CECO Environmental(US:CECO)2023-11-07 20:30Financial Data and Key Metrics Changes - CECO reported record revenues of approximately $149 million for Q3 2023, representing a 38% year-over-year growth and the highest quarterly sales in company history [16][63] - The trailing 12-month revenue reached $508 million, a 27% increase compared to the previous 12-month period [34] - Adjusted EBITDA for Q3 2023 was $15.1 million, a 64% increase year-over-year, with an adjusted EBITDA margin of 10.1%, up 160 basis points from the prior year [36][79] - Free cash flow generated in Q3 was approximately $28.5 million, following $10 million in Q2, marking a significant recovery from a negative cash flow in Q1 2023 [49][87] - The company raised its full-year 2023 revenue guidance to a range of $525 million to $550 million, indicating a 25% increase at the midpoint year-over-year [25][57] Business Line Data and Key Metrics Changes - CECO's orders for Q3 2023 totaled approximately $145 million, marking the fifth highest quarterly bookings level in company history [15][31] - The company has maintained a book-to-bill ratio of approximately 1.2x over the past 12 months, supporting a record backlog of $394 million, which is a 42% increase year-over-year [44][81] - The industrial water segment has grown to represent nearly one-third of CECO's overall business mix, highlighting a strategic shift since 2020 [52] Market Data and Key Metrics Changes - CECO's sales pipeline has expanded to approximately $3 billion, more than double the size from 2020 [44] - The company is experiencing strong demand in various end markets, including industrial air and energy transition sectors, driven by global infrastructure investments and regulatory changes [75][116] Company Strategy and Development Direction - CECO is focused on long-term sustainable performance and has raised its full-year guidance multiple times throughout 2023, indicating confidence in future growth [6][5] - The company is actively pursuing programmatic M&A to enhance its market position and expand its service offerings [90][132] - Investments in new technologies and operational upgrades are being prioritized to improve efficiency and customer service [14][39] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about maintaining growth in 2024, forecasting revenue between $575 million and $600 million, representing approximately 10% growth [28][57] - The company is well-positioned to capitalize on government investments and market dynamics related to the energy transition [58][137] - Management emphasized the importance of maintaining a balanced approach to growth, focusing on both organic and acquisition-driven strategies [112][134] Other Important Information - CECO's cash position at the end of Q3 was $48.5 million, with net borrowings of approximately $31 million to support growth investments [71][72] - The company is committed to maintaining a leverage ratio below its credit facility limits, with gross debt at $135.5 million [72][88] Q&A Session Summary Question: What are the expectations for EBITDA margins as growth continues? - Management indicated a long-term target for EBITDA margins in the mid-teens, driven by double-digit top-line growth and operational efficiencies [100] Question: How is the current interest rate environment affecting deal structuring? - Management acknowledged that while higher interest rates make deals more expensive, strong free cash flow generation will help manage debt and interest expenses [107][125] Question: What is the outlook for bookings and project timing in 2024? - Management expects a balanced distribution of bookings throughout the year, with no significant seasonal effects anticipated [122]