CECO Environmental Corp. Reports Fourth Quarter and Full Year 2018 Results

Mar. 7, 2019

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 fourth quarter and full year of 2018.

Highlights of the Fourth Quarter 2018*

Revenue of $93.9 million, compared with $73.5 million
Organic revenue of $93.9 million, compared to $65.0 million
Gross profit of $29.8 million (31.7% margin), compared with $25.6 million (34.8% margin)
Operating Income of $5.7 million, compared with a $(8.2) million loss
Non-GAAP operating income of $8.4 million, compared with $3.5 million
Net Income was $0.9 million, compared with a $(11.6) million loss
Non-GAAP net income of $3.0 million, compared with a $(1.7) million loss
Net Income per diluted share was $0.03, compared with $(0.34) loss per diluted share
Non-GAAP net income per diluted share of $0.08, compared with $(0.05) loss
Adjusted EBITDA of $10.0 million, compared with $4.9 million
Bookings of $74.5 million, compared with $91.4 million
Backlog of $182.1 million, compared with $150.6 million, adjusted for divestitures

Full-Year 2018 Highlights*

Revenue of $337.3 million, compared with $345.1 million
Organic revenue of $328.0 million, compared with $310.5 million
Gross profit of $111.5 million, down $1.7 million
Gross margin of 33.1%, up 30 basis points
Net loss of $(7.1) million, or $(0.21) loss per share
Non-GAAP net income of $10.2 million, or $0.29 per diluted share
Adjusted EBITDA of $30.7 million
Bookings of $367.4 million, compared with $333.6 million
Bookings of $359.1 million, compared with $297.9 million, adjusted for divestitures

* All comparisons are versus the comparable prior-year period, which include results from divestitures, unless otherwise stated.

CECO`s Chief Executive Officer Dennis Sadlowski commented, "I am very pleased with our financial results for the fourth quarter and want to thank the entire CECO team for delivering big improvements in our performance. We achieved 44% year-over-year organic revenue growth, over 100% growth in EBITDA, and incredible free cash flow generation of $17 million. We view cash earnings as integral to generating top-tier returns for our shareholders and believe this to be a fundamental strength of CECO`s asset light business model."

Mr. Sadlowski added, "In 2018, we executed on our operating strategy, delivered growth with a 20% year-over-year increase in bookings and are well underway to transforming how we do business with a more customer focused and solutions-based mindset. Our fourth quarter bookings were below our expectations as capital markets volatility and US political tensions created delays in customer decisions. We expect this to be more of a timing issue as our overall sales pipeline remains very strong and robust. We are headed into a new year with an impressive backlog of $182 million, which is up $32 million organically from the prior year. Our end markets are large and generally healthy going into 2019 which provide us confidence in our aggressive financial targets for 2021."

Fourth Quarter Results

Revenue in the fourth quarter of 2018 was $93.9 million, up 27.8% from $73.5 million in the prior-year period, and up 6.3% from $88.3 million in the third quarter of 2018. Revenue in the fourth quarter of 2017 included $8.5 million attributable to our divested businesses, Keystone, Strobic and Zhongli.

Operating Income was $5.7 million for the fourth quarter of 2018 (6.1% margin), compared with an $(8.2) millionloss in the prior-year period. Non-GAAP operating income was $8.4 million for the fourth quarter of 2018 (9.0% margin), compared with $3.5 million in the prior-year period (4.8% margin).

Net income was $0.9 million for the fourth quarter of 2018, compared with a $(11.6) million net loss in the prior-year period. Net income on a non-GAAP basis was $3.0 million for the fourth quarter of 2018, compared with a $(1.7) million net loss in the prior-year period.

Net income per diluted share was $0.03 for the fourth quarter of 2018, compared with net loss per diluted share of $(0.34) in the prior-year period. Non-GAAP net income per diluted share was $0.08 for the fourth quarter of 2018, compared with non-GAAP net loss per diluted share of $(0.05) for the prior-year period.

Cash and cash equivalents were $43.7 million and bank debt was $76.1 million as of December 31, 2018, compared with $29.9 million and $117.7 million, respectively, as of December 31, 2017.

Backlog and Bookings

Total backlog at December 31, 2018 was $182.1 million as compared with $168.9 million at December 31, 2017, and $211.4 million on September 30, 2018. In 2018, $18.3 million of beginning backlog was attributable to the divested Keystone, Strobic, and Zhongli businesses. Adjusted for divestitures, backlog increased $31.5 million year-over-year.

Bookings were $74.5 million for the fourth quarter of 2018, compared with $91.4 million in the prior-year period. Bookings in the 2017 quarter included $6.5 million attributable to the noted divestitures, compared with $1.7 million in the current-year. Adjusted for divestitures, bookings in the fourth quarter decreased $12.1 million.

Bookings were $367.4 million for the year of 2018 as compared with $333.6 million for the prior-year period. Bookings for the year of 2017 included $35.7 million attributable to noted divestitures, compared with $8.3 million in the current-year. Adjusted for divestitures, bookings for the year increased $61.2 million.

2018 Full Year Results

Revenue was $337.3 million for the twelve months in 2018, down 2.2% from $345.1 million in the prior-year period. Revenue in 2017 included $34.6 million attributable to our divested businesses, Keystone, Strobic, and Zhongli compared with $9.3 million for the year of 2018.

Operating income was $10.0 million in 2018 (3.0% margin), compared with $8.0 million in the prior-year period (2.3% margin). Operating income on a non-GAAP basis was $24.1 million in 2018 (7.1% margin), compared with $28.3 million in the prior-year period (8.2% margin).

Net loss was $(7.1) million for 2018, compared with a net loss of $(3.0) million in the prior-year period. Net income on a non-GAAP basis was $10.2 million for the year of 2018, compared with $9.5 million in the prior-year period.

Net loss per diluted share was $(0.21) in 2018, compared with net loss of $(0.09) in the prior-year period. Non-GAAP net income per diluted share was $0.29 for the year of 2018, compared with $0.27 for the prior-year period.

Conference Call

A conference call is scheduled for today at 8:30 a.m. ET to discuss the fourth quarter and fiscal 2018 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 replay of the conference call will be available on the Company`s website for 7 days. The replay may be accessed by dialing (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 10128725.

About CECO Environmental

CECO Environmental is a global leader in air quality and fluid handling serving the energy, 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 solutions for applications including oil and gas, power generation, water and wastewater, battery production, poly silicon fabrication, chemical and petrochemical processing along with a range of others. CECO is listed on Nasdaq under the ticker symbol "CECE".