Slide 1: Q2'20 Earnings Call
Q2’20 Earnings Call August 5th, 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: New CEO: Todd Gleason
New CEO: Todd Gleason Key Points: • Over 25 years of experience in variety of senior leadership roles including general management, finance and strategy/growth • Significant roles in leading industrial companies: Honeywell, Trane and Pentair • Impactful experience leading private equity / venture co
Slide 4: Executive Summary: CECO positioning for long-term success
Executive Summary: CECO positioning for long-term success ($MM) • New CEO: Todd Gleason … Already immersed and advancing actions & new processes Leadership & • Acquisition: EIS transaction … Geographically and financially strategic Portfolio • Joint Venture: Strategic combination of Damper business
Slide 5: New Challenges, Proactive Measures
Adapting business and cost structure to adjust for Covid-19 and market “pause” ($MM) New Challenges Proactive Measures >$10 of annualized cost actions to be executed in ’20 Deemed “Essential” business Broad based actions from Board/Corporate through Policies and procedures clearly and business
Slide 6: Significant impact from cautious markets – especially early in second quarter
Significant impact from cautious markets – especially early in second quarter ($MM) Current view of end markets Refinery Industrial Solutions Q2 Orders: $11 | (23)% Energy Industrial Q2 Orders: $13 | (37)% TTM Orders: $43 | (25)% Solutions Solutions TTM Orders: $76 | (17)% FCC Cyclones Scrubbers Dus
Slide 7: Q2 2020 Financials
CECO ENVIRONMENTAL Q2 2020 Financials
Slide 8: Q2 Orders of $60 slow due to COVID crisis… market trends started to improve in Q2
Q2 Orders of $60 slow due to COVID crisis… market trends started to improve in Q2 (a) (b) Orders Revenue ($MM) $115.7 $103.0 9.2 $89.4 9.9 19.1 $85.3 $81.2 8.3 $80.5 9.4 $75.2 20.0 $75.7 10.5 9.5 $67.7 25.4 9.4 10.5 27.0 $60.0 20.1 20.4 8.6 16.7 23.5 7.6 21.2 13.0 87.4 73.1 50.6 55.7 50.6 48.9 49.1
Slide 9: Team executing on backlog well given macro-economic challenges
Team executing on backlog well given macro-economic challenges ($MM) $300.0 $237.8 $250.0 $208.8 $216.6 $208.9 $204.6 • Backlog down (2)% YoY and sequentially… (6)% excluding EIS acq. $200.0 • TTM Book to Bill Ratio at 0.97x $150.0 $115.7 $103.0 $89.4 $100.0 $85.3 $80.5 $75.2 • EIS acquisition adde
Slide 10: EBITDA and Operating margin rates improved on cost actions & execution
EBITDA and Operating margin rates improved on cost actions & execution ($MM) Non-GAAP Gross Profit Non-GAAP Operating Income Adjusted EBITDA $35.0 60% $30.0 20.0% $30.0 $28.8 $28.3 50% $14.0 18.0% $12.0 20.0% $26.8 $25.8 $12.0 16.0% $10.1 18.0% $10.0 16.0% $25.0 40% $9.6 14.0% $8.4 $10.0 $8.2 12.0%
Slide 11: Quick response with cost-out measures offset reduced volume in Q2
Quick response with cost-out measures offset reduced volume in Q2 ($MM) Three Months Ended Q2'20 Y/Y Y/Y $ GAAP: • $60 of Orders down (21)% Q/Q… Energy markets muted, Industrials improving since COVID lows Orders $ 60.0 (41.7%) $ (43.0) • Revenue down Y/Y and (7)% sequentially as projects slower due
Slide 12: Q2 free cash flow negatively impacted by working capital in quarter
Q2 free cash flow negatively impacted by working capital in quarter ($MM) (b) (a) Trade Working Capital Free Cash Flow conversion % of $- $39 $34 $41 $37 $44 TTM EBITDA: (7)% 40% 14% 78% 50% 13.4% 11.9% 20.0 11.3% 0.1% 11.1% 3.1% 15.0 9.8% 1.6% 2.9% 10.0 %- 3.3% Adjusted FCF: 5.0 $8.2 $9.0 $1.7 $6.0
Slide 13: Balance sheet in solid position to execute acquisition during COVID-19
Balance sheet in solid position to execute acquisition during COVID-19 ($MM) Total Debt: Being reduced by operating cash flows Strengthened balance sheet Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 $194 $175 Term Debt $ 50.0 $ 49.4 $ 48.8 $ 48.1 $ 47.5 Revolver 27.0 20.0 18.5 61.5 32.0 Total Debt $ 77.0 $ 69.4 $
Slide 14: Looking Forward
CECO ENVIRONMENTAL Looking Forward
Slide 15: CECO well-positioned and tackling market opportunities, with room to grow!
CECO well-positioned and tackling market opportunities, with room to grow! Current Portfolio Addresses: Protecting the Natural Environment and the Operational Environment … Reduce Abate Noise Process Eliminate Recover Increase Clean Emissions Pollution Water Particulate Catalyst Productivity Air Sig
Slide 16: Evaluating long term targets and CECO processes … but unwavering commitment
Evaluating long term targets and CECO processes … but unwavering commitment Topline Growth Margin Expansion Cash Management + + More EBITDA Grow FCF as Sustainable Margins >13% % of EBITDA & Targeting and ROTC +5% • Organic growth programs • Operating excellence & • Working Capital Mgmt lean enterpr
Slide 17: Conclusion / Questions?
Conclusion • Thank you Team CECO … Commitment to our customers and health and safety! • Portfolio improvements included EIS acquisition and recently announced Damper JV • Q2 financial results demonstrated execution on cost actions and delivering to customers • Market uncertainties will not slow down
Slide 18: Supplemental Materials
Supplemental Materials Non-GAAP Reconciliation 18
Slide 19: Organic Revenue
Organic Revenue (dollars in millions) Annual Annual Annual Q1 Q2 Q3 Q4 Annual Q1 Q2 QTR YTD 2016 2017 2018 2019 2019 2019 2019 2019 2020 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 $ 75.2 $ 330.4 GAAP revenue $ (6.0)
Slide 20: Non-GAAP Gross Profit and Margin
Non-GAAP Gross Profit and Margin (dollars in millions) Annual Annual Annual Q1 Q2 Q3 Q4 Annual Q1 Q2 2016 2017 2018 2019 2019 2019 2019 2019 2020 2020 TTM Gross profit as reported in accordance with GAAP $ 134.9 $ 113.2 $ 111.5 $ 28.4 $ 26.8 $ 28.8 $ 30.0 $ 114.0 $ 28.3 $ 25.8 $ 112.9 Gross profit m
Slide 21: Non-GAAP Operating Income and Margin
Non-GAAP Operating Income and Margin s) (dollars in millions) Annual Annual Annual Annual Annual Annual Annual Annual Annual Annual Q1 Annual Q2AnnualQ3 AnnualQ4 Annual Annual Q1 Q1 Q2 Q2 Q3 Q4 Annual Q1 Q 2012 2013 2014 2015 2016 2012 2017 2013 2018 2014 2019 2015 201920162019 20172019 20182019 201
Slide 22: Non-GAAP Net Income, Adjusted EBITDA and Margin
Non-GAAP Net Income, Adjusted EBITDA and Margin Annual Annual Annual Annual Annual Annual Annual Annual Annual Q1 Annual Q2 Annual Q3 Annual Q4Q1 Annual Q2 Q1Q3 Q2Q4 Annual Q1 Q2 (dollars in millions) (dollars in millions) 2013 2014 2015 2016 2013 2017 2014 2018 2015 2019 2016 2019 2017 2019 2018 20
Slide 23: Return on Tangible Capital
Return on Tangible Capital (dollars in millions) 3Q 4Q 1Q 2Q 3Q 4Q 1Q Q2 Q3 Q4 Q1 Q2 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019 2020 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 7.4 Other non-cash adjustments, not in Non-GAAP: Add: Non-cash stock compensation 0.6
Slide 24: Adjusted Free Cash Flow
Adjusted Free Cash Flow Annual AnnualAnnualAnnualAnnual AnnualAnnual1Q AnnualQ2 1Q Q3 Q2 Q4 Q3Annual Q4 1Q AnnualQ2 1Q Q2 (dollars in millions) (dollars in millions) 2015 2016 20152017 20162018 20172019 20182019 20192019 20192019 20192019 20192020 20192020 2020TTM 2020 TTM Net cash provided Net byca