Q4 2023 Earnings Release
March 5, 2024
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 performance. We use words such as "believe," "expect," "anticipate," "intends," "estimate," "forecast," "project," "will," "plan," "should" and similar expressions to identify forward-looking statements. Forward-looking statements
involve risks and uncertainties that may cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. Potential risks and uncertainties, among others, that could cause actual results to differ materially are discussed under "Part I - Item 1A. Risk Factors" of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and may be included in subsequently filed Quarterly Reports on Form 10-Q, and include, but are not limited to: the sensitivity of our business to economic and financial market conditions generally and economic conditions in our service areas; dependence on fixed price contracts and the risks associated therewith, including actual costs exceeding estimates and method of accounting for revenue; the effect of growth on our infrastructure, resources, and existing sales; the ability to expand operations in both new and existing markets; the potential for contract delay or cancellation as a result of on-going or worsening supply chain challenges; liabilities arising from faulty services or products that could result in significant professional or product liability, warranty, or other claims; changes in or developments with respect to any litigation or investigation; failure to meet timely completion or performance standards that could result in higher cost and reduced profits or, in some cases, losses on projects; the potential for fluctuations in prices for manufactured components and raw materials, including as a result of tariffs and surcharges and rising energy costs; inflationary pressures relating to rising raw material costs and the cost of labor; the substantial amount of debt incurred in connection with our strategic transactions and our ability to repay or refinance it or incur additional debt in the future; the impact of federal, state or local government regulations; our ability to repurchase shares of our common stock and the amounts and timing of repurchases, if any; our ability to successfully realize the expected benefits of our restructuring program; our ability to successfully integrate acquired businesses and realize the synergies from strategic transactions; and the unpredictability and severity of catastrophic events, including cyber security threats, acts of terrorism or outbreak of war or hostilities or public health crises, as well as management's response to any of the aforementioned factors. Many of these risks are beyond management's ability to control or predict. Should one or more of these risks or uncertainties materialize, or should the assumptions prove incorrect, actual results may vary in material aspects from those currently anticipated. Investors are cautioned not to place undue reliance on such forward-looking statements as they speak only to our views as of the date the statement is made. Except as required under the federal securities laws or the rules and regulations of the Securities and Exchange Commission, we undertake no obligation to update or review any forward-looking statements, whether as a result of new information, future events or otherwise.
While we report our results in accordance with generally accepted accounting principles in the U.S. (GAAP), comments made during this conference call and these materials may include the following "non-GAAP" financial measures: organic revenue, non-GAAP gross profit, non-GAAP operating income, non-GAAP net income, adjusted EBITDA, adjusted free cash flow, adjusted net free cash flow, non-GAAP gross profit margin, non-GAAP operating margin, non-GAAP earnings per basic and diluted share, adjusted EBITDA margin and selected measures expressed on a constant currency basis. These measures are included to provide additional useful information regarding our financial results and are not a substitute for their comparable GAAP measures. Management believes that these measures provide individuals with additional information to better compare the Company's results over multiple periods. Explanations of these non- GAAP measures and reconciliations of these non-GAAP measures to their directly comparable GAAP measures, to the extent the reconciliation be performed without unreasonable efforts, are included in the accompanying "Appendix." Descriptions of many of these non-GAAP measures are also included in our SEC reports.
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Q4 and Full Year 2023 Earnings Highlights
- RecordQ4 Revenues, Gross Profit $ and Adjusted EBITDA
- RecordBacklog in '23 … YE of $371 up ~19% YoY
- Book-to-Billof ~ 1.1 for Past 12 Months
- Sales Pursuit Pipeline at All-time Levels of ~$3.5B
- Deployed ~$60M in growth investments
- Each Acquisition Delivering Results > Deal Models
- Achieving or Exceeding Guidance Important / Consistent
- Delivering Robust Cash Flows for Continued Investment
Final FY'23
Guidance Results
Orders | |
1.1x - 1.2x | 1.1X |
Revenue | |
525 - 550M | 545M |
Adj. EBITDA | |
55 - 57M | 57.7M |
Cash Flow | |
50 - 70% | 63% |
of Adj EBITDA
$MM
✓
Achieved
✓
Upper-End
✓✓
Exceeded
✓
Achieved
Another Great Quarter and Year… Positioned for Continued Strong Growth
3
Q4 and FY 2023 Financial Summary
Q4'23 YoY
Orders $128M (15%)
Sales $154M 32%
Adj. | $19.4M | 49% |
EBITDA | 12.6% | +139bps |
FY Book-to-bill ~1.1x
FY Organic Sales Up ~22%
Normalized* FY Margins Up
~110 bps YoY
Orders
Sales
Adj.
EBITDA
TTM YoY
$583M 11%
$545M 29%
$57.7 37% 10.6% +58bps
Adj. EPS
(diluted)
$0.28 $0.07
FY EPS Growth overcame ~($0.20)
of Interest Expense
Adj. EPS (diluted)
$0.75 $0.01
FCF $12.2M $3.2M
Strong Working Capital Execution
FCF ~ 63% of Adj. EBITDA
FCF
$36.2M 33%
Strong Q4 Performance and another Year of High Double-digit Growth
* Normalized for Q1 2022 Insurance settlement favorable non-recurring. | 4 |
CECO Transformation Journey
2020 Portfolio Mix
Fluid
Solutions
10%
25%
Industrial Air
65%
Energy Solutions
80% Long-cycle | 20% Short-cycle
Growth
20202023
$316M Revenue $545M
+72%
$183M Backlog $371M
+103%
Shareholder | ||||||
Value | ||||||
2020 | '24 YTD | |||||
$6.35 | Stock Price | $23.21 | ||||
+266% | ||||||
$225M | Market Cap | $808M | ||||
+259% |
2023 Portfolio Mix
~30% ~30%
Energy Transition | Industrial Water |
~40%
Industrial Air
70% Long-cycle | 30% Short-cycle
Steady Portfolio Transformation = Growth and Shareholder Value
Legend:
- 2020 financials are based on December 31st, 2020
- 2020 Stock Price as of July 6, 2020 (Timing of new CEO)
Legend (cont.): | ||
• | 2023 financials are based on December 31, 2023 | 5 |
• | 2023 Stock Price as of close of business March 1st, 2024. |
Committed To Consistent Execution … Accelerating Transformation
- Strong Q4'23 Results - Record Backlog, Revenue and GP$
- Programmatic M&A Delivering
- Robust High-growth Region and Staff Expansion
- Advancing Operating Excellence
- 2024 Outlook / Plan = Growth
Strong Finish to 2023
- Sustained Double Digit Growth Mindset
- Continue Programmatic M&A
- Further Margin Expansion
- Operating Model Deployment
- Acquired Business Integration
- Continue to Drive Short Cycle Mix
- Balanced Capital Deployment
- Deliver Against 2024 Targets
Maintain Strong
Execution in 2024
- Sustained Financial Performance
- High Performance Organization
- Portfolio/Biz Mix Optimization
- Full Operating Model Deployed
- EBITDA Margins in Mid-Teens
Exciting Outlook for
2025+
6
Updating Full Year 2024 Guidance
Initial FY '24
Order Rate: 1.05 - 1.1X Book to Bill
Revenue | 575 - 600 |
Mid-point YoY % | Up ~10% |
Adj. EBITDA | 65 - 70 |
Mid-point YoY % | Up ~20% |
Free Cash Flow | 50% to 70% |
of EBITDA | |
($MM)
Updated FY '24 | 2024 Commentary | ||
• Investments Maintain Growth | |||
1.05 - 1.1X | |||
• Market Drivers Remain Good: Reshoring, | |||
Infrastructure, Energy Transition, Policy $, Other… | |||
Raised | |||
590 - 610 | • Maintaining Double Digit Sales Growth … | ||
Strong Y/E Backlog Entering 2024 | |||
Up ~10% | • Opportunity Pipeline Remains Robust | ||
Improved | |||
67 - 70 | • Maintaining Strong y/y$ Growth | ||
• Adj. EBITDA ~3X 2021 levels | |||
Up ~20% | |||
• Margin Expansion Opportunities Remain | |||
50% to 70% | • Maintain Focus on Working Capital Management | ||
of EBITDA | • FCF for Debt Repayment and M&A | ||
Outlook for 2024 Remains Very Positive … Increasing Sales & Profit Expectations
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Financial Performance
8
Q4'23 P&L and Earnings
($MM) | Q4'23 | YoY |
Orders: $128.3 (15%)
Sales: | $153.7 | 32% |
Gross Profit | 34.6% | 222bps |
Margin: | ||
GAAP OI: | $12.7 | $4.3/51% |
Non-GAAP OI: | $16.3 | $5.3/48% |
Adj. EBITDA: | $19.4 | 49% |
GAAP EPS: | $0.11 | ($0.13) |
Adj. EPS: | $0.28 | $0.07 |
($MM)
Comments
- Tough compare driven by significant order that didn't repeat
- Company record TTM $583M
- Steady execution from growing backlog and benefit of acquisitions
- Record GP$ quarter, up 41% YoY on higher volume
- GP% up YoY driven by execution and project mix.
- TTM of $171M with margins of ~ 31.4%, +105 bps YoY.
- Adj EBITDA % of 12.6%, + ~140 bps YoY driven by strong volume execution and favorable mix
- Partially offset with investments in growth and process improvement
- Adj. EPS +33% with operational performance overdriving interest expense headwinds
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($MM)
Orders: Q4'23 Continues Track Record of Double-Digit TTM Growth TTM = Trailing 12 Month
Avg = TTM/4
Company | |
2020 - 2023 CAGR 28% | Record |
$583 | |
$527 |
$361
$280VPY
+29%+46%+11%
2020 2021 2022 2023
Avg/Qtr:
$70 | $90 | $132 | $146 |
Comments
Broad-based Orders Growth … Robust and Growing Opportunity Pipeline
Orders > 100M for 8 consecutive quarters
Consistently high order intake … 2023 2H with orders of ~ 275M… essentially equal to 2020
Order intake balanced across Air-Water-Energy
TTM Double-digit Orders Growth => 2024 & 2025 Revenue Growth | 10 |
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Disclaimer
CECO Environmental Corporation published this content on 04 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 05 March 2024 13:04:01 UTC.