Q4 2019 Earnings Call
Good morning, everyone and thank you for joining today's call or please you could join us for this update on our 2019 fourth-quarter and full-year results as in past calls. I'll be viewing our results and discussing the Outlook of our markets with a few added comments on how they could be influenced by the global coronavirus pandemic with Matt following me with the financial details off then summarize our progress and plans before leading us into the Q&A session where we'll address your questions.
As we jump in I want to underscore that we're confident in our ability to accelerate growth remain committed to delivering top-tier returns to our investors and our steadfast in pursuing our environment driven business strategy.
Let me start with a brief look back and have you turn to slide three.
Highlights are for three three operating strategy that we launched in late 2017 to guide our priorities Investments and execution. It's proven to be a successful blueprint for transforming sequel environmental into a vibrant Growth Company.
In the past couple of years, we've upgraded the leadership team expanded or International footprint made investments in new product Innovation streamlined our operation and substantially improved the capital structure.
And reinforcing our organizational and operating Foundation. We transformed our execution to this customer focused culturally aligned and delivering Excellence execution is what makes us even stronger and more resilient than the sum of our organizational parts.
Applied for you can see the results of the team's exceptional execution around our blueprint for three three strategy since it was implemented two years ago. I can sum up those results in two words off solid progress.
Executing against the strategy. I stated that we were aiming to generate organic growth and in two years time. We've delivered 29% growth in organic orders and increase of 85 million.
The left hand chart on slide for the pics the excellent trajectory for increasing orders a key to our progress.
Revenue development as shown in the center chart also increased over the period by 10% and equally important we maintain consistently robust gross margins across the mix of New Jersey and aftermarket business even in the face of inflation and competitive pressures.
Finally the chart on the right highlights an improvement and are even 10% which came while also making a much-needed reinvestment in Seacoast future growth potential.
for three operating strategy will continue to guide our execution into twenty-twenty and as I'll discuss after-match financial report will revitalizing our set of strategic actions to accelerate our growth
during the slide Vibe. I'll share some highlights and thoughts on our performance during Q4 and throughout 2019.
Let's begin with a fourth-quarter results and $89 million. Revenue was up 5% sequentially and with gross margins holding at 33.6% We generate an 11 .36 ibadah rate in the fourth quarter.
In addition, we produce $9 of free cash flow in the quarter a 90% conversion of our ebitda.
All of these results demonstrate the progress that the secret team is making as we execute our plans.
Across-the-board our key p&l metrics are improving as we exit the year.
Only a new orders do we fall short as our streak of steadily increasing results was interrupted. So a robust quarter on the key financials gets an asterisk.
68 million and new orders for Q4. We were off the pace of 2019 and down 7% year-over-year.
Unfortunately, our energy segments are very few project or closings in the quarter which contributes The Lion's Share of the drop-off.
But this won't deter us from marching forward. The team is working hard to start the next week of growing orders. And the sales pipeline remains healthy.
That asterisk on Q4 did not prevent us from achieving full year organic orders growth of 7% and 2019 at the upper end of our target range and the increasing backlog help to produce so much progress as we hit our stride in the second half. We ended the year with backlog up $35 million.
Revenue picked up in the second half resulting in full-year sales of 342 million up 4% for 2019.
John contributions to the revenue growth were delivered by our industrial Solutions segment along with some terrific execution across the board.
But also positively followed the revenue Trend as we close 2019 at 33 million which reflected a 7% increase year-over-year even with our ongoing reinvestment for the future months.
For the full year, we generated five million free cash flow. Well below our capability, but what's notable. Is it after a less-than-stellar start? We brought back in the second half a gathering $17 free cash flow on the final two quarters of 2019 as I mentioned before we believe that cash flow is both the strength of our asset-light business model and one of the keys to generating top-tier returns we intend to keep the pressure on
Finally our capital structure continues to improve battle give you the details but there's a lot to like the actions taken and ongoing performance and 2019 puts us in a position with greater flexibility more capacity and reduce leverage. This capital structure enables us to seize investment opportunities to accelerate our growth and compounding returns for our investors.
For moving on I'll paraphrase from an old saying for my soccer days. You are what your results say you are and with that in mind, we believe that our 2019 results say that recall has transformed itself into a vibrant Growth Company with capabilities capacity and Market position to deliver top-tier returns.
Turning to slide six. We highlight the vast array of products and services that help us compete in the growing low-carbon economy.
In a nutshell sequel is providing solutions for a cleaner safer world with a broad portfolio of application-specific product solutions that range from reduced emissions of chemicals and particulate matter too productive fluid handling and process water treatment designs our biggest target remains clean air.
Developed and are building a reputation for not only providing Sustainable Solutions but also for doing so when others can't do our technical capabilities and Innovative projects.
You shine a light on our products services and Technical capabilities. I wondered if she are too unique technical project wins from the fourth quarter. One is an exciting New Order that demonstrates the Ingenuity of our applications team and the value of our Solutions the other highlights our capability and capacity to take on challenging customer needs.
Together these two projects demonstrate our value proposition offer Superior product solution capability that makes our customers operations more efficient and safe while protecting the environment.
Let's now turn just like seven which depicts our recent energy segment project with this one involves a new industrial customer that operates the petrochemical facility in the Philippines producing ethanol, which is a key component in plastic resins adhesives and synthetic products used in every aspect of Modern Life.
Facilities ownership devised a plan to generate electricity and process Heat by using a gas by product as a fuel source.
represents an essentially free fuel source and generate significant added benefits via the integrated process eating
despite a sizable capital investment. It will drive major efficiencies for this facility and have a payback of less than two years.
It going our our team team members were called in when the customer and their stalled on developing an efficient design for the exhaust system. That would allow the customer to use the exhaust for process each month.
The seagull lighting team was able to provide an elegant solution with significant cost savings by using a smaller and more efficient equipment layout. It's Eco solution resulted in reduced capital and instead cost and we'll make future maintenance easier and safer to perform.
It's an example of us turning our applications expertise and gas turbine exhaust systems in the significant economic benefits for our customer the fact that the system helps protect the environment by reducing fossil-fuel used in the facility makes it another win win win or Seco or customer and the environment.
Turning to slide eight. You'll see a schematic of a product solution that makes Seacoast and out in our competitive markets.
This one was from a long time customer involving the R&D center of a large semiconductor manufacturer.
Located in the Pacific Northwest. The customer is looking to significantly expand their production of computer chips for testing with some challenging design installation and delivery requirements.
Silicon Wafers for computer chips or produced the price of submissions contain hazardous air pollutants or half switch must be treated to comply with air quality and safety standards.
He goes through all team. Took this one home because in this instance, we were the only company that could perform on the entire project scope the ultimate competitive advantage.
As a result of our long-standing relationship and the trust built Through The Years signal was initially hired into a consultant role to help break the project specifications.
subsequent
Rhe do all team when the order to design a high-volume scrubber can fit a small footprint and a complex manufacturing environment.
The requirements included aggressive schedule for delivery and installation. What would made this effort noteworthy was The Innovation required to stretch this equipment to its performance limit instead of reduced operating footprint many of our competitors simply don't have the capability or capacity for such a lift. But we do
it's a win-win-win for ceco the customer and the environment.
And we further strengthen our reputation which helps us with the next win?
Pulling this line 9A review the Outlook of our served end markets.
For digging in I want to emphasize three points.
First you'll notice that our end Market exposures have been updated to reflect the overall 2019 Revenue mix of the company.
Strong industrial and Midstream oil and gas Revenue in 2019 have shifted our end Market makes away from the gas-powered in segments, which has been in a protracted downturn since late 2016 month.
Second the overall Seco End Market Outlook remains generally positive and the sequel sales pipeline is relatively robust. I say this despite the speed bump in the energy segment order some softness in the fluid handling settings.
And third like every company was a global footprint. Our markets are being influenced by the spread of the Coronavirus.
There's no way of predicting the magnitude and duration of a global pandemic. So we're Outlook cannot fully account for the uncertainty that's infectious disease poses, but I can provide some contacts with terms of what we're seeing and doing
our first concern is for our people, especially the 85 Associates we have in China are people have been following the government protocols limiting travel while doing as much as they can to support our customers.
our people are
Shanghai and Beijing and Guangzhou and have no signs of the virus.
We have regular dialogue and are taking precautions to ensure their good health.
Better represents about 5% of our ongoing revenue and much of the activity is slowed. So we would likely see some push out across the market.
Our second priority is for our customers. We have little direct Supply from China to other parts of the world. But with the virus spreading into other regions of the world, we are seeing issues arrives. They force localized temporary closing and Manufacturing facilities or delays in shipping.
We are working to ensure we remain current with our customers and at the same time new Global capex and maintenance project decisions may be swayed by the uncertainty associated with the magnitude and duration of a global pandemic.
Right now we are seeing some modest delays, but overall Market still reflect Point activity.
With that in mind, let's move to the pie chart and are served in Market Outlook. I'll begin at the top with the refinery slice of our Energy Solutions market and then move counter-clockwise.
The refinery Market remained steady and while Q4 project activity was down from a year ago are leading technology position in marketshare. Keep us connected with the global activity in the market.
As with most of the energy markets this segment is project-based capital-intensive sector which extensive planning Horizons. This gives us some visibility but project schedules, and do sometimes shift forward or back.
Looking forward every indication points to a market that is stable with an active pipeline of projects and we have no intention of relinquishing are strong number one market share position.
Moving counterclockwise the Midstream on the gas market segment continue to show buoyancy in 2019 Eco orders were up 44% and we continue to widen the function of activity with valuable solutions for critical applications across the segment.
Strength in the past year comes from Key wins and gas pipeline gas separation and LNG applications as well as the games. We've made and process water.
And we've also extended our reach with new technologies and talent to enable further growth in the segment.
Continuing along the gas power can a revenue mix it shifted download and 2019 but backlog is strong.
Project activity in Q4 and early 2020 has been sparse but the twelve-month Outlook from our sales pipeline suggest demand is increasing.
Is improved our competitive position in this end market, so we expect to benefit from the update.
Next at the bottom of the pie chart is solid fuel power-gen here. We include our camper business. That was formerly all gold power projects.
A small portion of the company we had two consecutive strong quarters with increases of 23% and 67% in order sequentially.
Some of that strength comes from the sales team adapting their effort to a Jason sees that are not strictly cold power such as application wins and the mining industry.
Our team will continue to focus on successfully supporting the install base through aftermarket offerings and demonstrate resilience by opening up new applications.
Moving counterclockwise industrial fluid handling is up next.
Same face the challenging 2019 and our results suffered.
our Outlook suggests that the aquaculture segment is improving while we expect demand generated from the auto sector to remain so sluggish
Fluid handling segments. I've seen the largest percentage pick up in Outlook based on our 12-month sales Pipeline with a few big projects on the horizon for 2020. You can be sure that we'll be going all out to capture those projects.
Is this to Industrial Solutions?
The segment serve the air quality improvement needs across the range of production environments or industrial Solutions 2019 started strong and finish strong.
Market itself on the other hand. It's been quite difficult suggesting a considerable share game by Seco in 2019.
Signals are mixed and we have sensing more discipline as it pertains to capex than and we seen a few projects deferred on the other hand. He goes pipeline is still help with several potential Awards being pursued.
I have 7 p.m. I did take about 50 in January and February signal expansion for the first time in several months. But the spread of the virus is likely to dampen that from becoming a trend in the short-term.
And our plans are not just counting on the market. We've been active with people and product Innovation Investments to keep our growth trajectory moving.
And closing all emphasized three points.
2019 was a year of clear progress for Seco with strong second-half results and were committed and positioned to deliver top-tier returns are for three three operating strategies transformed how we do business and it's driving our progress toward a 20 21 goals finally are served markets are large diverse and active and we're determined to win chair off and with that. I'll turn things over to Matt Matt take it away.
Thanks, Tara before digging in I want to emphasize that I'll be discussing the details Financial results and how we strengthen our capability and capacity to accelerate growth. Let's start with slide eleven which shows that I am trying to order his growth with SNAP A sequential increase in Revenue Drive profitability higher orders were down $48 sequentially and 7% year-over-year starting from the top of the stack birth chart explains basis fluid orders declined slightly reflecting the continued softness in their end markets mro spending slows throughout 2019, especially in oil and gas American putting off handling down 12% organically to the podium where. Please with preferred that are making changes to course-correct in 2020 or the other hand. Our pipeline for new aquarium opportunities has grown significantly am optimistic and our ability to win with our market-leading fiber optic.
It has been mentioned there's some.
Projects on the horizon will be in on the hook moving down the back bar industrial orders were healthy up 11% sequentially and 22% year-over-year and 21 million. It's a tough market and I'm pleased to say that a result suggests were gaining share of the competition while there's some mixed signals in this market. We feel good about are very healthy pipeline heading into twenty-twenty by far the most significant factor of our fourth-quarter orders results came from our energy segment after a steady increase in orders through Q3 this project based segment in a speed bump with project time to get Awards leading to less than desired results in a meeting. Some orders were pushed out especially the refinery segment where fewer than five million of projects were awarded globally Q4 or gas-powered doesn't segment has been stabilizing your sales pipeline remains active in a few solid wins in Q3. Although not many project reach the award stage during this last quarter each of the big three gas turbine aliens gec when the Mitsubishi a report of the recent quarterly resolved.
At all have noted a stabilization in the market for the seat down. Turn the latest 2016. We continue to take share in 2019 building our market-leading positions and have that mindset of 2026.
Satellite shows our Revenue without questioning nearly 5% and down slightly year-over-year by paying percentage. And please receive the backlog conversion in the second half as our team has been executing to customer requests growing backlog next project revenue and healthy margins is key to achieving future operating leverage speaking of backlog an alternative by 12 which shows this equivalent of Bank Revenue at 216 point six million the 2018 rebuilt back on the $35 billion contribute your excellent starting position for the coming year. Even with a decline in Q4 90% I'll note that while orders were long and we desire Q4 is typically been slow for seat. Go with the last four years averaging approximately 70 billion.
Majority of speakers order pipeline consists of original equipment business, but which we have leading Brands and Market positions because of a long cycle nature of our business trailing-twelve-month indicators are good overall measure of our orders performs PTM tends to smooth out the lumpiness of a single quarter while still providing the direction of future Revenue.
looking at 2018
Back on 3:35 million an increase in nineteen percent and our book-to-bill is greater than 1.1 x the increase demonstrates. We're winning share and grow into XR aggregate markets.
I'll turn to slide 13 which shows that the combination of execution sequential growth was. Even as a double-digit margins are very smart ones remain healthy at 33.6% while flat sequentially was up a year of year did driven by an approved project margin and productivity as well as cost savings that are fluid handling plans are non-gaap operating income was up 37% sequentially and 14% year-over-year of improved project working with lower sg&a in stock compensation adjusted ebitda was up sequentially by 20% and essentially flat year-over-year on volume project margins and lower sg&a.
During the slide 14 or detailed answers for the fourth quarter of 2018 show that we had solid operating performance on several profitability metrics have already discussed revenue and orders. So I'll take them there. Do you highlight a few other metrics?
On that basis was operating income and earnings per share or out your of your 1.2 million and $0.21 respectively Land by higher gross margins lower sg&a, including our taxes interest expense basis. We delivered 10.1 million and adjusted ebitda hitting 11.3% of the quarter and emphatic demonstrative shouldn't of operating leverage as we grow on a line early for Chevrolet. Nineteen said, you're a beer to 27% in the quarter but improved project margin lower sg&a lowering interest and taxes.
30 to 5:15. We have the same performance metrics but this time reflecting the total year 2019. I want to emphasize that the chart shows that we hit our stride 2019 with significant progress, especially during the second half when we achieved operating results or the Gap bases are operating income eight million and earnings per share improved 70% year-over-year as a result of improved volume and margin coupled with an on repeat of the prior-year right now as on behalf of associated with the messenger that took place in October of 2018.
Basis or early 4shared jumped 111% year-over-year or Thirty cents per share on volume operating leverage and lower interest and tax expenses. Our 2019 non-gaap effective tax rate came at exactly on her estimate of 25%
Flipping the 516 we delivered more good news by generating Seventeen million and free-cash-flow hear the second half of 2019, which are the left shows our trade working capital group 5% sequentially on a landline wage increase our project web. However, is that a fantastic 0.1% of sales? This is a compelling Testament to our asset-light property moment body to the right. We generate $9 free cash pack you for driven by 10.9 million of operating cash flow all set with 1.9 million of capex, primarily your my Machinery upgrade and an Erp implementation in our business office at 90% free cash flow even that conversion with a good performance.
On a full year basis. We got off to a week start and then as predicted came back strong during the second half of the Year. Our capability was better than the total year result. And we continue to make investments to improve our operational excellence earlier Dennis highlight the success of our for three operating strategy and that's ought to be interesting to provide a quick update or a simplification efforts as a reminder in 2017 Dodge 67 legal aid in 13 apiece. And please note that closing 2019. We have sixty are peas and 41 legal entities this past quarter. We made great strides with 2,000 RPMs. I mentioned both of these last quarter. I want to touch it again because they're in place and improving our operating results.
the first
Is Microsoft cloud-based d365 platform at our public business we went live in November and it's already provided our teams Advanced costing in Inventory management capabilities the platform making us more productive in a soft fluid handling market and stronger competitively and the market begins to strike. The only Ford d365 also allows us to compete online which was unsaid in the 2009 version of our AARP with this change. We can serve our OEM customers and distribution partners and want to get quotations online and along with visibility to lead times second wave upgrade our energy segment to an epic or 10 version a cloud-based version offers enhanced project management in service modules that were not available through us in our previous version of our doctor the fan apart require change management team work long hours and a dedication to delivery to the customer even if your system is down.
Several of our team members shine in particular. I want to mention Stacy sabarsky Garrick Hank and Alex Tyler and operation and built. I'm in in our it team for their extraordinary efforts just as importantly I want to make their families for the time. There's a lot of them devoted to see go getting us live.
Please with a systemic change. We're unable to get the account. It's improving cash earnings and strategically positioned us to accelerate our ground next up on 517 wage that we've got a healthy balance sheet, which is Big component accelerating orgasm during the fourth quarter free cash flows further reduce our debt 267 billion. Our net leverage ratio is sufficiently below 1.6 over 100 million of untapped capacity in our current facility and oppressive capability to see the investment opportunities consistent with our new Financial criteria and enduring environmental mission.
Yeah, the whole structure my comments today alternative by 18 which addresses our progress towards our 2021 Financial targets that we've committed to meeting. If not exceeding the results. We've achieved this past year, especially during the summer after the measure of our progress towards delivering top-tier returns.
Starting in the upper-left quadrant. Our goal is to organically markets to access over time. And as you can see we're doing just that he TM rather than four percent growth is also performing Right Choice Greens on our robots backlog will favorably come into play with this Target and were operating inactive and markets with a Competitive Edge very Innovative product and high-caliber Engineering activities off the two thousand. One of the dentist said earlier good examples of this Competitive Edge, which is essential to Growing organic Revenue off.
Moving to the right or even our rate is largely driven by revenue and the operating leverage achieved.
With Revenue picking up order or even outright improved you're 11.3% in the quarter. We still have some work to do on the gross side to move our maybe the ratings at the target range of 12 to 14% They seem to consistently generous as well as reduced GNA to fuel our sales and marketing Investments.
Next is achieving a superior return on tangible Capital which continues to reflect our asset-light operating model was working capital going down and earnings improving. We have improved ROTC for a sixth consecutive order and exceeding the target Zone at 59% We're confident that there's still room for improvement or focused on accomplishing that finally on the lower left hand side is our free cash flow converge, right which a 90% coupon was above the target range on a GTM basis free cash flow conversion was 14% as we continue to work off a tough first half 2019 or working capital loan remain down in a project with as a driver further free cash flow Improvement are working hard at it to wrap up and really pleased with the progress that we made into on 19, especially during the second half over the past couple of years. We transform our operations and built a healthy balance sheet. I'm confident that we're up to the challenge of continuing to achieve organic growth all that leads to top-tier returns, and that's what we're committed to Thursday.
That I gave it back to Dennis.
Thanks, Matt. Nice job as always.
In closing I want to touch on our transformation progress and steps towards accelerating growth. The entire organization is proud of what we're achieving and remains confident in Iraq and to achieve even more before three three operating strategy. It's been a blueprint for transforming how we do business and driving growth throughout the organization it require tough decisions and sustained actions and a commitment to achieving our 2021 financial goals.
Our organizational and operational Foundation have been reinforced become a much more agile, resilient and capable organization that can and does beat the competition off and adapt to changing market conditions with an attractive value proposition.
importantly, we substantially improved our capital structure to give us greater flexibility more capacity and less leverage that's already paying off and will continue to do so as we accelerate our growth
Spiegel has a talented and highly focused team that has been exceptional in executing the 4th through operating strategy.
Over the past couple of years we've transformed ourselves into an engine of organic growth organic orders of increased 29% Revenue up 10% and backlog closed $35 million higher than two years ago in the process. We've expanded our ebitda margins and ROTC closed at a record high of 59%
One of the keys to those impressive results is our team's ability to bring home exciting project wins to drive growth and produce solid Financial returns.
And looking at these winds I see two things that point the Seacoast transformation.
First our investments in an expansion of technical sales coverage are paying off in both new projects and the aftermarket.
Second develop the competitive one-two punch that's becoming tougher and tougher to be offering Superior Products and capabilities to protect the environment and improving the customer's operations to be more efficient and safe.
It's all very good news, and we're rightfully proud what we're absolutely not setting the company on cruise control rather propelled by our momentum and fueled by our untapped potential. We're going to shift Segal in a higher gear. So turning to slide nineteen. I'm excited that we're revitalizing are set of strategic actions with the aim of acceleration and doing so with the following guideposts.
First is to keep an eye on the ball by executing for every customer and aggressively competing in our large and attractive and markets and I speak for everyone at SQL environmental when I say that will do so with passion and discipline.
Second to focus on the Sustainable Solutions that are demanded by our customers in this growing low-carbon economy.
The concept and need for sustainability that will be inspiring influencing and guiding our strategic actions going forward.
And third focus our actions on accelerating growth to be positioned to win with Market expansion into a Jason Industries and growth regions new product Innovation and record any models and targeted m&a.
And closing. We're on a path to delivering top-tier returns. I'm confident that we can continue to win share organically in generate value as we push to accelerate Thursday.
And now would welcome your questions operator.
We will now begin the question-and-answer session to ask a question. You may press * then 1 on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the keys off to withdraw your question, please press star then to the first question today comes from Chris Van Horn, please go ahead.
Good morning. Thanks for taking my questions Wonder Chris.
so
To talk about the order headwinds during the quarter. Yeah. It sounds like most of those work deferred to give some a little more color on maybe the timing and and what you see around those orders coming back. Yeah. Yeah. Chris orders were short of of our Target that we got would happen in the fourth quarter, even as we anticipated if you were closed things and so at the same time as we see that you can tell we remain committed to growth, you know, orders are are important. We don't shy away from that the key indicator and we weren't completely pleased with the result having said that you know, the key variables in US continuing to do we need to do is regular customer interaction including adding people in New segments and new territories and then our hit rate on projects and both of these are still in great shape. So while we didn't dead
The trend of increasing orders going the pipeline is still.
Very large very active and most of what we see is still moving forward in our Pipeline and energy segment alone over for closings over the next twelve months is over a billion dollars in the date and all three of our segments is continued to grow and the only thing that really put a question mark out in the current. Is it the coronavirus wage? It's absolutely changing activity in a number of reasons of the world mentioned China already this morning, but we are seeing other activities in and around the world where there are slow travel that's causing slow or decision-making that's affecting both orders and in some cases slowing down inspections and things like that related project execution and Revenue.
Okay, great. Thanks for that color. And then you don't you continue to execute well on the margin line and you know, when you look out through 2020 and into twenty Twenty-One wage, you still have additional operational leverage to pull is is is most of it volume driven. And then how do you see kind of that? Margin, you know trajectory getting to that 12 to 14%
Yeah, I'll make a few comments on the gross margin. But but I think you're you're referring mostly to the operating margins and and how we move forward. You know, what the gross margin line. The team has done a fantastic job. I think a really transitioning to sell value especially in our custom and engineered product scope away at where a lot of people can get into the habit of doing a cost-plus modeling is to how they view the market and that in conjunction with aftermarket sales and follow on and and service revenues, you know have continued to help us keep a nice solid Blended gross margin even as we grow the mix of of type and and area of projects and sales activities. So at the gross margin line, we've been very pleased to offer the ability that we're getting out of a whole mix of activities and a whole mix of different market conditions.
Yeah over the longer. Chris, I'd suggest 30 to 34% on gross margin. And if you look at the last three years or a few days actually declined as we've taken cost that of GNA and increase sales. We got a decent flow through an operating Leverage is all about growth. Lots of maintaining that gross margin.
Got it. All right, great. And then you know last for me, you know, obviously, you know, despite Q4. You still had a really good growth for the year and just want to know you know, I think that's the answer is probably a mix of thought but maybe some some detail around that is it macro driven and you seeing a little bit more push from from your customers to sustainable projects and as well as competitive factors and and maybe highlight each of those. Thanks. I'm not sure. I followed your question precisely but we were pleased throughout the year to be growing backlog and ended the year thirty thousand million above where where we ended the prior-year and so find ourselves again in good shape with a with a backlog. Our markets are are very large. They're growing in importance with the importance of sustainability all around the world and we're executing our plan to drive the sequel growth engine. So I think we're long-term medium-term in a good place.
to be the there is a question mark right now over the short term has this virus does change some of the activity in the
Pace that people are moving to close.
Okay, great. Thank you so much for the time.
The next question today comes from Jim of Needham & Company, please. Go ahead. Thanks. Good morning, Dennis Dennis just a follow-up on some of the commentary page that you just provided. It. Sounds like you you're you are seeing a little bit more foot-dragging in in the last couple of weeks, I guess as as we're seeing more of an impact outside of China from the The Cove in nineteen outbreak. Is that is that fair to say I have to say, yes, unfortunately, I am tryna for sure. We saw immediate impact, you know, everybody was asked to stay out for an extra week after the Chinese New Year and there's been quite a bit of government function including you know, we're trying to stagger and have a lot of our people work from home, but beyond that we we started to see other elements that that are slowing down not changing long-term many.
anything but for example
So we have a large project wants to be fast track. It's in the Middle East and it has an influence from an EPC in Asia as a part of the process. Even on a fast-track. They need to audit all the major facilities, including our headquarters and they have curtailed travel in order to get that done. So they approve you on a fast track product from there in customer and at the same time we're not able to take care of some of the small issues if I might execute along the way and there's a similar example where we're producing a large order also on a fast track with a tight timetable in Northern Italy and at the moment everybody is showing up to work progress that's being made but it looks like they'll be delays around people flying in for normal inspections that that always take place on projects like these and so those are the elements that are driving.
more uncertainty in the short run
Haven't seen anything affect longer-term at this point.
So if you know, I'm wondering how we we should be thinking about this near-term. Is there the potential that that this potentially could impact your Revenue short-term or just causes folks to maybe delay on on some of the projects and as you know, some folks out for the near-term booking visibility. I'll start with revenue and tell you that you know, we do think that one will be tough, but we'll make it up later in the year. I remind you that we're ending the year with the largest backlog from a year-end perspective in the history of the company at 217 million. So that's nice as we head into twenty-twenty, you know, the long-term implications of what's happening with Cove in nineteen or still to be determined but our pipeline strong and we're seeing a lot of order activities. So I feel pretty good about the order side and run.
For full-year Q one will be tough.
If I may just question on selling an administrative expense that was surprisingly low and it looks like you know lowest level we've seen in a couple of years. You know, how long do we think about that going forward? I assume that there there may be some normalization of that as we as we look out to q1 and and down to the balance of the year was that an unusually low number it was to the extent of roughly about a million dollars. So Seacoast Bank in project management and then the support functions like Finance i t h r and if you look at reported STNA and also includes. And depreciation and so that's your name is lower and coupons. We trade our future stock compensation accrual if there is about a million dollar benefit in there as we looked at Future stock awards and Analysis They concluded that we were overcrowded. So that's a long time event that you would have seen in bath.
Okay, that's helpful. They expand in just with the final question for me. I'll jump back in the queue interested in that the slide that you showed about expansion into a
Okay, that's helpful and
Markets, and I'm wondering if there's anything you might be able to say about that. Whether that's something that you think you're going to be in a position to accomplish organically or if inorganic is going to be the the main way that you you look at some of these opportunities and just in general. How does the M and a pipe off?
Before he answers that question real quick gym. I want add one of the point on sg&a the item I mentioned to you doesn't impact keep it. That's kind of something. I know but everyone knows I want to make sure that I took it out to you it only impacts operating coming to Gap sg&a. So go ahead Dennis. Thank you question was if we look out forward and what we're executing on and behind Thursday, we have made a number of Investments over the last year or two years. So to put people in regions that we think we can get traction for example in our industrial Busy has been predominantly North Americans probably good at a time like this. What where the crisis hasn't really hit the us as much but we've deployed people in Europe in India and China and are getting good traction on there. So the point being we're not counting exclusively on the market and we continue to make selective ads in ways that we think
Can generate good new orders mix?
We've also heard made some investments in new product Innovation a number of those wins or finding their way into the market and getting some traction. So they're too not just counting on the market but controlling those things that we can do to drive organic growth in these large markets in these attractive markets and and over the sustained longer-term. We have been active in in the m&a market assessing targets and candidates, you know, kicking tires looking at opportunities. We expect to continue to do that. We think that's a part of how we build value but think it's a great place to be with the growing importance on sustainability until the kinds of solutions that we execute on Thursday continue to do so
Got it. Thank you.
Yeah, thanks you the next question today comes from Sameer Joshi of a HC Wainwright, please. Go ahead. Thanks, Dennis. Thanks for taking my questions. I'm just following up on the theme of the energy Market order flow for the Midstream oil and gas you are showing promising. Uh, like I'm going to growth next year what gives you that confidence?
Yeah, so how do we look at and report an Outlook of our you know, external markets say number of factors direct club with customers and what we're hearing and seeing from them industry reports and projections to a lesser degree. And then what's really interactive sales pipeline our sales pipeline jobs that we are referring to is a project or sales opportunity that one of our people is actually touched reviewed with a customer. It has a value package and it hasn't anticipated alarm time award timetable and everything in that next twelve months. And so we've continued to see over the last year and and even early in the this year long flowing modest growth in that overall sales pipeline. So that's again the the number of awards and dollarized value going out into the future wage.
I think I mentioned our energy segment alone has over a billion.
$10 in in that rolling 12-month Pipeline and and growing modestly. And so it's that that gives us confidence that things are moving things are being placed on a reputation continues to grow we've extended into a number of new applications and we think that there's still a lot of opportunity in all kinds of regions around the world and that's largely where we built quite a bit of success in the last year on the other side. Okay. Thanks for that. You may have touched upon this uh back just a clarification. Are you seeing more of a competent treasure in addition to the weakness in Industry that is that has caused this Q4 and then through one expected the business.
Let me just see if I heard your question. What were you asking about competitive pressure in the industrial arena in the energy?
In the energy segment. I I think we seen that in particular when the power didn't Market went into a dive, you know the market last year were probably about half of what they were in 2016 when they were very robust and so the growth that we've generated over the last three years comes at a time when we still had our what was our largest survey and Market segment and about half that half the stable it's growing. We've lost a few competitors along the way so it's still intensely competitive. But but we're really believe that we have the best team the best product the technical capability and if things pick up, you know, they you're also one that can move very swiftly to address opportunities as they come.
Thanks for that one. Last one. Do you are you forcing further reduction in that and what is the optimal level that you're targeting off?
For further reductions in what?
in the den
in the deck. Okay, we've actually done a really nice job of paying down debt over the last few years as you can tell I think our net leverage ratio is sitting sub one which Thursdays markets I think is a benefit for us. We have a very healthy balance sheet will continue to pay down debt opportunistically. We have very low interest rates. So it's it's really odd. But how do we take our Capital apply it to Value creation ideas, which is emanated targets as well as Investments. So we'll continue to pay it down as we have cash sitting on the balance sheet, but I think but less than 1 times net basis on 1 and 1/2 on a gross basis were in a very good position.
Thanks for taking my question.
You bet. Thanks a lot. Thanks to there again. If you have a question, please press * then 1 the next question today comes from Jerry Sweeney, please. Go ahead. Hey. Good morning Dennis Matt. How're you doing Gary? Obviously, I mean, I think you've done a really nice job over the last couple of years, you know with the strategy in a takeout, you know, the friction of balance sheet all that, but I want to take a little bit of a step back and maybe the they could stretch your vision per say a little bit. I mean if you look out the next five years, what's the the biggest opportunity what gets you excited? What do you want the sort of be this next big step forward for Seco?
Yeah, I I think it's easy to be excited right now because sustainability continues to take on a larger and larger theme All Around the World in business with our industrial customers with our power generation with our energy customers. Um, you see it more and more as the key topics in around visit and that's exactly the kinds of solutions that we address. So we address sustainability needs that come home, you know with industrial progress and that's what we're all about that. We've been all about and and so for that I think it's a great place to be because we continue to anticipate we'll see him in around those kind of sustainability solutions that we offer.
having said that we
A growth engine we cleaned into that. We're doing a lot better at translating unmet customer needs in the new product and more active as we said and looking at ways to add to the portfolio through Target and m&a that also address this growing trend on sustainability.
you know on the m&a part and that's really I think an area of Interest I mean particular for me if you can sort of start building out this industrial platform a little bit if we see some short-term or even short to medium-term dislocations in the market because a Corona it feels as though you're in a position to be opportunistic and go after some opportunities wage that sort of a fair assessment we
Yeah, that there's no doubt that the improvements we've made in the balance sheet right now to sameer's last question right now. We have a very flexible debt structure that allows us to pay down debt at any time. We don't have new ideas in front of us to invest in but also allows us to flex pretty quickly to attack and seize opportunities that we might come out and find in the market and we've been actively we know the areas that I mentioned around Sustainable Solutions that we like a technology company. And so we continue to seek Technologies then enhance the way we do things and the way we impact customers. So absolutely we like the positioning we have the company truck got it. It ain't going to the granular level a little bit just for the backlog. I mean on a year-over-year basis, that's the way I generally take a look at it very good but dead.
anything any Rumblings in the backlog or any projects that have
Potentially shift it's because of the coronavirus from you know, solidly in the backlog the question marks or things like that. So if I if the question in the first off, I'd say our backlog is solid it's active it's moving has been for the last year and and even as we've grown continues to be solid grown now active and so the backlog is as best I could say, you know, no risk except for delays right now that we may want to say no risk interestingly enough. I would say the orders profile today has the same profile. So so the sales pipeline is also getting some pussy out but don't see anything that suggests anybody is is putting their hands back in their pocket or rethinking major investment at this point wage.
Every day, there's new new data and so in both cases, we we like the long-term prospects of what we have at the same time. I think I mentioned at least one project where I'm likely to be production delays due to people not wanting to travel to Regions that are showing signs of the virus growing in Georgia regions in Northern Italy, but we are doing other major bid work even in China via videoconference on projects that are wanting to have a fast track but have a lot of technical complexity where we would love to be face-to-face because we are very clear who the technical leaders are and its sequel environmental and we're trying to move those things through Thursday. It's more around shortest term delay right now than anything we're seeing that would change any of our long-term views.
Got it.
No question. This is probably more from at thirty-five million in cash. I think 75% give or take a little bit overseas. I think the rest us, you know, we've talked in the past, you know, something, you know gets caught up in some of the things the legal entities etcetera. What can you get that down to over the course of the next year and what would be a good caring amount and then back to you know, 75% overseas, you know, is that stuff? They're just keeping it there for you know, operational opportunities, etcetera, you know working to bring some of that back just to you know, I'm pretty like take off some of cash on the balance sheet. Yeah, the international cash the only bar for bringing it back home is really withholding taxes that are local to the country which that cash reside. Sometimes it doesn't make sense to send it back on the domestic side, you know, we can move cash within the US and Canada and no problem. In fact if I can make them.
I would because I can get in and out of.
Revolvers fast as I wanted to run this, uh, pretty efficiently, um, you know, do I think we could bring more back from International absolutely working those levers right? Now. The only thing that's working against us is that we're actually generating pretty good Cashflow internationally, so we'll keep bringing it back as we can and the number I'd say that's Optimum for us Jerry in the future, you know be something subject and internationally do I think we're get there in the near future, you know, maybe two to three years, but we don't necessarily need the cash right now because of our liquidity and our credit facility off.
Got it suffice to say if you wanted that cash or other investment opportunities overseas. You could bring it back. You just gotta oh, yeah, the only place that because we have large projects in the moves around a lot and I don't want to revolvers all over the world. It's nice to have cash available to you know, match terms with our vendors and pair collect from our customers as need be the only place that somewhat primitive that we've been very successful in his China would be brought five million dollars back here today in 2019. That's the only place like a little bit harder to get the cash out of but we have a good plan and consolidations of Legal Clinic is really help to move that forward. Got it. Perfect. I appreciate it. Thanks guys, and you know take care of you 2019, so
the next question
From tape Sullivan of Maxim group, please. Go ahead. Hey, thank you. Good morning. Just a couple of follow-up from me. I think you mentioned so revenue and one Q 20 and thanks for all the comments on a temporary or hopefully impacts from coronavirus on one Q. Did you come and revenue week compared to the prior-year prior quarter or can you follow up that comment please? I think that will have a comparable challenges in both q1. Sorry in q1 against prior-year and sequentially again, I want to reiterate strongest backlog leading leaving any year for Cinco ever 217 million. We do not see any risk of at this point in time of backlog canceling. It's more of delays later into the year and so Q one will be a little bit tough. If we are very confident about the full-year. Okay. Thank you. And then with the unchanged ebitda margin Target, but did you say earlier continue to guide gross profit margin at 32 age?
33%
Yeah, I mean we don't provide quarterly or annual guidance as you know, but we we've had said that for the most part 30 to 34% He's a range that out there that that typically works if you looked at our life or your history of Falls right into that that that Range 32 34 range. Okay. All right. Thank you very much for the follow-ups. Have a good rest of the day.
The next question comes from Bill Baldwin of Baldwin Anthony, please go ahead. Yeah. Good morning. Thanks for fitting me in here Dennis. I just wanted to get your comments and insights said Dennis and Matt on what what's going on in terms of your focus on the on your installed base your aftermarket a business. And and and how do you see that coming along? And and how much of a priority is that for? You looking looking at longer-term? Yeah. So Bill thanks for asking wage after market has been and continues to be an important element of an overall sales mix, you know, a lot of the Project based businesses that we sell in addition to our on a mix of Greenfield and Brownfield projects extensions and then quite a few of a lot of our equipment customer equipment on the only side, you know, yep.
Is that ten plus year operating life lifetime?
And with all of that we continue to mine opportunities for break-fix type Parts Services service contracts and Thursday as well as consumables and and Spares in the like so after market remains instrumental to seat go and achieving those 3-year targets and going to X in the market. We met a number of Investments That continue to mine and harness the opportunities for aftermarket and also looking at ways to design products that may only help customers that the new equipment but also help us and help them with aftermarket capabilities to build stickiness for us and build value and emergency for them.
Okay, so
sounds like you got good initiatives going on there as imagine the addition of your technical sales Personnel is helped you quite a bit in that market also had to Dennis or do you expect it to
So, absolutely we we've added technical sales people in various regions of the world and in u.s. and still have a very focused group home, exclusively working the aftermarket opportunities with inside sales outside sales and a growing service team. Thank you very much. Thanks Bill. This concludes our question-and-answer session. I would like to know from the conference over to Dennis for any closing remarks. Okay. Well, thanks again for joining us, you know, I think 2019 was another year of progress for ceco environmental. We're executing to our blueprint for organic growth or pleased with the fourth-quarter profit of Bowery, and we continue to work towards accelerating our success is going forward. So, thank you all.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.