Q1 2022 CECO Environmental Corp Earnings Call
Good morning, and welcome to the CECO Environmental Corporation first quarter 2022 earnings call.
All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad.
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Now, let's turn the conference over to Steven Hooser Investor Relations. Please go ahead.
Thank you for joining us on the CECO environmental first quarter 2022 earnings call on the call with me today is Todd Gleason, Chief Executive Officer, and Matt Eckl Chief Financial Officer.
Before we begin I'd like to note that we have provided a slide presentation to help guide our discussion.
The call will be webcast, along with that slide presentation, which is on our website at CECO in viral dot com.
The presentation materials can be accessed through the Investor Relations section of the website.
I'd also like to caution investors regarding forward looking statements any statements made in today's presentation that are not based on historical facts are forward looking statements such statements are based on certain estimates and expectations and are subject to a number of risks and uncertainties.
Actual future results may differ materially from those expressed or implied by the forward looking statements. We encourage you to read the risks described in our SEC filings, including on Form 10-K for the year ended December 31 2021.
Except to the extent required by applicable securities laws, we undertake no obligation to update or publicly revise any of the forward looking statements that we make here today, whether as a result of new information future events or otherwise today's presentation will also include references to certain non-GAAP financial measures.
We've reconciled the comparable GAAP and non-GAAP numbers in today's press release as well as the supplemental tables in the back of the slide deck with that I'd now like to turn the call over to Chief Executive Officer, Todd Cleveland Todd.
Thanks, Steven and good day, everyone.
We're going to start with slide number three of the presentation that Stephen mentioned to follow along with our prepared remarks.
We look forward to discussing our first quarter 2022 results in detail as well as reviewing our full year outlook, which was highlighted for the first time in our earnings release. We will also discuss this morning's announced $20 million share repurchase program and our recent acquisition of Compass water solutions, which we closed last week.
We issued a separate press releases regarding both of these earlier today and we encourage you to read those releases as they do provide additional information.
Let's talk about the first quarter, we are off to a great start in 2022 headlined by a few records.
Let's start with our fantastic orders growth, which came in at $161 million up 75% when compared to the first quarter of 2021.
And don't forget the first quarter of 2021 was up over 20% when compared to the first quarter of 2020.
And that quarter in 2020 was only modestly impacted by Covid. So it wasn't a weak quarter.
Now back to the Q1 2022 record orders of $161 million that level is over $40 million higher than our previous record quarterly bookings.
Additionally.
Our orders growth came in broadly across our portfolio.
Matt will cover our backlog levels in detail, but the highlight is that Q1 orders created the largest backlog in company history as well.
We are well positioned for future revenue growth as a result.
Speaking of revenues.
First quarter 2022 revenues were $92 million up 29% year over year.
We have been signaling that our revenue would start to grow in 2022 given we had strong double digit orders growth throughout each quarter of 2021.
We are pleased to deliver such strong organic growth as we kick off 2022 and are confident in our ability to drive this momentum throughout the year and beyond.
Gross margins were just under 30%.
We have seen new project orders coming in at higher margins than what we produced in the first quarter. So this will help us steadily improved gross margins.
Of course, many companies have experienced declines in gross margins given the challenges in global supply chains logistics and inflation.
We have strategically focused on this and are getting price across the board, especially in our shorter cycle businesses. So again gross margins throughout our backlog, including recent orders are at or above current gross margin levels. We will continue to focus on protecting margins by strategically focusing on driving price performance.
Productivity and growth.
Now regarding EBITDA, we are very pleased we produced nine and a half million dollars in the first quarter of 2022.
EBITDA was up over 50% versus the same period a year ago.
So.
A great great start to 2022 orders backlog revenue EBITDA all very strong.
As I mentioned earlier and you saw in our earnings release, we will be providing details on our full year 2022 outlook. Historically, we have provided certain frameworks for how investors can think about our yearly performance, but starting this quarter and moving forward. We felt it was important to provide a full year guidance range.
The last section on this slide highlights capital allocation, which notes the actions we are taking to deploy capital across accretive M&A transactions and our just announced share repurchase program, let's talk about each so please turn to slide number four.
Today, we announced a $20 million share repurchase program.
The authorization goes into effect immediately and is good for three years or until we complete the approved 20 billion dollar level.
This is the largest share repurchase authorization in <unk> history, and it builds on the $5 million stock buyback, we did last year.
It reflects the board's confidence that we will continue to execute on organic growth.
Drive higher levels of profitability and deliver outstanding free cash flow.
We hope investors appreciate that we see the same opportunity in our current share price and that this multi year authorization gives management the opportunity to remain proactive in this area.
Now on the right side of the slide.
We highlight the acquisition of Compass water solutions, we identified compass water solutions, a number of months ago and began to evaluate their niche leadership position in the industrial water treatment market, which we believe is a mid to high single digit growth market.
The business fits very well within our growing industrial water portfolio and we are pleased that we closed the transaction last week.
Compass produced $11 million in sales and double digit EBITDA margins in 2021, and we believe we can accelerate growth by utilizing sito's existing global footprint and adding our strategic resources.
This expands our addressable water market by almost a quarter of a billion dollars and add our third industrial water business to CECO in less than a year. We are pleased to welcome the great Compass employees and leadership team to CECO.
2022 represents a year in which we will pick up the pace a bit with respect to strategic acquisitions as I mentioned, we've already closed multiple transactions well CECO has a long history of making acquisitions, we only need a few transactions over the past few years as we wanted to navigate the challenges associated with Covid.
The acquisition of E. I S. In 2020 has been a homerun with significant sales growth and the maximization of their earn out associated with driving higher income.
We aim to deliver exceptional returns on our acquisitions and believe we have a nice playbook to drive operational excellence.
We have also maintained very consistent debt levels and balance sheet health over the past few years. Despite the acquisition of E. S. G.
G R C as well as share repurchases last year, and we intend to maintain appropriate debt levels I will now hand, it over to Matt and he will walk you through more detail on our first quarter 2022 results Matt.
Thanks, Scott, let's dive into slide number six in our Q1 performance as Tom suggested orders were up over 75% year over year as well as sequentially. This was a balanced effort across CECO as customers continue to invest in sustainability and placed their trust in our air quality and water treatment solution.
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Sales came in slightly better than expected at 92 million, which was up nearly 30% year over year and flat sequentially as the teams executed for customers in the month of March and falling unfreezing of our backlog.
Gross margins remain compressed versus historical averages as we continue to navigate the supply chain challenges inflation and continue to execute on long cycle projects booked during the peak of Covid.
We continue to execute price discipline in markets, where elasticity exists in.
In our short cycle businesses, we're seeing price increases stick with customers.
Our margins improving as we look ahead more to come here.
Reported operating income and EBITDA metrics, each improved 50 plus percent year over year on improved volume lower project margins and lower operating expenses aided by a onetime insurance settlement of $2 5 million.
Putting this benefit EBITDA was up 12% year over year in the quarter adjusted.
Adjusted EPS was a clean story at 14th.
Five cents year over year predominantly on operations with no FX impact.
Summarize, there's a very good quarter for CECO.
Now, let's move to slide number seven.
Coming out of the gate Q1 was a fantastic start to 2022 market demand was strong across all end markets platforms that serve air quality, such as emissions management thermal acoustic and industrial air were exceptionally strong as customers came to us for their sustainability needs. Each of these platforms to all 100 plus percent growth year over year.
A few double digit headline orders demonstrate our leadership in air water and energy transition first was a peerless emission control system for a 500 megawatt utility provider that is converting from coal to clean burning natural gas and solar power.
Second Yeah, I guess booked a large multi unit RTL for a leading can manufacturer expanding coating line and wants to protect their employees and the environment from talking with the Ocs.
To put into context, we acquired it in June of 2020, with a backlog of $8 million today. The backlog is nearly three exercise.
Our first two years' investment case considerably and believe the sustainable beverage can manufacturing market shows no signs of slowing down.
Todd highlighted well we have an integrated many acquisition in a few years definitely a nice proof point of CECO driving value via M&A.
Other platforms, such as separation and filtration saw a 50 plus percent growth of water treatment orders and our shorter cycle platforms like fluid handling got fab and expansion joint also enjoyed high single digit growth year over year on infrastructure spend.
In total $161 million of orders marked an all time high for CECO by a margin of greater than $40 million.
Regarding revenue our backlog continues to turn in nearly all platforms grew with the exception of separation infiltration that just started to grow their backlog in Q1.
No single platform stood out in the quarter as all grew relatively proportionate to their size.
Our short cycle sales continue to grow with $22 million in the quarter up 24% year over year with the acquisition of DRC encompass short cycle sales will top out at nearly 100 million or approximately 30% of total CECO sales, we continued to make progress on our transformational journey.
Please turn to slide number eight in our backlog.
$283 million. This is a record for CECO with the previous watermark at $228 million in Q1 of 2016, what's most impressive is that 60% is weighted towards broad industrial markets as opposed to 70% weighted towards power generation in 2016.
This demonstrates the healthy diversification we've taken it to go over the last few years.
On slide nine gross margins remain pressured down nearly two points sequentially and five points year over year, we feel very good about our project execution, but still see supply chain challenges and mature receipts subcontractor logistics and once I couldn't Michigan.
We keep a close watch on executed project margins versus as sold margins and since Q3 of last year have seen noticeable improvement in our performance well continues the way it most on our gross margins as the inflationary cost of materials and executing on our backlog that was priced in prior years.
Today, we see our backlog margins, improving and expect them to trend up in the second half.
Nearly all platforms, we're pushing price where elasticity exists as an example, our pumps business has initiated a second price increase this year and orders have not flowed in fact, it actually increased.
Our larger project business as we continue to push for price and are winning in select end markets like that cant in automotive, but lesser so in energy oriented end markets. We anticipate an improvement in margins in late second half and into 'twenty 'twenty, three but continue to monitor I S M data and the mix of our backlog.
As for EBITDA Veeco delivered $9 5 million in the quarter year over year volume increases were able to overcome lower project margins and deliver significant EBITDA dollar increases year over year.
First quarter SG&A on an adjusted basis was approximately $20 million, which was essentially flat year over year and up modestly versus the fourth quarter on seasonal expenses SG&A costs were up approximately $1 9 million year over year on increased headcount to support growth higher salaries and higher management incentive compensation.
These increases were offset by an insurance settlement that we booked in the first quarter. After many quarters of hard work by our legal team to resolve.
All in we are pleased with our operating results for Q1.
Turning to the balance sheet in slide 10, we had a $1 million use of free cash flow in the quarter predominantly driven by a healthy dose of $20 million in receivables outsized orders growth means an increasing customer milestone billings and we anticipate improved cash flows in the coming quarters.
Following the <unk> acquisition, our balance sheet stands at two times leverage and in great shape to support growth.
Slide 11 outlines how we think about recent capital allocation decisions.
Our first priority beyond organic investments is M&A.
Water is a great bolt on acquisition that had to reverse osmosis technology to our industrial water platform improves our short cycle sales metric and with similar economics to GIC is accretive to CECO shareholders. We will continue to target small bolt on acquisitions, five $2 million to $5 million in EBITDA with favorable valuation and our focus on strengthening our IND.
Real air and water platforms.
To add to our capital allocation program, we've announced a three year $20 million share repurchase authorization with a $2 billion sales pipeline record backlog and anticipated improved cash flows we believe a healthy balance of M&A stock buybacks will reward shareholders appropriately the.
The buyback is the largest in chico's history, and meaningful enough to offset annual dilution and shrink our share count over time, we make these decisions based on the confidence we have in our team and the position of our products, having a growing market.
With that confidence we've introduced guidance for 2022 on slide 13.
So here's how we're thinking the year plays out.
With a robust pipeline and a great start in Q1, we are providing full year's order guidance of $410 million to $430 million.
At the midpoint this would be up around 17% versus 'twenty, 'twenty, one which was up 29% in orders versus 'twenty 'twenty.
For revenue, we are introducing a range of $360 million to $380 million, we expect to see our backlog turn in supply chain constraints stabilize as we navigate 2022.
And we hope to deliver at the upper end of our range or better but this is our current outlook acquisitions will be an additional benefit of course.
Q1 gross margins are currently at the bottom end of our guided range and while we expect the second half left an improved backlog margins pricing and slowing inflation, we are cautiously optimistic to achieve the midpoint of 30% by year end.
We see upside in sales volume as a conservative option on our gross margins.
So by assuming 30% full year gross margins $20 million of run rate non-GAAP , SG&A and layering in modest incremental investments.
We organically arrive at the midpoint of 35 million of EBITDA acquisitions likely push us to the higher end of our range, but also provided option for project margins and backlog timing two key variables in our guidance framework.
Todd would you like to elaborate further on our guidance for 2022 and take us into Q&A.
Thanks, Matt Yeah. So let me expand on a few areas around our guidance and then we'll wrap up our prepared remarks and take questions.
As the slide highlights, we're making more investments to advanced CECO. These are investments in people process systems and of course acquisitions and business development.
We're excited to share how far CECO has come over the past few years with respect to a more balanced portfolio that can deliver strong growth across many industrial and energy transition markets. These investments are important to develop a sustainable business results. We aim to achieve in the long term. So our guidance reflects these costs.
As with any guidance there were opportunities to exceed but also unforeseen challenges none of US think we're out of the woods with respect to inflation and certain supply chain and logistics challenges, but we have a lot of good momentum. We hope you find this guidance helpful. Let's go to our last slide please turn to slide number 14.
As we have repeatedly said today CECO is off to a fast and strong start to 2022.
Our large backlog and pipeline of over 2 billion and opportunities. We are pursuing we expect to continue to gain traction around growth we.
We are pleased to announce our new share repurchase program, which we believe is a great use of capital for shareholders.
And then just a week or two we will announce our inaugural ESG report. This is the culmination of a lot of hard work by a cross functional team and we look forward to sharing our ESG story with you with you this month.
None of this would be possible without our incredible team I want to thank all of our CECO associates for everything that you do to deliver excellence for our customers and to share our communities benefit as well.
And with that I'd like to open the line to questions operator.
We will now begin the question and answer session.
To ask any question you May Press Star then one on your telephone keypad.
If youre using a speakerphone please pick up your handset before pressing the keys.
And any time your question has been addressed and you'd like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
The first question comes from Amit Dayal with H C. Wainwright. Please go ahead.
Thank you and good morning, everyone.
Really strong results congratulations on the execution and just to begin with is with respect to acquisitions could you maybe elaborate a little bit on sort of the growth strategy for some of these recent acquisitions are you taking these products to your existing customers or are you finding new customers food.
These are these new portfolio add ons.
Yeah. Thanks for the comment a minute and I. Appreciate the question on on our current M&A not only strategy, but the the transactions we've completed so far this year.
So far the transactions have all sort of had this following component in come in in that yesterday, they fit a and they end.
As they all will fit a specific theme of focusing on a more broad industrial markets.
The transactions this year, thus far have been in one of our comfort zones of that which is industrial water, where we have been growing organically well positioned globally in industrial water for quite some time. So these transactions add to customer access.
For us to new markets for us and similarly for the acquisition targets ads, you know more products to our existing customers. We believe into global markets that they did not have access to as well. So our acquisition strategy is to stay focused on sort of our three.
<unk> co.
Core areas of industrial Air industrial water in the energy transition first and foremost.
And continue to add sort of broad industrial platforms products and services that have more of that shorter cycle profile to give us a better business mix to balance out our longer project revenue businesses as well. So all of the acquisitions year to date have fit that you can expect if we're looking.
Get future transactions for them to have a similar profile fundamentally and you know they don't all have to necessarily.
Double down on current customers and current markets per se, but we're going to stay true to sort of that core.
Thank you for that and then on the margin side I know you have some inflationary pressures et cetera.
And you're not too far off from sort of historical levels, but.
Do you see margins reverting to the mood, 30% levels by the end of the year potential.
Potentially yes, Matt.
Matt Matt highlighted a little bit in our prepared remarks.
So we're so look we're just below 30% which would have.
It you know ignoring the current challenges of inflation and supply chain logistics et cetera, being below 30% would've been certainly below our our low point average, which is 30% to 34% over over a long period of time, we believe we're going to get back there we think that the next few quarters.
We are still experiencing you know our ability to get price going through our backlog. So theres, some timing of price and price actions, our ability to to get productivity again through our backlog.
So right now we're in a little bit of a timing imbalance. So to speak which is why we are still below 30%. We believe we're going to get back up above 30% as we get into the second half of this year and look there's nothing that's really fundamentally changed in our business other than you know the thing the ramifications of the market.
<unk> is that all industrial all companies frankly, but certainly in our space. We're all facing and you know look I think broadly speaking companies are doing a great job of overcoming the challenges and and of course getting price where appropriate and we're going to continue to do that.
Yeah. The only thing I'd add was there probably at about 26% margin in the backlog. This time last year were definitely looking at 28% now and things that were quoting right now and we just got a job that came across something like 40%. So we're seeing an improvement in our backlog margins could take some time for the long cycle projects to the funnel through the P&L.
Understood understood. Thank you and then you know maybe from a sort of sequential expectation I know you provided I know the guidance for the first time.
Should we expect sequential improvements through 2022 or is there any seasonality with respect to some of these backlog and orders that you know may cause variability in how the quarter's going through.
No there's no real seasonality, it's really about timing of individual projects and when they land in and the mix of our business. So but we are working on productivity. We are seeing the blended margins creep up we do expect sequential increase it was up modestly we feel real improvement in our margins in the late second half late second half.
This year in early 2023.
Yeah, and just to double down on one thing there. We appreciate that you know you are asking a question about sequential that's important to us.
Obviously ongoing improvement ongoing productivity ongoing performance, but you know just kind of given the current profile of CECO.
We would be reluctant to currently give quarterly guidance, just because things can be a little choppy in the quarters are like a lot of companies and so look we're very comfortable with the full year outlook.
That's a that's an easier if you want to call it that sort of number for us to get our head around because it takes out a little bit of the variability and the noise that exists in the month or in a couple of months that could be influenced by.
A handful of larger projects, but as Matt already answered we feel good about the kind of the ongoing productivity and momentum we have.
Right.
I appreciate that thank you for that.
Just one last one maybe with respect to the backlog strength, you're seeing how is that coming mostly domestic orders or backlog or is it there's some international demand as well.
50 50.
Alright.
Yes, that's all I have is I will take my other questions offline. Thank you.
We have thought.
The next question comes from Rob Brown with Lake Street Capital markets. Please go ahead.
Hi, Good morning, Thanks for taking my call and make sure I'm on the quarter.
Thanks, Rob.
On the I just want to get some more detail on the compass acquisition is that.
How much of that business is all short cycle doesn't have sort of recurring kind of razor razorblade model, how how does the business work in.
Who are the customers for that business.
Sure we're pretty excited about this business I can tell you that 60% in systems, So aro and slop water systems oil water separation. The end market is typically going to be a naval ships U S coast guard or potentially a marine vessels like Maersk et cetera anywhere where you're gonna have water on.
Ships vessel that needs to be discharged back into the ocean, but it needs to be in compliance with wherever the standards are by the Spanish military or the U S. Coast Guard whoever is responsible for that that's why we're gonna serve internationally, we have international footprint all over the globe to help.
Pull more of their business thrill and when we think about the aftermarket content of that business is something like 40% to 45% Super Rich gross margins why because the product has to be certified by the Spanish military or Nordic Army or the U S Coast Guard and so you can't just plug in some other filter business.
Or some other pirated a.
Product you have to use the compass brand and so that's what makes me really excited when we think about short cycle. You know they will have occasionally a job here or there that's maybe a million or two Max and that's just because it's several aro units that are being sold.
But for the most part I would tell you that their average is about 200 K per order size. So we consider the entire thing short cycle in nature, because everything ships out within a few months, we also see Rob real opportunity to bring investment.
At an appropriate level into the organization you know when you're a somewhat small company.
Like Compass is.
They've been doing a great job of growing and advancing the product line getting this very nice balance of systems, and then replacement certified replacements locking in their market access there, but there's opportunities outside of what Matt suggested around vessels. There is a there's other opportunities that we feel it will.
I'll be talking about that in the future that we feel we can bring their expertise and their product line into begin with just a modest investment for real strong growth because their margin profile, especially on the aftermarket replacement is so rich.
Okay, great. Thanks for the color and then and then kind of back to gross margins on your longer cycle projects. How do you protect gross margins. There you sort of fixed price upfront and then and then you take the risk of inflation or there are escalators built into those contracts.
Victor.
Yeah. So.
There's a number of different approaches depending on sort of maybe even the market the business.
Project, but generic.
Generically speaking you know, we'll have typically a fixed price bid will have locked in or also received fixed price contracts with our suppliers.
And we'll at times, especially now with over the last six or so months.
Ensured that we have appropriate language in our contracts that protect us and our supply chain and our customers from escalating materials. So we will have escalation clauses around key components. It could be metals, if it's a heavy metal product that we are providing it could even be logistics if it is something.
It includes you know a fairly extensive transportation.
Related area of the contract so our customers understand that these aren't small products that that you know are off their radar screen. These are very fundamental to the success of their operation. There's only a handful of companies that can do what we do in these very mission critical areas of industrial air and water.
In the energy transition so they understand that some of the new language that is associated with what you know escalation clauses et cetera are just going to be at least standard for now.
Okay, great. Thank you I'll turn it over.
Thanks, Rob.
The next question comes from Gerry Sweeney with Roth Capital. Please go ahead.
Hey, good morning, Matt and Todd Thanks for taking my call.
Hey, good morning.
Just wanted to talk about orders, obviously up significantly and I'm just curious of how much of that is maybe end market driven versus maybe some changes you've made internally, obviously theres been a lot more focus on the short cycle, but.
One have you made any sort of changes on go to market strategy or do you see any opportunities to do so too.
So it keeps them.
Our business going.
Yeah. Good question. So look you don't get $160 million in orders at our size and with our you know without there being some decent market dynamics out there certainly sure. So I'd like to acknowledge that we're certainly feel we're well positioned as if there's a if there's a tide that rises you want to be.
You would have boats and that was harbors right and I I would say CECO, we feel has done a great job over the last few years.
Of of a few things, though to take to be in better position for as the tides rise for example.
Overall, you know an extended period of time, but we have been not only talking about externally, but certainly focusing on internally. This this focus on more and more markets more adjacencies more short cycle.
More general industrial and that has been an organic theme internally, but also a little bit of a of an inorganic theme is we've made some small acquisitions over the last few years or we've made some new investments to go after service businesses et cetera. So the point is I feel like it's a combination certainly of.
Market strength in a lot of areas, but how much we've really diversified seek over the last few years, Matt mentioned in his prepared remarks, if you look back four or five years ago. When maybe we didn't give these exact numbers, but you would've looked back four or five years ago, we would have had a quarter over 100.
Millions of dollars of orders I would say, 60% to 70% of that strong quarter would've been.
Energy related order, you know power oil and gas et cetera, and it's and it sort of flipped and now it's more 60, 70% of our strong growth has been general industrial So again I just want to acknowledge that our teams, but the organization to platforms is really internally and you know and certainly with our customers.
A spotlight on where we see the best opportunities were run into those faster and so you know again, it's just a lot of hard work by our organization. Our you know our associates all over that.
The planet are working hard to serve our customers.
That's really helpful actually I appreciate that.
The other question I had is obviously, you're making acquisitions, but as you look at FICO as a whole.
At your portfolio are there opportunities, maybe even to divest to get smaller to get bigger for lack of a maybe a better term of putting it.
Yeah look.
We certainly understand that companies that are diversified like CECO have options in their portfolio.
Now we you know we.
Feel like we're clicking on a lot of really good cylinders.
We're really excited about our growth profile as a company.
We're really excited about our ability to continue to add pieces to our organization through smart strategic accretive M&A.
It adds again more balanced to industrial air industrial water and energy transition more short cycle and as we look at our portfolio over time, if we feel that there is a piece of it that doesn't continue to add that same value you know to our longer strategy. Then we'll evaluate that but right now again, we feel like we've got a lot.
Momentum as an organization and we want to maximize those returns for our shareholders.
That's helpful and then Matt just maybe more a little bit more for you.
Free cash flow I know working capital is probably his up you know the countries people will probably some inventory all that stuff because the supply chain et cetera, but how do we look at that for there do you have any projections for that for this year or is it still a little bit and maybe it was a little bit too early to sort of get too comfortable making some type of object.
The answer is up.
Going up.
Okay.
That's a specific.
I'm very we don't look at our balance sheet, you can see that in billings in excess of growing greater than cost in excess which is a good sign that we're billing customers early those are called advanced billings or advance payments and receivables are growing and these are good receivables. So cash flows will grow through this is exactly what I've said for.
The last three to four years when the business grows cash flow grows it's going up.
We thought about giving guidance it says everything's going up but we thought that might be specific.
But I got my report total up.
Thanks.
Yeah.
Thanks, guys I appreciate it thanks, Matt Thank you Sir.
Again, if you have a question. Please press Star then one.
The next question comes from Bill the Xylem with Titan Capital. Please go ahead.
Thank you first of all with relative to the accounts receivable being up and.
Does that indicate that there were sales strength late in the quarter.
How do we how do we read that.
Yeah, they're not correlated.
There is receivables as based on milestone billings and not kind of revenue.
So it just timing of when we actually build the customer that starts the clock further or 30, 60, or 90 day terms wherever they might be of when they actually need to pay us.
Yeah.
And since our E. R. Then is not an indication of pace throughout the quarter. Maybe you could maybe you could highlight what was the pace of sales and separately orders through our through Q1 and into April if you would please.
Yeah.
Yeah, well I was going to say, one thing and I'll, let Matt He's got all the data obviously, he's ready dying to tell you we when we announced our fourth quarter results you May remember Bill we talked about.
At that point in the quarter. We were we had already seen very strong January and February orders. So I would just remind you that we shared you know sort of a pretty publicly that you know or you know in the first quarter. When we gave our fourth quarter earnings release that we are already seeing very strong January and February and I'll, let Matt talk about.
How that continued orders look like are you So January and March were strong.
April was pretty decent it was probably more on par with the February so not bad whatsoever, and then I would say that our revenue was more like a slight ramp with from January to February March being obviously because of.
A little bit longer month in February .
More revenue than February .
But not a hockey stick.
But given that Oh I'll call it up and down is there is there anything that we can read into a into that or that you all read into it or.
It is truly a little bit lumpy.
It's just lumpy you know we have a project sometimes that are double digits, sometimes 10 to 15 million I mentioned some headline orders that came in we didn't have a ton of those but our history is marked by though is it's what we do how we do have projects and they come in but.
That's why we want to grow short cycle sales why because it's more predictable and easier in those or gravy on top you know one way to look bill at our quarter also from the $160 million of orders is I always sort of you know again, we you know we have the inside information right. So we can sort of look and go okay. What dollar level.
Will could have booked last year had just the customer if you want to call. It that kind of pulled the trigger at that time, and we had it on or if we have a lot of our pipeline on our radar screen and it's coming down to a matter of days you know at times you know does it book at the end of the quarter or the beginning of the quarter, let's call that in this particular 112.
The day window that I'm discussing here the current window 15 million, let's just be you know and let's also say could put $15 million worth of orders have quote unquote slid to Q2 sure in this in this quarter, our first quarter could have been $130 million at the low give or take.
For higher even than 160 million, but let's just say and landed at 160. Both of those numbers would have been record quarters and would have produced record backlogs. So even if some of our orders had been placed in the fourth quarter or moved to the second quarter. Therefore, I guess you would call it negatively impacted.
Q1, we feel that it would have still been a record quarter bike by a good distance over our previous record so.
This wasn't because we pulled in or we got things that slid out of last year fundamentally it did help our quarter from a bookings perspective, but it wasn't as pronounced maybe as you know is one or two big orders.
That's helpful and and finally relative to this step up in orders this quarter too.
Just given the long cycle nature of some of those is there going to be a quarter in the future.
Where we're going to see a significant step up.
In in revenues or as you had stated earlier in our comments to another question or do you really feel like you can can try to to manage that to be a bit smoother.
Well it won't be one quarter, well, probably won't pop up to you know to set this number I mean, just work who we are as a company today.
But yes, there will be a period of time, we believe that our you know orders clearly translate to revenue.
These are solid orders, we have a very very very low D booking rate it would be a kim and maybe even less than most.
Industrial companies bad debt rate I mean, we're talking you know lower than one or 2% on average and if if even that so look you can do the math and just making a determination that if we're running at $90 million to $95 million of revenue this quarter, which we did 93 well it's hard to believe that we're not gonna have a few quarters that reflect much higher revenue.
When this turns through our backlog.
So I guess, maybe then the question is when does the this this big order push when does that flow through revenue.
They will flow through over the course of four to five quarters and the pop up in Rabat that you might expect isn't going to be some $20 million order just shows up but it'll be the compiling of several projects plus our basement. That's on top of each other and so yes, you will see an increase at some point in time.
My bet is late this year early next year.
But it's not like it's going to be a major onetime blip $40 million revenue and dropped back down it's pretty smooth.
Great. Thank you and congratulations on a fantastic.
Fantastic quarter, and and taking the questions. Thank you.
Thank you felt great questions.
Again, if you have a question. Please press Star then one.
The next question comes from Thomas <unk> with Graham Partners. Please go ahead.
Yeah, Hi, guys, sorry for the company changed.
<unk>.
The I went from thinking I own too much stock, maybe not earning enough.
The the energy cycle.
It looks really positive to me has there been anything breaking loose in pipeline.
Are we still super early on that and still a lot of resistance out. There I was just curious do you have any color on.
You know what the what the interest and orders looks like in that area I know its still probably early but I keep thinking that somebody's going to someone.
Somebody's going to flip on on this ESG environmental stuff to get energy I'll, Let me know what you guys think yeah.
So I think the question is specifically on the midstream on the pipeline side, Yeah. That's our yep Yep. Thanks, Thomas So yeah that was a one platform. If if for those of you that have been tracking CECO that was it was really our only platform that didn't show orders growth last year.
It showed nice orders growth this quarter we.
We expect that to continue we see investment in midstream pipeline at least in our space, where more capital is now being applied.
I also would say that David.
David Taylor and the business leaders within separation filtration or doing a fantastic job.
Of not only being in position for tide to rise in the midstream capital investment side, but really doing a.
Fantastic job of maintaining and developing relationships in other markets, we talked about navy and in other end markets that they have an opportunity and have long supplied a very good margin business, a great relationships with those customers.
There are cycles in the department of defense spending as we all understand when those cycles come back those are great for us the other I would suggest is.
They are getting better and better positioned for what we're calling this energy transition, especially carbon capture and other gases. So we look forward to talking about some of those projects over the next few quarters.
As we are solving.
Along with other suppliers and partners of ours really some really unique carbon sidoti capture sequestration solutions for a variety of different industries, and we look forward to talking about that so again, finding adjacent markets doesn't mean, our current markets arent still strong appealing and worthy of investment.
Finding new Adjacencies organically.
Marketing ourselves, creating business development relationships and we expect to be talking about large orders in C. O two capture in other areas that are exciting.
Okay. Thanks.
Thank you.
This concludes our question and answer session I would like to turn the conference back over to Todd Gleason CEO for any closing remarks.
Thank you for the questions and for everyone's interest and we look forward to.
Continuing today to connect with our investors and analysts to answer questions and to be helpful. I'd also like to once again acknowledge our appreciation for all the great.
Associates around the world at CECO are delivering for our customers every day working hard to make sure that we are at the right place at place at the right time for our for all of our stakeholders are staying safe and healthy as always and so look we are we're excited about the year, we feel great about the start to the year as we.
Already articulated multiple times and with that we are we hope to speak with you soon and see you soon at an event and best of luck out there.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Yeah.
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