PR Newswire
DALLAS, Aug. 8, 2023
Record Orders, Revenue, Backlog, Gross Profit and Adjusted EBITDA
Company Raises Full Year 2023 Outlook
DALLAS, Aug. 8, 2023 /PRNewswire/ -- CECO Environmental Corp. (Nasdaq: CECO) ("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 2023.
Highlights for the Quarter(1)
- Orders of $162.9 million, up 44 percent; Record backlog of $391.0 million, up 35 percent
- Revenue of $129.2 million, up 23 percent; Net income of $3.7 million, compared to $4.4 million; Non-GAAP net income of $5.2 million, compared to $6.4 million
- GAAP EPS (diluted) of $0.11, compared to $0.13; Non-GAAP EPS (diluted) of $0.15, compared to $0.18
- Gross profit of $39.8 million, up 26 percent to 30.8 percent, up 70 bps
- Adjusted EBITDA of $13.7 million, up 29 percent
- Book-to-bill ratio of 1.26
(1) | 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. | |
"Our second quarter results continue to demonstrate the sustainable growth programs and market leadership positions we have been steadily building over the past few years, and bolsters our position as we enter the back half of the year. I am pleased that we set new records across a broad set of core financial metrics, which were driven by great execution from our entire team. Although there is still work to be done, it is especially rewarding to have generated record backlog on top of delivering the highest quarterly revenue in company history while adding a book-to-bill ratio of greater than 1.25 for the third consecutive quarter," said CECO Chief Executive Officer, Todd Gleason.
Second quarter operating income was $8.6 million, up $2.9 million when compared to $5.7 million in the second quarter of 2022. On an adjusted basis, non-GAAP operating income was $11.4 million, up $2.7 million when compared to $8.7 million in the second quarter of 2022. Net income was $3.7 million in the quarter, down $0.7 million compared to $4.4 million in the second quarter of 2022. Non-GAAP net income was $5.2 million, down $1.2 million compared to $6.4 million in the second quarter of 2022. Adjusted EBITDA of $13.7 million was up $3.1 million compared to $10.6 million in the second quarter of 2022. Free cash flow in the quarter was $10.0 million, down $9.1 million compared to $19.1 million in the second quarter of 2022.
"The 23 percent revenue growth in the quarter was comprised of 16 points of organic growth and seven points from acquisitions. Additionally, we continue to steadily improve our gross profit dollars and gross margins which are up 150 basis points in the first half of 2023 when compared to the same period a year ago. Over the past few years, we have been investing in strategic growth programs and operational excellence resources to generate sustainable and higher performing financial results. We are just starting to see these strategic shifts positively impact our financials as we believe we are in the early stages of creating more sustained top-line and bottom-line growth and margin expansion," added Gleason.
Company Raises Full Year 2023 Outlook
The Company increased its expected full year 2023 guidance to reflect revenues forecasted to be between $500 and $525 million, up at least 21 percent, at the mid-point, year over year. The Company also updated its expected full year 2023 adjusted EBITDA forecasted to be between $50 and $55 million, up approximately 25 percent, at the mid-point, year over year. The updated expected full year revenue and adjusted EBITDA guidance compares to the previous outlook, provided in May, of revenues to exceed $485 million and adjusted EBITDA to exceed $50 million.
"We are pleased to increase our full year guidance, which reflects continued confidence in the high performance and advantageous diversity of the CECO portfolio. Our record backlog and strong sales pipeline provide strong visibility in support of sustainable future growth. Additionally, the acquisitions we have completed over the past year and a half are all performing at or above the high-growth financials associated with each transaction," stated Gleason. "As I discussed last quarter and reiterate today, we expect 2023 to be another building block in our steady transformational journey to further advance our leadership in our Industrial Air, Industrial Water and Energy Transition markets which we expect to provide long-term value for our shareholders."
EARNINGS CONFERENCE CALL
A conference call is scheduled for today at 8:30 a.m. ET to discuss the second quarter 2023 financial results. Please visit the Investor Relations portion of the website (https://investors.cecoenviro.com) to listen to the call via webcast. The conference call may also be accessed by dialing 888-346-4547 (Toll-Free) within the U.S., or +1-412-317-5251 (Toll-Required) outside the U.S.
A replay of the conference call will be available on the Company's website for a period of one year. The replay may also be accessed by dialing 877-344-7529 (Toll-Free) within the U.S., or +1-412-317-0088 (Toll-Required) outside the U.S. and entering access code 7832794.
ABOUT CECO ENVIRONMENTAL
CECO Environmental is a leading environmentally focused, diversified industrial company, serving the broad landscape of industrial air, industrial water and energy transition markets globally by providing innovative solutions 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. CECO solutions improve air and water quality, optimize emissions management, and increase energy efficiency for highly-engineered applications in power generation, midstream and downstream hydrocarbon processing and transport, electric vehicle production, polysilicon fabrication, semiconductor and electronics, battery production and recycling, specialty metals and steel production, beverage can, and water/wastewater treatment and a wide range of other industrial end markets. CECO is listed on Nasdaq under the ticker symbol "CECO." Incorporated in 1966, CECO's global headquarters is in Dallas, Texas. For more information, please visit www.cecoenviro.com.
Company Contact:
Peter Johansson
Chief Financial and Strategy Officer
888-990-6670
[email protected]
Investor Relations Contact:
Steven Hooser
Three Part Advisors, LLC
214-872-2710
[email protected]
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(in thousands, except per share data) | (unaudited) | December 31, 2022 | ||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 47,617 | $ | 45,522 | ||||
Restricted cash | 935 | 1,063 | ||||||
Accounts receivable, net | 126,663 | 83,086 | ||||||
Costs and estimated earnings in excess of billings on uncompleted contracts | 61,905 | 71,016 | ||||||
Inventories, net | 31,828 | 26,526 | ||||||
Prepaid expenses and other current assets | 15,634 | 12,174 | ||||||
Prepaid income taxes | 6,456 | 1,271 | ||||||
Total current assets | 291,038 | 240,658 | ||||||
Property, plant and equipment, net | 24,194 | 20,828 | ||||||
Right-of-use assets from operating leases | 11,530 | 11,373 | ||||||
Goodwill | 199,736 | 183,197 | ||||||
Intangible assets – finite life, net | 42,899 | 35,251 | ||||||
Intangible assets – indefinite life | 9,559 | 9,508 | ||||||
Deferred income taxes | 816 | 829 | ||||||
Deferred charges and other assets | 2,846 | 3,077 | ||||||
Total assets | $ | 582,618 | $ | 504,721 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Current portion of debt | $ | 4,313 | $ | 3,579 | ||||
Accounts payable and accrued expenses | 116,254 | 107,198 | ||||||
Billings in excess of costs and estimated earnings on uncompleted contracts | 61,365 | 32,716 | ||||||
Notes payable | 2,500 | — | ||||||
Income taxes payable | 3,788 | 3,207 | ||||||
Total current liabilities | 188,220 | 146,700 | ||||||
Other liabilities | 13,611 | 15,129 | ||||||
Debt, less current portion | 137,322 | 107,625 | ||||||
Deferred income tax liability, net | 7,991 | 8,666 | ||||||
Operating lease liabilities | 8,326 | 8,453 | ||||||
Total liabilities | 355,470 | 286,573 | ||||||
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, 34,738,126 and | 347 | 344 | ||||||
Capital in excess of par value | 252,406 | 250,174 | ||||||
Accumulated loss | (13,596) | (19,298) | ||||||
Accumulated other comprehensive loss | (17,091) | (17,996) | ||||||
Total CECO shareholders' equity | 222,066 | 213,224 | ||||||
Noncontrolling interest | 5,082 | 4,924 | ||||||
Total shareholders' equity | 227,148 | 218,148 | ||||||
Total liabilities and shareholders' equity | $ | 582,618 | $ | 504,721 | ||||
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES | ||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||
(unaudited) | ||||||||||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
(in thousands, except per share data) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
Net sales | $ | 129,181 | $ | 105,375 | $ | 241,744 | $ | 197,811 | ||||||||
Cost of sales | 89,364 | 73,700 | 167,034 | 139,708 | ||||||||||||
Gross profit | 39,817 | 31,675 | 74,710 | 58,103 | ||||||||||||
Selling and administrative expenses | 28,451 | 22,988 | 55,644 | 41,640 | ||||||||||||
Amortization and earnout expenses | 2,273 | 1,450 | 4,020 | 2,900 | ||||||||||||
Acquisition and integration expenses | 332 | 1,491 | 824 | 2,540 | ||||||||||||
Executive transition expenses | 158 | — | 158 | — | ||||||||||||
Restructuring expenses | — | — | — | 73 | ||||||||||||
Income from operations | 8,603 | 5,746 | 14,064 | 10,950 | ||||||||||||
Other income (expense), net | 121 | 1,936 | (453) | 1,478 | ||||||||||||
Interest expense | (3,750) | (1,098) | (6,158) | (1,920) | ||||||||||||
Income before income taxes | 4,974 | 6,584 | 7,453 | 10,508 | ||||||||||||
Income tax expense | 984 | 1,860 | 993 | 2,972 | ||||||||||||
Net income | 3,990 | 4,724 | 6,460 | 7,536 | ||||||||||||
Noncontrolling interest | 266 | 339 | 759 | 356 | ||||||||||||
Net income attributable to CECO Environmental Corp. | $ | 3,724 | $ | 4,385 | $ | 5,701 | $ | 7,180 | ||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 0.11 | $ | 0.13 | $ | 0.17 | $ | 0.21 | ||||||||
Diluted | $ | 0.11 | $ | 0.13 | $ | 0.16 | $ | 0.20 | ||||||||
Weighted average number of common shares outstanding: | ||||||||||||||||
Basic | 34,619,216 | 34,873,238 | 34,531,050 | 34,961,645 | ||||||||||||
Diluted | 35,143,782 | 35,041,152 | 35,171,727 | 35,119,685 | ||||||||||||
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(unaudited) | ||||||||
Six months ended June 30, | ||||||||
(in thousands) | 2023 | 2022 | ||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 6,460 | $ | 7,536 | ||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||||
Depreciation and amortization | 5,650 | 4,668 | ||||||
Unrealized foreign currency gain | (863) | (5) | ||||||
Fair value adjustment to earnout liabilities | 296 | — | ||||||
Earnout payments | — | (1,007) | ||||||
Gain (loss) on sale of property and equipment | 78 | (7) | ||||||
Debt discount amortization | 182 | 187 | ||||||
