Slides
Page 1
Gabelli Funds 11th Annual Waste & Sustainability Symposium April 3, 2025
Page 2
Forward-looking statements and Non-GAAP information 2 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 identify and 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.
Page 3
Update: April 1, 2025 Press Release • Company Announces Completion of Divestiture of Fluid Handling Platform (Global Pump Solutions) • Provides Transaction Highlights • States intention to utilize proceeds to further invest in growth and business expansion 3 FY 2025 Outlook Remains Unchanged : • FY Revenue Range: $700 to $750M … up ~ 30% at Midpoint vs. 2024 • FY Adjusted EBITDA Range: $90 to $100M … up ~ 50% at Midpoint vs. 2024 • 2025 Outlook Strengthened / Bolstered by Record Q4 Bookings + 2024 Revenue & EBITDA That Rolls Into 2024 + Acquisitions Concluded in 2024 and early 2025
Page 4
4 Global Pump Solutions (GPS) Snapshot Transaction Details • Description: The CECO GPS business consists of 3 niche leadership severe service industrial centrifugal pump brands - Dean, Fybroc and Sethco - which joined the CECO family through an acquisition in 2013. • Core Offering: horizontal and vertical metallic, FRP and thermoplastic sealed and magnetic-drive sealless centrifugal pumps and accessories, including baseplates and seal systems. • Large Customer Base: 1,500 customers globally with a substantial installed base, and industry-leading distribution partners. • Diversified End Markets: Chemical Processing & Transport, Thermal Fluid Circulation, Downstream Oil & Gas, Battery Production, Metals Processing, Petrochemical, Aquariums & Marine parks, Aquaculture, Semiconductor & Solar Manufacturing, Wastewater Treatment. • Headquarters & Manufacturing: Indianapolis, Indiana • R&D and Production Center: Telford, Pennsylvania • Resources: ~100 employees, >90% in N. America • Buyer: May River Capital • Enterprise Value: ~ $110M • Consideration: cash at closing • Use of Proceeds: Reduce outstanding RCF balance and to fund future strategic growth investments. • Advisors: EC M&A and Koley Jessen served as CECO’s financial and legal advisors. Products & Solutions C reates additional capacity for further investment in growth and business expansion Business Overview
Page 5
Who Is CECO? 5
Page 6
6 CECO Environmental Building The Leading, Global, Sustainable Industrial Environmental Solutions Company Leading Businesses • Balanced, Niche Leadership Positions o Industrial Air o Industrial Water (new since 2020) o Energy Transition • Global: ~ 50% of Orders Outside U.S. • Strong Organic Growth o Averaged 10%+ Organic Since 2021 o Record Backlog Positions Us for Future Sustainable Value Creation • Focused Capital Allocation Model o Invest in Organic Growth / Expansion o Debt Management o Programmatic M&A o Stock Buybacks • Proven M&A Track Record o ~ 50% of Acquisitions Doubled Sales within 24 months of Deal • Management Aligned w/ Shareholders Programmatic M&A ~ Dozen Strategic Deals Since mid-2020
Page 7
CECO Environmental ... Mission Critical … 7 We Protect The Environment We minimize our environmental impact and help our global customers do the same We Protect People Solving customer challenges to ensure their employees work in a safe and productive work environment We Protect Industrial Equipment and Improve Processes We help maximize our customer’s investment in their operating systems and optimize their output
Page 8
8 Sales, Engineering & Admin Manufacturing & Assembly ~1,500 Employees worldwide Global HQ: Dallas, TX ~40% Sales Outside of US CECO Environmental ... Global Company To Serve Global Opportunities
Page 9
9 Organic Growth Programs / Investments • Sales Team, Engineers and Project Managers • CapEx: Biz. Growth, ERP Migration, Cybersecurity M&A Transactions • Active Pipeline … Air / Water / Energy Transition • Targeting ROIC > 25% Debt Management • Maintain a Healthy Balance Sheet • New Credit Facility Expands Capacity Stock Buybacks • $15M repurchased since 2021 (avg. price ~ $8.20) • $10M remaining on authorization Capital Allocation Strategy Investment Drivers CECO Environmental ... Focused Capital Deployment For Growth … Organic Growth & CapEx Up ~2X Since 2020 M&A Programs Remain Programmatic Stock Buybacks $15M Since 2021 Debt Management Maintaining Healthy Leverage
Page 10
10 CECO Environmental ... 100% Providing Environmental Solutions for Industry 100% Industrial Diversified Industrials Energy Transition / Power o Power Generation o Datacenter Power Management o Midstream Oil & Gas o Refining Processes o Petrochemical Processing o Nuclear & Geothermal o Carbon Capture o General Industrial o EV Production & Battery o Beverage Can Production o Food & Beverage Production o Metals o Water / Wastewater o Semiconductor 100% Environmental • Supply Water Treatment • Waste Water Treatment • Ultra - Pure Water Supply • Produced Water Treatment • Oily Water Separators • Reverse Osmosis • Emission Management • Thermal & Acoustics Management • Gas & Liquid Separation/Filtration • Cyclonic Separation • Combustion Mgmt • Carbon Capture • Thermal Abatement • Silencers • Wet/Dry Scrubbers • Oil Mist & Smoke Removal • Odor Management • Dust Removal • Air Flow Management ~30% ~ 40% ~ 30% Energy Transition Industrial Water Industrial Air End-Market Solutions
Page 11
CECO Environmental ... Delivering Strong Results While Transforming …. 11 $361 $527 $583 $667 B2B >1.0 2021 2022 2023 2024 2025 Orders $324 $423 $545 $558 2021 2022 2023 2024 2025 $26 $42 $58 $63 2021 2022 2023 2024 2025 $700 – $750 Revenue Adj. EBITDA YE ‘24 Backlog > $540M Backlog 3-year CAGR +36% B-2-B Consistently > 1.0x More Short-Cycle Business Mix Global Diversity Adds Balance Revenue at Higher Gross Margins ($MM) Margin Expansion 300+ bps More Productivity in 2024 and Growing Investments in Talent + Process + Footprint $90 – $100 3-Year CAGR +23% 3-Year CAGR +20% 3-Year CAGR +34%
Page 12
1 2 CECO Environmental ... A Transformational Journey … 10% 25% 65% ~ 25% ~ 40% ~ 35% 2020 Portfolio Mix 2024 Portfolio Mix Energy Solutions Fluid Solutions Industrial Air Energy Transition Industrial Water Industrial Air Advancing Our Leading Industrial Air Portfolio Building Industrial Water … From “Nothing” in 2020 to ~25% of CECO in 2024 Extending Our Niche Leadership Positions in Energy As The Market Transitions Growth 2020 TY2024 Revenue$316M $558M +77% Backlog $183M $541M +196% Shareholder Value2020 Current Stock Price$6.36 $23.09 +263% Market Cap $225M $810M +395% Legend: • 2020 financials are based on December 31 st, 2020 • 2020 Stock Price as of July 6, 2020 (Timing of new CEO) • 2024 Growth financials are based on TY2024 • Current Stock Price as of close of business Apr. 1, 2025 • TY = Total Year
Page 13
Key Financials 13
Page 14
Q4 and FY 2024 Financial Performance 14 Q4’24 YoY FY 2024 YoY Backlog $541M 46% $541M 46% Orders Book to Bill $219M 1.38x 71% $667M 1.20x 14% Revenue $159M 3% $558M 2% Adj. EBITDA Margin % $19.1M 12.0% (2%) (60bps) $62.8M 11.2% 9% + ~70bps Adj. EPS 0.27 (0.01) 0.73 (0.02) Free Cash Flow ($4.4M) ($17M) $7.4M ($30M) Choppier Year Than Expected … Record 2H’24 Bookings Provides Momentum Into 2025 • Full Year Record Backlog – largely organic (M&A a modest add) • Record Q4 and FY Orders – strong finish to the year, with 2H’24 orders up ~ $100M sequentially vs. 1H’24 • Continued improvement in productivity, mix, and execution • TTM Adj EBITDA with strong incremental margins of ~ 40% • FY Adj EPS ~ Flat as Modest Growth Offset By Tax & Other Items • Approx. $15M of cash received in early January (see appendix) • FCF Shortfall = 2025 FCF Upside / Opportunity Highlights • Q4 Revenue up Modestly • Full Year Revenue up Low Single Digits • Q4 Sequentially up $23M | 17% TTM = Trailing 12 Month Negatively Impacted By Customer-Driven Project Delays and Order Timing Weighted to 2H’24
Page 15
Consistent Gross Profit / Margin Improvements Continued TTM basis 15 $128.2 $171.0 $181.3 $190.5 $192.6 $196.1 30.3% 31.4% 32.4% 33.6% 34.8% 35.2% 29. 0% 31. 0% 33. 0% 35. 0% 37. 0% 39. 0% 100 .0 110 .0 120 .0 130 .0 140 .0 150 .0 160 .0 170 .0 180 .0 190 .0 200 .0 Q4'22 Q4'23 Q1'24 Q2'24 Q3'24 Q4'24 ($MM) TTM = Trailing 12 Month FY’23 FY’22 FY’24 Past 12 – 18 Months • Approx. $10M of Sourcing and Efficiency • Pricing and Business Mix • Strong Project Execution • Acquisitions = Accretive Margins 2025+ Expectations • Continued Execution, Sourcing and Productivity benefits • Focus on EBITDA Margin Ramps as Strong Gross Margins are Maintained Significant Progress With Productivity, Price/Mix, and Project Execution
Page 16
2025 and Advancing Market Leadership 16
Page 17
Record Orders Establishes New Record Backlog 17 * Starting Backlog – Revenue + Net Orders +/- FX + Acquired Backlog = Ending Backlog ($MM) B2B = Book to Bill $214 $312 $356 $391 $394 $371 $390 $391 $438 $91 $151 $146 $163 $146 $128 $145 $141 $162 $94 $116 $113 $129 $149 $154 $126 $138 $136 $159 -10 30 70 110 150 190 230 270 310 350 390 430 470 510 550 Q4'21 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 Q1'24 Q2'24 Q3'24 Q4'24 Backlog Orders RevenueBook-to-Bill FY’22 FY’23 ~ 1.2x ~ 1.1x ~1.2x FY’21 ~ 1.1x YTD’24 Company Record $219M $541M Backlog and Sales Pipeline Supports Growth Outlook
Page 18
18 Continuing to Execute On Portfolio Transformation 2020 – 2025 Programmatic M&A • Completed ~ Dozen Transactions ‘20 - ‘25 • Doubled Size in 50% of Acquired Companies Within ~ 24 Months • “Walked Away” From Many Transactions Not Meeting Screening Criteria • Built Ind’l Water … Added Key Ind’l Air … Expanded Energy Transition 2024 Completed Portfolio Actions* * Additional Information in Appendix Ind’l Air business Closed Jul ’24 Ind’l Air business Closed Oct ’24 Ind’l Air business Closed Dec ’24 Accretive Strategic Acquisitions to Advance Ind’l Air Leadership 2025 Portfolio Actions* • Closed Jan 3, 2025 • Public Company and Corporate Cost Synergies • Significant Growth: Ind’l Markets • Significant Growth: Int’l Markets • Significant Growth: Packaged Solutions • Completed divestiture process in late Q1 • Process initiated in 2024 • 3 Brands … Dean, Fybroc and Sethco • 2 locations: Indiana and Pennsylvania Global Pump Solutions • Concluded Divestiture of Global Pump Solutions business
Page 19
19 Building a Balanced Revenue Model With $4B+ Sales Pipeline 30% Mix of Revenue Of Sales from Aftermarket, Services and Standard Product / Quick Shipment Sales 25% Of Sales from Repeat, Standard or Lightly Configured Engineered Solutions 45% Of Sales from Customized / Highly Engineered Solutions & Services Sales Pipeline 1) Mix of revenue below is in approximate terms and may fluctuate quarter over quarter 2) Pipeline is defined as Total Active Order Pursuits for Next ~ 18 Months > $4.5B Current Pipeline Up From $1.5B in 2021 ~ 40% of Sales Pipeline: • Opportunity to Replace ~ $10B Installed Base ~ 20% of Sales Pipeline: • New Markets From Innovation, M&A and Int’l Expansion ~ 40% of Sales Pipeline: • Industrial & Energy Markets Growing and New Facilities or Infrastructure / Capabilities 1) 2)
Page 20
2025 Outlook – Maintaining Strong Outlook 20 Full Year 2025 Orders B - 2 - B: 1.0 – 1.1x YoY midpoint 15%+ Revenue 700 – 750 YoY midpoint 30% Organic 15% Inorganic 15% Adj EBITDA 90 – 100 YoY midpoint 50% 12.8% - 13.3% YoY midpoint margin +180bps Free Cash Flow % of Adj. EBITDA 60% – 75% YoY +$45 - $65 Tailwinds Monitoring • Record Y/E 2024 Backlog • 2H’24 and Early 2025 Orders Momentum • Strong End Markets: Power, Gas, Diversified Industrials • Record Sales Pipeline > $4.5B • Recently Completed M&A Transactions • Tariffs / Other Trade and Tax Legislation • Interest Rates • Inflation • Customer Reaction to Policies ($MM)
Page 21
CECO Environmental ... Summary 21 Thank You For Your Interest and Thank You Team CECO • 2024 = Mixed Results. Overcame Challenging Market Dynamics Around Customer Delays While Driving Record Orders • Portfolio Transformation Continues Through Programmatic M&A => Completed 4 Strategic / Accretive Transactions in the Past 6 Months; Concluded Sale of Fluid Handling Business … More Tightly Aligns Portfolio • Organic Growth = Balanced Across All Sectors with Energy-Power and Data Centers Booming • Margin Expansion = Increased EBITDA Margins 300bp+ Since ‘21 … Expecting Strong 2025 Margins • Balance Sheet Health = In Great Position Entering 2025 and Sale of Fluid Handling Expected Late Q1 • Shareholder Value = 2025 Outlook and Longer-term Growth Plans Expect to Support Value Creation
Page 22
Appendix: M&A Transaction Summary
Page 23
23 Profire Energy Snapshot … Concluded on January 3, 2025 Financial Profile / Accretive Acquisition • Description: Leading North American supplier of mission-critical combustion automation and control solutions and services to improve environmental efficiency, safety and reliability for natural gas and biogas-fired applications • Core Offering: Combustion Automation & Control Solutions supporting customer and industry regulatory compliance, emissions reduction, safety, and ESG objectives • Large Installed Base: ~100K systems, entering replacement cycle • Diversified End Markets: Oil & Gas, Petrochemical, Natural Gas Utilities; and growing exposure to Energy Transition: RNG, Biogas and Biofuels; and Industrial Operations • Founded 2002: Established brand with a blue-chip customers • Headquarters & Manufacturing: Lindon (Salt Lake City), Utah • R&D Center: Edmonton - Alberta, Canada • Service / Distribution in multiple states • Resources: ~130 employees, > 10% field service • Purchase Price, net of cash: ~ $108M, ~9x pre-synergies • Profire Energy Management’s 2024 Full Year Outlook: o Sales: ~$60M, up ~5% YoY => Record revenues o Gross Profit: ~50% o Adj EBITDA: ~20% o FCF Conversion: ~100% Products & Solutions High Value Creating Transaction … Adds Leadership and Strong Financial Profile Business Overview
Page 24
24 Verantis Environmental Solutions Group (“Verantis”) Closed in December ‘24 Business Overview Financial Profile / Transaction Metrics • Leading Engineered Solutions Provider: Industrial Air Treatment and Industrial Particulate Contaminant removal • Founded 1920 … Established International Brand • Core Segments: Semiconductors, Chemicals, Wastewater • Core Offerings: Scrubbers and Waste incinerators • Resources: Offices in Ohio, Singapore and China; manufacturing facility in Ohio. ~75 employees • Installed Base: >1,000 Systems = Growing Parts & Service Biz. • Strong Leadership Team: Technical + Market Knowledge • FY’24 Sales: ~ $45M with Steady Double-Digit Growth since ‘19 • Current Sales Footprint: Global • Profit Profile: Accretive Gross Margins and EBITDA Margins • FCF: Strong Cash Flow Generation • Transaction Summary: o Growth: Increase access to growing industries o Growth: Complements Multiple CECO Industrial Air Brands o Accretive Multiple: Similar to Deal Multiples in ‘22 and ‘23 Products & Solutions Strategic & Accretive Transaction … Expands Leadership in Industrial Air
Page 25
25 WK Group Transaction Closed in Early October ‘24 Business Overview Financial Profile / Transaction Metrics • Leading Engineered Industrial Air Solutions Provider: Industrial Exhaust Air and Industrial Particulate Contaminant Treatment • Founded 1959 in Wetzlar, Germany, Expanded to Asia-Pacific in 2003 … Established International Brand with a Diversified, international blue-chip customer base • Core Segments: Semiconductor, Pharma, Chemicals, Automotive • Core Offerings: Range of air treatment technologies aimed at improving the efficiency and performance of industrial processes and minimizing their impact on the environment • Resources: Strategically located sites in Singapore, Germany, China and India with ~120 employees, a majority with technical degrees • Installed Base: >1,500 Systems • Strong Leadership Team: Technical + Market Knowledge • TY2024E Sales: ~ $15M with ~ 20% aftermarket & short cycle • Current Footprint: Europe, SE Asia, China and India • Growth Profile: 2020-23 Revenue CAGR of 15% • Margin Expansion Potential: >500 bps improvement • Accretive Multiple: Similar to deal multiples in ‘22 and ‘23 • Rationale: o Growth: Global expansion, New end markets and applications o Market Coverage: Expands presence in attractive end markets o Capability Expansion : Close portfolio gaps, add Technical + Project FTEs Products & Solutions That C leanse / “Scrub” Industrial Waste Streams Strategic & Accretive Transaction … Expands Leadership in Industrial Air Burner Technologies Oxidizers Incinerators Wet & Dry Scrubbers
Page 26
26 EnviroCare Transaction Closed in Late July ‘24 Business Overview Financial Profile / Transaction Metrics • Leading Engineered Solutions Provider: Industrial Air Treatment and Industrial Particulate Contaminant removal • Founded 1981 … Established International Brand • Core Segments: Chemicals, Cement, Food, Mining & Metals, Fertilizer/Ag and Municipal • Core Offerings: Evaporative Gas Conditioning, Wet Scrubbers, Wet Electrostatic Precipitators – with multiple active patents • Resources: ~ 22K SF facility in N. California … ~20 employees • Installed Base: >1,000 Systems = Growing Parts & Service Biz. • Strong Leadership Team: Technical + Market Knowledge • 2024 FY Sales Est: ~ $13M with 30% aftermarket & short cycle with attractive growth profile and recurring revennue • Current Sales Footprint: Mostly N. America • Profit Profile: Accretive Gross Margins and EBITDA Margins • FCF: Strong Cash Flow Generation • Transaction Summary: o Growth: Accelerate Global Expansion + Aftermarket o Growth: Compliments Multiple CECO Industrial Air Brands o Accretive Multiple: Similar to Deal Multiples in ‘22 and ‘23 Products & Solutions Strategic & Accretive Transaction … Expands Leadership in Industrial Air