CECO Environmental Corporation

08/08/2022 | Press release | Distributed by Public on 08/08/2022 05:12

CECO ENVIRONMENTAL REPORTS SECOND QUARTER 2022 RESULTS

Record Backlog, Strong Revenue and Net Income Growth, and Update to Full Year Outlook

DALLAS, Aug. 8, 2022/PRNewswire / -- CECO Environmental Corp. (Nasdaq: CECE) ("CECO"), a leading environmentally focused, diversified industrial company whose solutions protect people, the environment, and industrial equipment, today reported its financial results for the second quarter of 2022.

Highlights for the Quarter and Recent Corporate Developments*

  • Orders of $113.5 million, up 33 percent; Record Backlog of $289 million
  • Revenue of $105.4 million, up 34 percent
  • Net income of $4.4 million, up $4.1 million; non-GAAP net income of $6.4 million, up $3.3 million
  • Adjusted EBITDA of $10.6 million, up 63 percent
  • Company announces senior management transitions
  • Company increases full year financial outlook

*All comparisons are versus the comparable prior year period, unless otherwise stated.
Reconciliations of GAAP (reported) to non-GAAP measures are in the attached financial tables.

"We delivered strong results in the second quarter and are pleased to share that we increased our backlog to new record levels while driving sales growth of more than 30 percent and EBITDA growth of more than 60 percent. We also repurchased more than $4 millionof shares in the quarter as we systematically execute our capital allocation strategy that includes both M&A and share repurchases," said CECO Chief Executive Officer, Todd Gleason.

Second quarter operating income was $5.7 million, up 171 percent when compared to $2.1 millionin the second quarter 2021. On an adjusted basis, non-GAAP operating income was $8.7 million, up 85 percent when compared to $4.7 millionin the second quarter of 2021. Net income was $4.4 millionin the quarter, up $4.1 millioncompared to $0.3 millionin the second quarter 2021. Non-GAAP net income was $6.4 million, up $3.3 millioncompared to $3.1 millionin the second quarter 2021. Adjusted EBITDA was $10.6 million, up 63 percent compared to $6.5 millionin the second quarter 2021. The Company repurchased $4.3 millionshares in the second quarter as part of the previously announced $20 millionshare repurchase program.

In the second quarter, the Company completed the acquisition of Compass Water Solutions, based in California, USAand Western Air Duct, a company based in the United Kingdom. Combined, the companies generated 2021 full year sales of approximately $15 millionand each delivered double-digit EBITDA margins.

"We are extremely pleased with our year-to-date results which have included orders growth of approximately 55 percent, record backlog up more than 35 percent and revenue growth up more than 30 percent through the first half. We have closed multiple strategic acquisitions that add new capabilities and market opportunities to our industrial air and industrial water platforms, and those acquisitions are already performing very well against their operating targets," added Gleason.

Company Increases Full Year 2022 Outlook:

The Company updated full year 2022 guidance to $375to $400 millionin revenue, up approximately 19 percent at the midpoint year over year. The Company updated its full year adjusted EBITDA to reflect a range starting at $37 millionand the high-end exceeding $40 million, up more than 50 percent at the midpoint year over year.

"Our revised outlook reflects our continued confidence that we expect to deliver outstanding results through the year. We remain in excellent position to drive strong double-digit sales and income growth while also maintaining our focus on capital allocation," concluded Gleason.

Senior Management Transitions:

The Company also separately announced today that Matthew Eckl, Chief Financial Officer, and Pamela Turay, Senior Vice President of Human Resources, will leave the Company in August to pursue other opportunities. Effective Aug. 15, 2022, Peter Johanssonwill join CECO as Chief Financial and Strategy Officer. Additionally, the Company's current General Counsel, Lynn Watkins-Asiyanbiwill assume the newly created role of Chief Administrative and Legal Officer, which incorporates legal, human resources and corporate communication functions.

EARNINGS CONFERENCE CALL

A conference call is scheduled for today at 8:30 a.m. ETto discuss the second quarter financial results of 2022. The conference call may be accessed via webcast by going to the Company's website at https://investors.cecoenviro.com/events-webcasts-and-presentations/ or by dialing (888) 346-4547 (Toll-Free) within the U.S., or Toll/International +1(412) 317-5251.

A replay of the conference call will be available on the Company's website at http://www.cecoenviro.com for seven days. The replay may be accessed by dialing (877) 344-7529 (Toll-Free) within the U.S., or Toll/International +1 (412) 317-0088 and entering access code 6087150.

ABOUT CECO ENVIRONMENTAL

CECO Environmental is a leading environmentally focused, diversified industrial company, serving a broad landscape of industrial air, industrial water and energy transition markets across the globe through its key business segments: Engineered Systems and Industrial Process Solutions. Providing innovative technology and application expertise, CECO helps companies grow their business with safe, clean, and more efficient solutions that help protect people, the environment and industrial equipment. In regions around the world, CECO works to improve air quality, optimize the energy value chain, and provide custom solutions for applications including power generation, petrochemical processing, general industrial, refining, midstream oil and gas, electric vehicle production, poly silicon fabrication, battery recycling, beverage can, and water/wastewater treatment along with a wide range of other applications. CECO is listed on Nasdaq under the ticker symbol "CECE." Incorporated in 1966, CECO's global headquarters is in Dallas, Texas. For more information, please visit www.cecoenviro.com.

Company Contact:
Kimberly Plaskett, Corporate Communications
(469) 928-1090
[email protected]

Investor Relations Contact:
Steven Hooseror Gary Guyton
Three Part Advisors, LLC
214-872-2710
[email protected]

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

(unaudited)
June 30, 2022

December 31, 2021

ASSETS

Current assets:

Cash and cash equivalents

$

34,416

$

29,902

Restricted cash

1,037

2,093

Accounts receivable, net

95,318

74,991

Costs and estimated earnings in excess of billings on uncompleted contracts

51,158

51,429

Inventories, net

23,981

17,052

Prepaid expenses and other current assets

11,911

10,760

Prepaid income taxes

893

2,784

Total current assets

218,714

189,011

Property, plant and equipment, net

16,357

15,948

Right-of-use assets from operating leases

12,144

10,893

Goodwill

185,795

161,183

Intangible assets - finite life, net

35,794

25,841

Intangible assets - indefinite life

9,494

9,629

Deferred income taxes

505

505

Deferred charges and other assets

2,926

3,187

Total assets

$

481,729

$

416,197

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Current portion of debt

$

3,303

$

2,203

Accounts payable and accrued expenses

101,233

84,081

Billings in excess of costs and estimated earnings on uncompleted contracts

35,896

28,908

Note payable - current

500

-

Income taxes payable

3,092

1,493

Total current liabilities

144,024

116,685

Other liabilities

15,122

14,826

Debt, less current portion

92,768

61,577

Deferred income tax liability, net

9,998

8,390

Operating lease liabilities

9,356

8,762

Total liabilities

271,268

210,240

Commitments and contingencies

Shareholders' equity:

Preferred stock, $.01 par value; 10,000 shares authorized, none issued

-

-

Common stock, $.01 par value; 100,000,000 shares authorized, 34,534,180 and
35,028,197 shares issued and outstanding at June 30, 2022 and
December 31, 2021, respectively

345

350

Capital in excess of par value

250,262

252,989

Accumulated loss

(29,538)

(36,715)

Accumulated other comprehensive loss

(15,567)

(12,070)

Total CECO shareholders' equity

205,502

204,554

Non-controlling interest

4,959

1,403

Total shareholders' equity

210,461

205,957

Total liabilities and shareholders' equity

$

481,729

$

416,197

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

Three months ended June 30,

Six months ended June 30,

(dollars in thousands, except per share data)

2022

2021

2022

2021

Net sales

$

105,375

$

78,680

$

197,811

$

150,572

Cost of sales

73,700

53,426

139,708

100,910

Gross profit

31,675

25,254

58,103

49,662

Selling and administrative expenses

22,988

20,510

41,640

39,965

Amortization and earnout expenses

1,450

2,282

2,900

4,072

Restructuring expenses

-

280

73

280

Acquisition and integration expenses

1,491

37

2,540

146

Income from operations

5,746

2,145

10,950

5,199

Other income (expense), net

1,936

(860)

1,478

(1,339)

Interest expense

(1,098)

(704)

(1,920)

(1,430)

Income before income taxes

6,584

581

10,508

2,430

Income tax expense

1,860

199

2,972

750

Net income

4,724

382

7,536

1,680

Non-controlling interest

339

89

356

206

Net income attributable to CECO Environmental Corp.

$

4,385

$

293

$

7,180

$

1,474

Earnings per share:

Basic

$

0.13

$

0.01

$

0.21

$

0.04

Diluted

$

0.13

$

0.01

$

0.20

$

0.04

Weighted average number of common shares outstanding:

Basic

34,873,238

35,491,725

34,961,645

35,444,477

Diluted

35,041,152

35,819,269

35,119,685

35,797,001

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

Three months ended June 30,

Six months ended June 30,

(dollars in millions)

2022

2021

2022

2021

Operating income as reported in accordance with GAAP

$

5.7

$

2.1

$

11.0

$

5.2

Operating margin in accordance with GAAP

5.4

%

2.7

%

5.6

%

3.5

%

Amortization and earnout expenses

1.5

2.3

2.9

4.1

Restructuring expenses

-

0.3

0.1

0.3

Acquisition and integration expenses

1.5

-

2.5

0.1

Non-GAAP operating income

$

8.7

$

4.7

$

16.5

$

9.7

Non-GAAP operating margin

8.3

%

6.0

%

8.3

%

6.4

%

Three Months Ended June 30,

Six months ended June 30,

(dollars in millions)

2022

2021

2022

2021

Net income as reported in accordance with GAAP

$

4.4

$

0.3

$

7.2

$

1.5

Amortization and earnout expenses

1.5

2.3

2.9

4.1

Restructuring expenses

-

0.3

0.1

0.3

Acquisition and integration expenses

1.5

-

2.5

0.1

Foreign currency remeasurement

(0.3)

1.1

-

1.7

Tax benefit expense of adjustments

(0.7)

(0.9)

(1.4)

(1.5)

Non-GAAP net income

$

6.4

$

3.1

$

11.3

$

6.2

Depreciation

0.9

0.8

1.8

1.6

Non-cash stock compensation

0.9

0.9

1.8

1.6

Other (income) expense

(1.6)

(0.2)

(1.5)

(0.4)

Interest expense

1.1

0.7

1.9

1.4

Income tax expense

2.6

1.1

4.4

2.3

Noncontrolling interest

0.3

0.1

0.4

0.2

Adjusted EBITDA

$

10.6

$

6.5

$

20.1

$

12.9

Earnings per share:

Basic

$

0.13

$

0.01

$

0.21

$

0.04

Diluted

$

0.13

$

0.01

$

0.20

$

0.04

Non-GAAP net income per share:

Basic

$

0.18

$

0.09

$

0.32

$

0.17

Diluted

$

0.18

$

0.09

$

0.32

$

0.17

NOTE REGARDING NON-GAAP FINANCIAL MEASURES

CECO is providing certain non-GAAP historical financial measures as presented above as we believe that these figures are helpful in allowing individuals to better assess the ongoing nature of CECO's core operations. A "non-GAAP financial measure" is a numerical measure of a company's historical financial performance that excludes amounts that are included in the most directly comparable measure calculated and presented in accordance with GAAP.

Non-GAAP operating income, non-GAAP net income, non-GAAP operating margin, non-GAAP earnings per basic and diluted share and adjusted EBITDA, as we present them in the financial data included in this press release, have been adjusted to exclude the effects of amortization expenses for acquisition related intangible assets, contingent retention and earnout expenses, restructuring expenses primarily relating to severance and legal expenses, acquisition and integration expenses which include retention, legal, accounting, banking, and other expenses, foreign currency remeasurement and other nonrecurring or infrequent items and the associated tax benefit of these items. Management believes that these items are not necessarily indicative of the Company's ongoing operations and their exclusion provides individuals with additional information to compare the Company's results over multiple periods. Management utilizes this information to evaluate its ongoing financial performance. Our financial statements may continue to be affected by items similar to those excluded in the non-GAAP adjustments described above, and exclusion of these items from our non-GAAP financial measures should not be construed as an inference that all such costs are unusual or infrequent.

Non-GAAP operating income, non-GAAP net income, non-GAAP operating margin, non-GAAP earnings per basic and diluted share and adjusted EBITDA are not calculated in accordance with GAAP, and should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Non-GAAP financial measures have limitations in that they do not reflect all of the costs associated with the operations of our business as determined in accordance with GAAP. As a result, you should not consider these measures in isolation or as a substitute for analysis of CECO's results as reported under GAAP. Additionally, CECO cautions investors that non-GAAP financial measures used by the Company may not be comparable to similarly titled measures of other companies.

In accordance with the requirements of Regulation G issued by the Securities and Exchange Commission, non-GAAP operating income, non-GAAP net income, non-GAAP operating margin, non-GAAP earnings per basic and diluted share and adjusted EBITDA stated in the tables above are reconciled to the most directly comparable GAAP financial measures.

SAFE HARBOR

Any statements contained in this Press Release, other than statements of historical fact, including statements about management's beliefs and expectations, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as amended, and should be evaluated as such. 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, 2021, and include, but are not limited to: the sensitivity of our business to economic and financial market conditions generally and economic conditions in CECO's 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 CECO's 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; 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; economic and political conditions generally; 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 unpredictability and severity of catastrophic events, including cyber security threats, acts of terrorism or outbreak of war or hostilities or public health crises, such as uncertainties regarding the extent and duration of impacts of matters associated with the novel coronavirus ("COVID-19"), 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. Furthermore, forward-looking statements speak only as of the date they are 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.

SOURCE CECO Environmental Corp.