Slide 1: Q3'20 Earnings Call
Q3’20 Earnings Call November 4th, 2020 1
Slide 2: Forward-Looking Statements and Non-GAAP Information
Forward-Looking Statements and Non-GAAP Information This presentation contains forward-looking statements with predictions, projections and other statements about future events. These statements are made on the basis of management’s views and assumptions regarding future events and business performa
Slide 3: New CEO: Clear Observations … ~100 Days
New CEO: Clear Observations … ~ 100 Days • COVID-related market impacts >80% of orders and revenue declines • Industrial Air markets rebounding well • Energy orders pipeline starting to build … More “studies and engineering” work underway • Talented leadership in application engineering and business
Slide 4: Overcoming Challenging Markets: Q3'20 Financial Results
Overcoming Challenging Markets ($MM) • Orders: ~ $67 … Down >40% Y/Y … Largest decline in Energy (Refining, Nat. Gas) Q3’20 Financial • Sales: ~ $77 … Down 9% … lower backlog / project impacts (COVID) but executing well • Gross Margins & EBITDA: ~ 32% GM and $7 EBITDA … as expected Results • EPS & F
Slide 5: Near-term Industrial markets improving; Energy stalled especially Refinery
Near-term Industrial markets improving; Energy stalled especially Refinery ($MM) Refinery Industrial Solutions Q3 Orders: $3 | (85)% Bottomed Out Energy Industrial Q3 Orders: $21 | +8% Improving TTM Orders: $25 | (58)% Solutions Solutions TTM Orders: $78 | (11)% Midstream O&G 18% Q3 Orders: $20 | (1
Slide 6: COVID doesn't change our market leading positions
COVID doesn’t change our market leading positions Long Cycle End Markets Shorter Cycle End Markets Refinery Industrial Solutions • Crack Spreads & Jet Fuel Demand at record lows • US Mfg frugal with CAPEX budgets, likely thru elections • Refiners deferring mission-critical maintenance CAPEX • Since
Slide 7: Q3 2020 Financials
CECO ENVIRONMENTAL Q3 2020 Financials
Slide 8: Energy markets, specifically refinery, weighs on orders … project delays persist on COVID
Energy markets, specifically refinery, weighs on orders … project delays persist on COVID (a) ($MM) Orders Revenue $115.7 9.2 19.1 $89.4 $85.3 8.3 $80.5 $75.7 $75.2 $77.4 9.4 9.5 $67.7 $66.8 9.4 9.0 10.5 25.4 8.6 $60.0 27.0 8.2 20.4 18.7 7.6 16.7 23.5 21.2 13.0 20.6 87.4 55.7 50.6 48.9 49.1 49.7 37.
Slide 9: Backlog lower as end markets remain frugal with CAPEX budgets
Backlog lower as end markets remain frugal with CAPEX budgets ($MM) $300.0 $237.8 $250.0 $216.6 $208.9 $204.6 $189.1 $200.0 • Backlog down (8)% sequentially and (20)% Year over Year $150.0 $115.7 • TTM Book to Bill Ratio at 0.84x $89.4 $100.0 $85.3 $80.5 $75.2 $77.4 • $7 COVID-related cancellations
Slide 10: EBITDA and Operating margin rates contract as volume and project mix softens
EBITDA and Operating margin rates contract as volume and project mix softens ($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% $25.8 $12.0 16.0% $10.1 18.0% $24.8 $10.0 $25.0 40% $9.6 14.0% $8.4 16.0% $10.0 $8.2
Slide 11: Encouraging signs from Industrial markets as Energy remains depressed
Encouraging signs from Industrial markets as Energy remains depressed ($MM) Three Months Ended Q3'20 Y/Y Y/Y $ • $67 of Orders up +12% Q/Q… Energy markets muted, Ind’ls improving since COVID lows GAAP: • Revenue down (9)% Y/Y but up +3% sequentially with 1st full quarter’s worth of EIS revenue Order
Slide 12: Effectively managing working capital in Q3 to drive positive free cash flow
Effectively managing working capital in Q3 to drive positive free cash flow ($MM) (a) (b) Trade Working Capital Free Cash Flow conversion % of $- $34 $41 $37 $44 $41 TTM EBITDA: 40% 14% 78% 50% 46% 13.4% 11.9% 12.8% 20.0 0.1% 11.1% 3.1% 15.0 9.8% 1.6% 5.1% 10.0 %- 3.3% Adjusted FCF: 5.0 $8.2 $9.0 $6
Slide 13: Continued debt paydown post EIS acquisition … ample balance sheet capacity
Continued debt paydown post EIS acquisition … ample balance sheet capacity ($MM) Debt Paydown Balance sheet $194 $175 $125 $115 $76 $80 $78 $67 9/3/2015 YE'15 YE'16 YE'17 YE'18 YE'19 Q2'20 Q3'20 Peerless Acquisition • Debt paydown of $(2) in Q3… ~$75 of capacity remains under credit facility • Cash
Slide 14: Looking Forward
CECO ENVIRONMENTAL Looking Forward
Slide 15: In better position today than previous downturn to capitalize on '21-'22 market recovery
In better position today than previous downturn to capitalize on '21-'22 market recovery Orders by Segment Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 $383.7 $355.4 $359.3 37.9 39.3 $298.0 43.9 91.8 $270.3 42.6 84.0 10
Slide 16: CECO: Committed to deliver increased and sustainable value
CECO: Committed to deliver increased and sustainable value ~ 5% Topline Growth Target: Expand “Core” Platforms + Modest M&A Long-term Growth & Profitability % 13%+ EBITDA Margin Target: Streamlined G&A + Ops Excellence $ 100%+ Free Cash Flow Conversion of Net Income: Historically Achieved Driving No
Slide 17: Conclusion / Questions?
Conclusion • Thank you Team CECO … Commitment to our customers and health & safety! • Navigating challenging markets with strong project execution and cost management • Energy markets – especially Refining and Midstream – remain low but slowly improving • Revamping CECO strategy to aggressively eval
Slide 18: Supplemental Materials
Supplemental Materials Non-GAAP Reconciliation 18
Slide 19: Revenue excluding Acquisitions & Divestitures
Revenue excluding Acquisitions & Divestitures 19
Slide 20: Non-GAAP Gross Profit and Margin
Non-GAAP Gross Profit and Margin 20
Slide 21: Non-GAAP Operating Income and Margin
Non-GAAP Operating Income and Margin 21
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 Q2 Q3 (dollars in millions) 2013 2014 2015 2016 2017 2018 2019 2019 2019 2019 2019 2020 2020 2020 TTM Net income (loss) as reported in accordance with GAAP $ 6.6 $ 13.1 $ (5.6) $ (38.2) $
Slide 23: Return on Tangible Capital
Return on Tangible Capital (a) Net Tangible Capital = (Currents Assets – Cash + PP&E) – (Current Liabilities less Current Debt) (b) TTM ROTC % = NOPAT / (Current Quarter End Net Tangible Capital + Prior Year Quarter End Net Tangible Capital)/2) 23
Slide 24: Adjusted Free Cash Flow
Adjusted Free Cash Flow Annual Annual Annual Annual 1Q Q2 Q3 Q4 Annual 1Q Q2 Q3 (dollars in millions) 2015 2016 2017 2018 2019 2019 2019 2019 2019 2020 2020 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 (4.9) 7.0 19.9 Add: earn-outs classified as