projects shift over time; committed to share gains
Outlook uncertain as pipeline of projects shift over time; committed to share gains ($MM) Refinery Industrial Solutions Q1 Orders: $8 | (56)% Energy Industrial Q1 Orders: $23 | (25)% TTM Orders: $46 | (23)% Solutions Solutions TTM Orders: $84 | (10)% FCC Cyclones Scrubbers Dust Collectors Midstream
Slide 8: Q1 2020 Financials
CECO ENVIRONMENTAL Q1 2020 Financials
Slide 9: Sequential orders improvement in all segments… outlook & backlog timing uncertain
Sequential orders improvement in all 3 segments… outlook & backlog timing uncertain (a) (b) Orders Revenue ($MM) $115.7 $103.0 9.2 $97.3 $89.4 9.9 19.1 $86.0 $85.3 10.2 $81.2 8.3 $80.5 12.0 9.4 20.0 $75.7 10.5 9.5 31.5 $67.7 25.4 10.5 18.9 27.0 8.6 20.1 20.4 23.5 21.2 87.4 73.1 55.6 55.2 50.6 55.7 5
Slide 10: Backlog remains above $200… team executing safely and effectively
Backlog remains above $200… team executing safely and effectively ($MM) $300.0 $237.8 $250.0 $216.6 $208.8 $208.9 • Backlog up $15 Y/Y and down $(8) sequentially $193.8 $200.0 • +1.08x TTM Book to Bill Ratio $150.0 $103.0 $115.7 $97.3 $89.4 $80.5 $100.0 • Slower backlog conversion to revenue on COVI
Slide 11: With lower revenue in Q1, team delivered healthy relative operating margins
With lower revenue in Q1, team delivered healthy relative operating margins ($MM) Non-GAAP Gross Profit Non-GAAP Operating Income Adjusted EBITDA $35.0 60% 20.0% $14.0 18.0% $30.0 $12.0 20.0% $30.0 $28.4 $28.8 $28.3 50% $12.0 16.0% $10.1 18.0% $26.8 $10.0 $9.6 14.0% $8.5 $8.4 16.0% $10.0 $25.0 40% 1
Slide 12: Solid execution and results in Q1'20 despite COVID-19 impact
Solid execution and results in Q1’20 despite COVID-19 impact ($MM) Three Months Ended Q1'20 Y/Y Y/Y $ GAAP: Reported Reported Orders $ 75.7 -22.2% $ (21.6) • $76 of Orders up sequentially but down Y/Y… pipeline remains strong but outlook uncertain Revenue $ 80.5 -6.4% $ (5.5) Gross Profit $ 28.3 -0.
Slide 13: Q1 Cash Flow driven by favorable milestone terms and AR collections
Q1 Cash Flow driven by favorable milestone terms and AR collections ($MM) (b) (a) Trade Working Capital Free Cash Flow conversion % of $- $48 $44 $39 $41 $32 TTM EBITDA: 14% (7)% 40% 14% 78% 13.6% 12.7% 11.9% 2.3% 11.3% 0.1% 20.0 2.9% 9.5% 15.0 3.3% %- 1.6% Adjusted FCF: 10.0 5.0 $1.7 $8.2 $9.0 $6.0
Slide 14: Balance sheet strengthened since '17… Proactive liquidity measures taken
Balance sheet strengthened since ’17… Proactive liquidity measures taken ($MM) Operating cash flows drive down debt Strengthened balance sheet Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Term Debt $ 76.1 $ 50.0 $ 49.4 $ 48.8 $ 48.1 $194 $175 Revolver - 27.0 20.0 18.5 61.5 Total Debt $ 76.1 $ 77.0 $ 69.4 $ 67.3 $
Slide 15: Re-evaluating timing to achieve mid-term financial targets
Re-evaluating timing to achieve mid-term financial targets (a) / (b) (c) Grow Revenue organically 2X market Expand EBITDA margins • Expanded Footprint EU/India YoY Growth% (TTM) • Reducing G&A, adding S&M EBITDA% • Innovation • Op Leverage on Growth 12-14% 9.5% TTM +4-7% 9.2% (3)% (1)% 2021 Q1’20 20
Slide 16: CECO executing on site for Michigan Power Utility during COVID-19 crisis
CECO executing on site for Michigan Power Utility during COVID-19 crisis Customer: Brownfield Gas Power Plant upgrade Product: Selective Catalytic Reduction (“SCR”) Solution: Removes 95% of Nitrous Oxide from Gas Turbine Exhaust Application expertise & experience >7 tons of harmful NOx, CO and VOC’s
Slide 17: CECO team winning new orders during COVID-19
CECO team winning new orders during COVID-19 Customer: Food & Beverage Product: FKI High Efficiency Cyclone Solution: Upgrade to abrasion resistant materials designed for explosion venting. Reduction of overall cost of ownership Operating efficiency at 99% at 10µ; 90% at 3µ CECO Value Proposition En
Slide 18: Demand remains for solutions to critical industries for a cleaner, safer world
Demand remains for solutions to critical industries for a cleaner, safer world Reduce Abate Noise Process Eliminate Recover Increase Clean Emissions Pollution Water Particulate Catalyst Productivity Air CECO Solutions: Energy Industrial Fluid Handling • De-NOx • Separators • Dust Collectors • Scrubb
Slide 19: Supplemental Materials
Supplemental Materials Non-GAAP Reconciliation 19
Slide 20: Non-GAAP Gross Profit and Margin
Non-GAAP Gross Profit and Margin (dollars in millions) Annual Annual Annual Annual Annual Annual Annual Q1 Q2 Q3 Q4 Annual Q1 2012 2013 2014 2015 2016 2017 2018 2019 2019 2019 2019 2019 2020 TTM Gross profit as reported in accordance with GAAP $ 42.4 $ 61.6 $ 84.8 $ 109.2 $ 134.9 $ 113.2 $ 111.5 $ 2
Slide 21: Non-GAAP Operating Income and Margin
Non-GAAP Operating Income and Margin (dollars in millions) Annual Annual Annual Annual Annual Annual Annual Q1 Q2 Q3 Q4 Annual Q1 2012 2013 2014 2015 2016 2017 2018 2019 2019 2019 2019 2019 2020 TTM Operating income as reported in accordance with GAAP $ 16.7 $ 7.0 $ 21.7 $ 4.9 $ (25.4) $ 8.0 $ 10.0
Slide 22: Non-GAAP Net Income, Adjusted EBITDA and Margin
Non-GAAP Net Income, Adjusted EBITDA and Margin Annual Annual Annual Annual Annual Annual Q1 Q2 Q3 Q4 Annual Q1 (dollars in millions) 2013 2014 2015 2016 2017 2018 2019 2019 2019 2019 2019 2020 TTM Net income as reported in accordance with GAAP $ 6.6 $ 13.1 $ (5.6) $ (38.2) $ (3.0) $ (7.1) $ 1.9 $ 5
Slide 23: Return on Tangible Capital
Return on Tangible Capital (dollars in millions) 3Q 4Q 1Q 2Q 3Q 4Q 1Q Q2 Q3 Q4 Q1 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019 2020 Non-GAAP Operating Income 5.3 3.5 4.0 5.2 6.5 8.4 7.2 4.4 7.0 9.6 6.3 Other non-cash adjustments, not in Non-GAAP: Add: Non-cash stock compensation 0.6 0.5 0.6 0.8
Slide 24: Organic Revenue
Organic Revenue (dollars in millions) Annual Annual Annual Q1 Q2 Q3 Q4 Annual Q1 2016 2017 2018 2019 2019 2019 2019 2019 2020 TTM Revenue as reported in accordance with GAAP $ 417.0 $ 345.1 $ 337.3 $ 86.0 $ 81.2 $ 85.3 $ 89.4 $ 341.9 $ 80.5 $ 336.4 Less revenue attributable to divestitures $ (50.9)
Slide 25: Adjusted Free Cash Flow
Adjusted Free Cash Flow Annual Annual Annual Annual 1Q Q2 Q3 Q4 Annual 1Q (dollars in millions) 2015 2016 2017 2018 2019 2019 2019 2019 2019 2020 TTM Net cash provided by operating activities 12.6 69.6 6.6 22.0 (13.8) 2.5 10.7 10.8 10.2 7.0 31.0 Add: earn-outs classified as operating - - 7.8 2.9 - -