PR Newswire | Nov 8, 2021 07:05AM EST

11/08 06:05 CST

CECO Environmental Reports Third Quarter and Year-to-Date 2021 ResultsBookings Up 39 Percent, but Q3 Results Impacted by Challenging Operating Environment DALLAS, Nov. 8, 2021

DALLAS, Nov. 8, 2021 /PRNewswire/ -- CECO Environmental Corp.(Nasdaq: CECE), a leading global air quality and fluid handling company serving the energy, industrial and other niche markets, today reported its financial results for the third quarter of 2021.

Highlights of the Third Quarter 2021*

* Revenue of $80.0 million, compared with $77.4 million * Gross profit of $22.7 million (28.4% margin), compared with $24.8 million (32.0% margin) * Operating loss of $(0.6) million, compared with operating income of $1.0 million * Non-GAAP operating income of $1.8 million, compared with $5.9 million * Net loss of $(1.2) million, compared with $(0.2) million * Non-GAAP net income of $0.5 million, compared with $3.8 million * Adjusted EBITDA of $3.5 million, compared with $7.3 million * Bookings of $92.6 million, compared with $66.8 million * Backlog of $219.1 million, compared with $183.1 million as of December 31, 2020 * Net loss per diluted share of $(0.04), compared with $(0.01) * Non-GAAP earnings per diluted share of $0.01, compared with $0.11 * Bank Debt of $67.0 million, compared with $74.0 million as of December 31, 2020 * Repurchased approximately 521,000 shares of common stock at cost of $3.7 million

*All comparisons are versus the comparable prior year period, unless otherwise stated

"Third quarter and year-to-date results reflect the 'tale of two CECOs', so to speak," said Todd Gleason, Chief Executive Officer. "On the one hand, our orders were up 39 percent in the third quarter and up 33 percent year-to-date. This represents strong bookings' growth and positions CECO for corresponding revenue growth in the coming quarters. Unfortunately, in the third quarter, we could not overcome challenges associated with lower-margin projects booked in late 2020, various short-term execution issues associated with supply chain and logistics costs, customer delays, and labor shortages. As the fourth quarter continues to progress, we are confident we will achieve improved volumes and margins, which we expect to result in revenues up double-digits and adjusted EBITDA to more than double sequentially from the third quarter."

Gleason concluded, "As we announced today, we are pleased to welcome Richard Wallman, the former CFO of Honeywell, to CECO's Board of Directors to assist me, the leadership team and the board in executing our longer-term strategy. We look forward to delivering stronger financial results in the fourth quarter and throughout 2022, as well as starting to utilize our healthy balance sheet to transform our portfolio."

CONFERENCE CALL

A conference call is scheduled for today at 8:30 a.m. ET to discuss the third quarter 2021 financial results. The conference call may also be accessed by dialing (888) 346-4547 (Toll-Free) within the U.S., (855) 669-9657 (Toll-Free) within Canada or Toll/International (412) 317-5251.

The live webcast and slides can also be accessed at https://investors.cecoenviro.com/events-webcasts-and-presentations.

A live and archived replay of the conference call will be available on the Company's website for 90 days. The telephone replay will be available one hour after the call ends through November 15, 2021. To access the replay, please dial (877) 344-7529 (Toll-Free) within the U.S., (855) 669-9658 (Toll-Free) within Canada, or Toll/International (412) 317-0088 and entering access code 10160914.

ABOUT CECO ENVIRONMENTAL

CECO Environmental is a global leader in industrial air quality and fluid handling, serving a broad landscape of industrial and other niche markets. Providing innovative technology and application expertise, CECO helps companies grow their business with safe, clean, and more efficient solutions that help protect our shared environment. In regions around the world, CECO works to improve air quality, optimize the energy value chain, and provide custom engineered systems for applications including power generation, petrochemical processing, general industrial, refining, midstream oil & 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". For more information, please visit www.cecoenviro.com.

Contact:

Matthew Eckl, Chief Financial Officer(888) 990-6670investor.relations@onececo.com

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS



(dollars in thousands, except per share data)(unaudited) December 31, 2020 September 30, 2021

ASSETS

Current assets:

Cash and cash equivalents $ 31,925 $35,992

Restricted cash 2,541 1,819

Accounts receivable, net 70,024 63,046

Costs and estimated earnings in excess of 50,536 45,498 billings on uncompleted contracts

Inventories, net 18,609 17,343

Prepaid expenses and other current assets 12,229 11,530

Prepaid income taxes 3,844 7,790

Assets held for sale - 467

Total current assets 189,708 183,485

Property, plant and equipment, net 15,893 16,228

Right-of-use assets from operating leases 10,998 11,376

Goodwill 161,593 161,820

Intangible assets - finite life, net 27,658 29,637

Intangible assets - indefinite life 9,701 12,937

Deferred charges and other assets 3,125 3,831

Total assets $ 418,676 $419,314

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Current portion of debt $ 3,750 $3,125

Accounts payable and accrued expenses 89,633 84,997

Billings in excess of costs and estimated 24,559 20,691 earnings on uncompleted contracts

Income taxes payable 467 543

Total current liabilities 118,409 109,356

Other liabilities 19,486 20,576

Debt, less current portion 62,182 69,491

Deferred income tax liability, net 7,188 6,970

Operating lease liabilities 8,884 9,310

Total liabilities 216,149 215,703

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, 35,809,061 and 35,504,757 358 355 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

Capital in excess of par value 257,482 255,296

Accumulated loss (37,916) (38,141)

Accumulated other comprehensive loss (14,401) (14,496)

205,523 203,014

Less treasury stock, at cost, 659,417 and 137,920 shares at September 30, 2021 and (4,101) (356) December 31, 2020, respectively

Total CECO shareholders' equity 201,422 202,658

Non-controlling interest 1,105 953

Total shareholders' equity 202,527 203,611

Total liabilities and shareholders' equity $ 418,676 $419,314

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)



Three months ended September 30,Nine months ended September 30,

(dollars in thousands, except per share data)2021 2020 2021 2020

Net sales $ 79,979 $ 77,425 $230,551 $233,081

Cost of sales 57,254 52,615 158,164 154,176

Gross profit 22,725 24,810 72,387 78,905

Selling and administrative expenses 20,929 18,989 60,894 59,374

Amortization and earnout expenses 1,776 2,050 5,849 5,546

Restructuring expenses 397 871 655 1,753

Acquisition and integration expenses 219 368 357 1,067

Executive transition expenses - 1,514 29 1,514

(Loss) income from operations (596) 1,018 4,603 9,651

Other income (expense), net 185 (290) (1,155) 1,057

Interest expense (722) (772) (2,152) (2,739)

(Loss) income before income taxes (1,133) (44) 1,296 7,969

Income tax expense 63 206 813 1,549

Net (loss) income (1,196) (250) 483 6,420

Non-controlling interest 53 (11) 259 (11)

Net (loss) income attributable to CECO $ (1,249) $ (239) $224 $6,431 Environmental Corp.

(Loss) earnings per share:

Basic $ (0.04) $ (0.01) $0.01 $0.18

Diluted $ (0.04) $ (0.01) $0.01 $0.18

Weighted average number of common shares outstanding:

Basic 35,472,298 35,358,913 35,463,279 35,263,688

Diluted 35,472,298 35,358,913 35,729,887 35,471,551

CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP MEASURES



THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30,

(dollars in millions) 2021 2020 2021 2020

Operating (loss) income as reported in accordance with GAAP$(0.6) $1.0 $4.6 $9.7

Operating margin in accordance with GAAP (0.8) % 1.3 % 2.0 % 4.2 %

Amortization and earnout expenses 1.8 2.1 5.8 5.5

Restructuring expenses 0.4 0.9 0.7 1.8

Acquisition and integration expenses 0.2 0.4 0.4 1.1

Executive transition expenses - 1.5 - 1.5

Non-GAAP operating income $1.8 $5.9 $11.5 $19.6

Non-GAAP operating margin 2.3 % 7.6 % 5.0 % 8.4 %



THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30,

(dollars in millions) 2021 2020 2021 2020

Net (loss) income as reported in accordance with GAAP $(1.2) $(0.2) $0.2 $6.4

Amortization and earnout expenses 1.8 2.1 5.8 5.5

Restructuring expenses 0.4 0.9 0.7 1.8

Acquisition and integration expenses 0.2 0.4 0.4 1.1

Executive transition expenses - 1.5 - 1.5

Foreign currency remeasurement (0.1) 0.4 1.5 0.3

Tax benefit expense of adjustments (0.6) (1.3) (2.1) (2.6)

Non-GAAP net income $0.5 $3.8 $6.5 $14.0

Depreciation 0.8 0.6 2.3 1.8

Non-cash stock compensation 0.9 0.7 2.5 1.5

Other (income) expense (0.1) (0.1) (0.3) (1.4)

Interest expense 0.7 0.8 2.2 2.7

Income tax expense 0.7 1.5 2.9 4.1

Adjusted EBITDA $3.5 $7.3 $16.1 $22.7



Earnings (loss) per share:

Basic $(0.04) $(0.01) $0.01 $0.18

Diluted $(0.04) $(0.01) $0.01 $0.18



Non-GAAP net income per share:

Basic $0.01 $0.11 $0.18 $0.40

Diluted $0.01 $0.11 $0.18 $0.40

NOTE REGARDING NON-GAAP FINANCIAL MEASURES

CECO is providing certain non-GAAP historical financial measures as presented above as the Company believes 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 the GAAP statement of operations.

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, executive transition expenses 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 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, 2020, 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.

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SOURCE CECO Environmental Corp.