Q3 2023 CECO Environmental Corp Earnings Call
[music].
Good morning, and welcome to the CECO Environmental Q3, 2023 earnings conference call.
All participants will be in listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions.
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Please note this event is being recorded.
I would now like to turn the conference Steven Hooser Investor Relations. Please go ahead.
Thank you Anthony and thank you for joining us on the CECO Environmental third quarter 2023 earnings call on the call with me today is <unk>, Chief Executive Officer, and Peter Johnson, Chief Financial and strategy Officer.
Before we begin I'd like to note that we have provided a slide presentation to help US guide our discussion the call will be webcast along with our earnings presentation, which is on our website at CECO in viral dotcom.
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.
And on Form 10-K.
For the year ended December 31 2022.
Except to the extent required by applicable securities laws, we undertake no obligation to update any publicly revised or any 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 provided the comparable GAAP and non-GAAP numbers in today's press release.
And they are provided in the non-GAAP reconciliations in the supplemental tables in the back of the slide presentation.
I'd now like to turn the call over to Chief Executive Officer, Todd <unk> Todd.
Todd.
Thanks, Steven and thank you for your continued support and interest in CECO.
I'm going to go ahead and start with slide number three which is entitled Q3 2023 earnings highlights as we highlighted in today's press release CECO developed delivered multiple financial records during the third quarter, our quarterly and year to date financial performance showcased strong continued growth, which is the result of our world class teams.
Working hard to deliver for our global customers every day.
Thank you two teams CECO for your customer focus accountability and all of your high performance we.
We will continue to invest in our people our processes and our solutions to ensure we meet or exceed customer requirements with respect to deliver quality.
And on time success now.
Now, let's review some of our third quarter highlights.
The section on the top left of this slide captures some of the records. We produced during the quarter. It is an impressive list of achievements I am pleased to share that our third quarter revenues represented the highest quarterly sales in the company's history.
The previous company record for sales was last quarter in Q2, So we continue to maintain our steady sales growth progress.
And even with record sales, we were still able to increase our backlog to produce yet another record backlog quarter. This is the fourth quarter in a row with record backlogs, which continues to support future growth projections. We also delivered the highest gross profit dollar level in our history benefiting from the tremendous sales volumes.
Importantly, we generated record free cash flows for any quarter as we executed very well on our working capital management.
Transitioning from the records, we produced in the quarter. Please see the highlighted comments on the top right section of the slide.
While records are great. They are inherently backward looking and it remains our focus and priority to position CECO for long term sustainable performance.
On the top right section of the slide we highlight that we are well positioned for future growth.
The backlog up over 40% year over year, we continue to add great visibility to future revenue growth.
Over the past 12 months, we have averaged a book to bill of one two times, which has enabled our backlog to reach new heights, and really accentuates the strengthening of our overall sales process, our sales and marketing process have also expanded that sales pipeline to now be approximately <unk> <unk>.
$3 billion, which is over double the size of what it was when I took over as CEO back in 2020.
So our teams continue to expand sales and marketing programs and new verticals and new geographic markets.
In each of our acquisitions are performing at or above our targets, which really helps to fuel topline and bottom line results.
The bottom section of this slide captures in just a few comments around driving higher performance and continued to create sustainable shareholder value.
In conjunction with our record breaking results, we are raising full year 2023 guidance, which we will cover in more detail. Soon this is now the fourth time, we have raised 20 twenty-three guidance since we first introduced it back in early November of last year.
We are also introducing full year 'twenty 'twenty four guidance today.
We believe we have strong visibility to a larger portion of 'twenty 'twenty four sales and profits given our record backlog and coupled with our large and diverse sales pipeline activity.
We are maintaining our investment in top talent, developing a winning culture and driving more operational excellence in.
In the quarter, we also invested in the acquisition of Kimco systems.
And we are deploying capital for new systems and operational upgrades. These.
These investments are important to continue to add value across our enterprise and of course increase the returns that we aim to deliver for shareholders.
We exited the quarter with a healthy balance sheet and we maintain our focused capital allocation strategy.
So overall, a great quarter and.
And we expect to finish the year strong and of course, we also believe that we're well on our way and well positioned for sustainable performance in 2024.
Now, let's turn to slide number four we will review a snapshot of seacoast third quarter and trailing 12 months financials.
Peter will cover many of these key financial figures and metrics in more detail in a few minutes.
Let me highlight a few key areas.
Mostly stick to the left side of the slide which covers Q3 'twenty three results. The panel on the right side of this slide provides a snapshot of our trailing 12 month financials, all of which are very strong.
She goes orders of approximately $145 million in the quarter represents the fifth highest quarterly bookings level in our company history.
Continuing a trend of outstanding orders growth and it drove a year over year growth of 43%.
On a TTM basis orders reached $605 million, 30% higher than the prior 12 month T. T M period, and up 8% sequentially as a reminder to our audience. We have been growing orders steadily since the second half of 'twenty 'twenty. So.
This is definitely not just a in the quarter or 12 month phenomenon, but rather a continuation of a part of a positive trend and deliberately converting customer demand into CECO bookings.
Sales of approximately 149 million were also a record for any quarter for CECO and represents a year over year growth rate of 38% approximately 31 points of that was organic sales growth just outstanding.
We also had nice sequential sales growth of approximately 16% when compared to Q2.
Adjusted EBITDA of slightly more than $15 million in the third quarter was up 64% over the prior year period. This result produced adjusted EBITDA margins for the quarter of 10, 1% an increase of 155 basis points year over year and while our inverse.
<unk> and growth in operating excellence resources is up over the past year, we expect our SG&A to maintain steady levels going forward, which will translate into higher EBITDA margins as we continue to look to deliver additional top line growth.
Our adjusted EPS in the quarter of 22, <unk> and our trailing 12 month adjusted EPS of <unk> 67 cents.
Is an improvement over last year in the preceding period and the T. T. M is up five cents over the preceding 12 month period.
We will continue to manage our debt and interest payments to drive higher EPS and as our guidance suggest we expect our higher EBITDA will also deliver more EPS expansion.
Finally, with respect to free cash flow, we generated $28 $5 million of free cash flow in the third quarter after delivering $10 million in Q2. These past two quarters have really overcome the slower start to 2023, given we had negative cash flow in Q1 of this year.
In the third quarter, we had operating cash flow of approximately $30 million.
With Epsilon.
Collections activity and improved supplier payment balances, we will maintain our focused efforts on working capital management and continued strong milestone achievement and billings Peter will expand on cash and debt in just a minute, but we are pleased to have generated such strong cash flows and utilize that capital to pay down debt while also funding.
T J and accretive acquisition.
With so many financial records in the quarter and year to date I would once again stress how please I am with our operating and financial performance and again, thanks to our global teams. They can deliver they continued to deliver for our customers every single day.
Please turn to slide number five.
I'm going to reiterate a few things we've shared as we have highlighted this slide in investor presentations over the past number of quarters.
As the title of the Slide suggests CECO was more balanced and pursuing more opportunities than ever before across everything we do our focus is to protect people.
Protect the environment and protect our customers industrial equipment in previous quarters, we have outlined how we are advancing our leadership position in industrial air and the three acquisitions highlighted in the middle column under newly acquired brands are yielding great results across.
Our entire enterprise and really helping us advance in industrial air.
We have also discussed how we were building our position in industrial water.
We added to our leadership position by acquiring chemical systems in the third quarter, which is highlighted on the slide all of our industrial water acquisitions have expanded our niche leadership across very attractive industrial water markets.
And as I have mentioned previously if you go back to 2020, when I joined CECO. There was little to no mention of industrial water is a strategic component of our portfolio.
Today, It represents close to a third of our overall business mix just great transformation to add much more balanced and leadership in this critical area.
Finally, as CECO shifts its commercial and customer focus to support the applications and opportunities presented by the energy transition. We are very pleased with the progress we are making to win new customers and expand in emerging energy markets and geographies.
And the transition excuse me the transcend acquisition that we announced in Q2 continues to position CECO to provide new and enhanced solutions to improve the efficiency and lower the cost of gas and liquid separation infiltration and legacy natural gas liquids transport and hydrocarbon processing infrastructure.
Sure.
And to benefit from new and emerging applications in renewable natural gas carbon capture and other low carbon opportunities. The transcend acquisition also continues to open doors to high margin opportunities and business models and engineering services equipment rental infield customer process diagnostics and.
Emergency services.
Now staying with slide five let me build off the diverse portfolio. We are sharing with this material while the following examples arent specifically outlined on this slide each customer solution I'm about to mention represents real projects, we booked in the third quarter.
Some for maybe just a few million dollars and some for over $10 million.
When a critical infrastructure investment and liquid natural gas or LNG pipeline expansion and maintenance occurs who does a leading natural gas company call to provide multimillion dollar filters in Cola lessors, they call Cecos separation in filtration platform with its leading peerless and transcend brands, which I just mentioned as we ensure time.
And high quality delivery is as well as the ability to work with the energy companies to explore other complex solutions such as carbon capture inefficient designs. Similarly, when a leading U S defense company expands its b 21 bomber painting facility, who do they call to ensure volatile organic compounds or.
Oh CS are eliminated to protect people.
The environment and protect their investment in capital equipment.
She goes industrial air platform with its leading Addwest brand to solve this critical V O C challenge.
And staying in industrial air when a large aluminum manufacturer needs a proven leader to supply multiple solutions for their well over $100 million capital investment they call us CECO environmental and our Busch branded solutions to solve their critical problems and aluminum manufacturing.
Could go on and on discussing how every quarter, we are providing incredible solutions and services, whether it's new customers.
Or new opportunities that are created from investments such as our new customer and distributor portal within fluid handling we continue to invest in high growth markets and delight our customers every day by being there when they need US most we will continue to be more global more diverse and more service oriented.
I'm now pleased.
Excuse me I am very pleased with the results of our investments in our journey of advancement at CECO now please turn to slide six and let's take a look at our guidance.
As I mentioned in my earlier remarks, as you saw in our press release today, we are pleased to share an update to our full year 2023 guidance as well as introduce full year 2024 outlook.
Here's some details and highlights I'm going to start with 2023.
With respect to orders our book to Bill has averaged one point too and we expect to maintain this for the full year. We are showing 1.1 to one point too because certain opportunities could slide into 'twenty 'twenty four but we remain very confident our bookings for Q4 and the full year will be in this range and we expect 2023 will be the <unk>.
Third consecutive year with a book to Bill greater than 1.1, just great consistency of growth.
We are raising our full year outlook for 2023 revenues to a new range of between $525 million and $550 million, which is up about 25% at the midpoint year over year.
This will be the second consecutive year of sales growth over 20% and a majority of our growth is organic.
We are also raising our outlook for 2023, adjusted EBITDA to a new range of.
Between $55 million to $57 million, which is up about 33% at the midpoint year over year.
This will represent a more than doubling of our adjusted EBITDA from just a few years ago.
And for both 2023 and 'twenty 'twenty four we continue to be committed to generating free cash flow in the range of between 50% to 70% of EBITDA. We will use this cash to manage debt levels fund acquisitions invest in capital for growth.
And to do share buybacks.
Now I'd like to outline 'twenty 'twenty four guidance.
We understand there were a number of unknowns and market dynamics that create pause with respect to forecasting in this environment.
We believe CECO is in a very unique position with better than average visibility to maintain growth.
Our leadership in industrial Air industrial water and energy transition will continue to benefit from various.
And market investments in restoring industrial production sustainable infrastructure growth global energy transition to new and renewable sources and in some cases specific governmental investments in programs such as the chips Act and others.
The combination of these market dynamics, coupled with a record backlog and our almost $3 billion of sales pipeline gives us confidence to provide 20 <unk> 'twenty 'twenty four full year guidance at this time.
So with respect to full year 'twenty 'twenty four orders, we continue to forecast really solid growth, perhaps at a slightly slower pace in 2020 three but right now we're forecasting a book to bill of between 1.05 and 1.1 as we really continue to see great opportunities in the areas I just outlined in fact, we could see.
The upside from this forecast if certain large projects do in fact transpire in energy transition or certainly certain industrial air capital capital programs that we have line of sight too, but for now we like high single digit to low double digit bookings growth.
We are forecasting full year revenue between $5 75, and $600 million at this time, which represents approximately 10% topline growth.
Upside to this range will obviously depend on the level of backlog that we exit 2023 with coupled with orders throughout 2024.
We do not have future acquisitions built in this guidance.
We would point out that we are having great success with our programmatic M&A execution, and we continue to evaluate strategic and accretive deals.
For adjusted EBITDA, we are forecasting $65 million to $70 million for the full year 2022. This outlook represents an over 20% growth.
At the midpoint versus 2023 and represents good margin expansion for the year to.
The opportunities to drive higher EBITDA and higher margins would be an increase in higher sales and increase in higher gross margins as well as productivity that we're working hard to achieve all things were pushing.
And now I won't repeat my commentary on free cash flow other than to remind the audience that we expect to maintain 50% to 70% of EBITDA as our free cash flow target.
We hope this color on 2023, and 2024 guidance helps investors to assess and appreciate the sustainable performance, we are driving at CECO.
I will now hand, it over to Peter and he will walk through more detail on our financials and some additional color on our capital deployment and cash management Peter.
Thank you Todd.
I'm very pleased today to be able to present to own attendance another set of solid financial results.
Results that confirm our confidence that CECO is still on track to deliver another strong full year performance.
And with that please turn to slide number eight with me.
On this slide I will present, a more detailed picture of Q3 2023 results.
Orders in the quarter of $145 3 million were the fifth highest for any quarter in company history.
And the third best in the best third quarter on record.
Cecos trailing 12 month order rate is now greater than $600 million on a run rate basis, an all time high.
With year to date orders of approximately $455 million besting the prior high of $377 million delivered in 2022, demonstrating continued strong conversion of chico's growing opportunity pipeline examples of which Todd described for you in his prior section.
Q3, 2023 revenue of a $149 4, million% to 38% increase over Q3, 2022, and a 15% improvement sequentially were the highest for any quarter in company history, continuing a four quarter trend of record setting revenue.
Rents benefiting from continued strong conversion of Zika is growing backlog and the beneficial impact of the Wakefield acoustics transcend solutions and kimco systems acquisitions.
This result increases cecos trailing 12 month revenue greater than $500 million.
Another all time high and has delivered year to date revenues of approximately $390 million.
I'd like to now touch on gross profit.
Gross profit of $43 million was a 33% increase over the third quarter of 2022 and was a record dollar level.
Resulting from higher shipments.
Gross profit margins in the quarter did decline, however by 100 basis points versus the prior year.
Due to some lingering supply chain challenges impacting a small number of significant projects projects, which we expect to have behind us or have concluded in the third quarter.
Adjusted EBITDA for the quarter was 64% was up 64% year over year to $15 $1 million as lower G&A spend and slower rate of investment in our platform sales and engineering resources offset the impact of lower gross profit margins.
Adjusted EBITDA margin quarter was 10, 1% an increase of 160 basis points from the year ago period.
Both GAAP and adjusted EPS were also up year over year as operational performance and our performance in corporate spending offset the drag due to higher interest rates and.
FX effects.
Before I move on one last note on operating income, which is a metric we don't discuss often.
I would like to point out that both GAAP and non-GAAP operating income posted strong increases in the quarter compared to a year ago periods up 180% and 75% respectively.
Please turn to slide nine with me for more details on <unk> orders.
On this slide you can see that Chico's order trajectory that began in Q4 of 2020 has continued into the third quarter of 2023, and we have delivered four of the best five order quarter in company history in the trailing 12 month period.
If we look back to Q1 2022.
All seven quarters since that quarter posted an orders rate greater than $100 million and the current rolling four quarter average of 150 greater than $151 million will produce a run rate over $600 million in bookings.
We recognize that quarter to quarter orders can be lumpy due to order timing.
And to provide a view that smoothes out the lumpiness and more closely matches our revenue realization I would highlight for you. The two roads at the top of the page denoted TTM in average per quarter, both of which show consistent progression of improvement on a year over year and sequential basis.
Now please turn to slide 10, we would look at revenue in more detail.
On Slide 10, you can see that CECO is revenue growth trajectory.
Began in Q1 2021, and then it showed continued sequential improvement with acceleration in 2022 continuing into the current quarter.
Q3 is the sixth consecutive quarter of 100 million plus delivery and revenue and the seventh consecutive quarter with a year over year revenue growth is greater than 20%.
As of the third quarter of 2023 average revenue per quarter on a rolling four quarter basis is now $127 million approximately 80% greater than we achieved at the low point in.
In the first quarter of 2021.
Yeah.
In the third quarter of 2023.
We had the best revenue quarter for a third quarter in company history, putting an exclamation point on a run of record quarterly revenues, resulting in the highest first second third and fourth quarters for revenue in company history.
And trailing 12 month revenue of $508 million is 27% higher than the prior 12 month period.
Now please turn to slide 11, I'll walk you through backlog and backlog trends.
<unk> finished the third quarter with new record backlog of $394 million, representing a 42% increase year on year, and a 26% level higher than the year end 2022 numbers.
The book gross margins in the backlog continued to trend higher than the year ago period, which for US is a strong leading indicator for improved margin realization in the coming quarters.
Our book to Bill was approximately 1.0 in the quarter.
And 1.20 for the trailing 12 month period.
Again, I'm happy to announce there were no cancellations in the quarter.
With a very strong opportunity pipeline in excess of $3 billion continued strong quotation activity. So far in the fourth quarter CBOE expects to maintain book to bill greater than 1.1 for the full year, a positive leading indicator for continued future growth.
Please move to slide 12, as me and we'll discuss briefly gross profit and EBITDA.
On the left hand side of the page.
We present, our gross profit trajectory gross profit delivery for the third quarter was a record $43 $1 million, representing a 33% increase over the third quarter of 2022, continuing a trend of 30% plus year over year improvements.
Gross profit margin in the quarter was 28, 9%, a 100 basis point decline year over year.
Adjusting for the impact of mix and project closeout costs and margin impacts mainly driven by supply chain challenges gross profit margin in the quarter would be favorable by approximately 770 basis points when compared to the year ago quarter.
Trailing 12 month gross profit is approximately $156 million, representing a 31% greater gross profit deliveries in the prior 12 month period, and a 90 basis point margin expansion to slightly over 31%.
Now I'd point, you to the right side of this slide as we look at adjusted EBITDA performance in Q3, 2023, CECO delivered a $15 $1 million of adjusted EBITDA, which is the second best absolute dollar results in company history.
Astounding, 64% greater number than third quarter of 2022.
Adjusted EBITDA margin was 10, 1%, a 160 basis point improvement over the year ago period. Despite the 60 to 80 basis point headwind related to mix and supply chain I've mentioned, just previously when discussing gross profit.
On a trailing 12 month basis CECO has delivered $51 2 million of adjusted EBITDA and nearly 33% increase over the prior 12 month period, and an aggregate margin of 10, 1% up 50 basis points.
Before I transition to the next slide let me reiterate that I continue to be pleased with the progress we're making in balancing our investments in growth and execution, while delivering on our commitments. We expect to continue to realize the benefits of earlier investments in platform and functional resources and.
Systems to support <unk> continued growth and profitability improvement.
I am also now seeing the benefits from our corporate services initiatives and from our acquisitions as demonstrated in our strong adjusted margin expansion year over year. Despite the headwinds noted at the gross profit margin level.
Now if we turn to slide 13, I'll provide you a little more color on our most recent acquisitions and other capital deployment efforts.
On the left hand side of the page are a summary of our Wakefield acoustics and transcend solution acquisitions closed earlier in the year. The integration of both companies is well underway with the entirety of the prior management team is fully intact and fully engaged.
We remain very bullish on the growth prospects for both businesses and we are already seeing strong evidence of their ability to double their size in the next two plus years.
Each company has a niche specialist with unique technical and applications differentiation that yield a strong margin profile and defensible competitive position. Both companies are already beginning to realize the benefits of being part of a larger organization with greater resources and a global reach.
In the third quarter, we further expanded in a previously discussed investment in Wakefield acoustics, which will allow the business to expand capacity approximately two times the capture a fantastic growth opportunity in the data center backup power segment initially in the UK and Ireland and then.
In Europe, we identified this opportunity during our due diligence and it has materialized even faster than expected.
Under prior ownership Wakefield would have struggled to access the required growth capital, but as part of CECO the opportunity will be fully funded and the business greatly expanded profitably.
We remain committed to invest in projects and people to accelerate growth and improve deliveries quality and profitability by in sourcing the manufacturing of components critical to transcend filter element production and performance. We have also approved an investment in the quarter to substantially expand the rental vessel fleet.
Which is a key element of the transcend value proposition.
With this larger fleet the trends and team can now execute more demonstration and pilot scale installations that demonstrated superior contaminant removal and process improvement capabilities and drive customer conversions.
I would now direct you to the upper right hand panel of the page, where I will walk you briefly through a summary of our most recent acquisition of Kimco systems, a leading industrial water solutions provider.
This transaction closed in mid August and we are very excited to add kimco systems to our growing portfolio of niche leadership water and industrial water businesses and brands.
<unk> primary end market is in the high growth food processing sector, where they are a leader in point of views applications for water filtration water delivery energy recovery reuse and treatment.
There is nothing to report on the share repurchase topic in this quarter. So I'll provide a few cap highlights from our capital investments made in the quarter.
Our capex spend year to date is approximately $5 5 million, which is slightly elevated compared to prior years with spending in the quarter in line with past spending levels. After an increase in Q1, which was the high point for 2023.
We continue to invest in upgrades in our it and data security infrastructure and an ERP migrations.
We have expanded our footprint in Pune, India and initiated operations of two recently purchased machining centers in our fluid handling business in the USA, which will deliver an improved cost structure and greater uptime than the equipment they are replacing.
Now, let's move on to slide 14 for a quick review of cash and liquidity before I turn the floor back over to Todd.
CECO finished Q3 with $48 5 million in cash an increase of $2 million from the year the prior period.
And essentially flat with second quarter levels.
Cash from operations, driven primarily by solid working capital management in the quarter was a big step up sequentially to $30 million from 11 4 million of operating cash in Q2, enabling CECO to fund the Camco acquisition make our capital investments issue select trade finance instrument.
To secure new project wins and pay down our revolver all by all while increasing our cash balance.
Net borrowings in the quarter on our revolver were approximately $31 million supporting growth investments and working capital M&A and Capex.
Approximately $24 million was spent in the quarter on acquisitions and related expenses and $1 6 million was used for capital investments.
Interest expense in the quarter was approximately $3 million compared to $1 6 million in the year ago period, due to higher interest rates and a higher debt balance.
Gross debt in the quarter at quarter end was $135 5 million a decrease of slightly more than $1 5 million from the second quarter of 2023.
Quarter end net debt finished at $87 2 million, a decrease of $1 $1 million sequentially, resulting in a comfortable leverage ratio of one seven times approximately a quarter turn decrease increase from year end levels and well below our credit facility leverage cap.
At current debt levels before planned debt repayments in the fourth quarter from continued improvement in our collections and operating cash generation.
It goes available investment capacity is in the $37 million range.
That concludes my summary of <unk> third quarter 2023 financial results a quarter in which the company. Our teams delivered a very solid set of results and I will now turn the microphone back over to Todd.
You through our full year 2023 outlook and concluding remarks, Thank you Todd.
Thanks, Peter a lot of great detail with respect to our financials and also various insights into our performance.
Okay, we're going to go to the final section and which includes our summary slide please turn to slide number 16.
We have already outlined our revised guidance for 2023 and the initial outlook for 2024.
What they have in common is double digit growth mindset over the past few years, we have outlined initiated and executed a focused growth strategy that will continue.
We also started to invest in new commercial leadership, new growth models and structure our program to expand market access the results have been.
And we expect will continue to be very strong.
So we are benefiting from strategy process structure and talent and we are benefiting from our leadership position in industries that are growing as a result of global expansion drivers that are outlined on this slide <unk>.
<unk> industrial production, including high Tech manufacturing and the need for advanced metals and components.
Global infrastructure investment.
New capital going into clean and Green energy, a K, a the energy transition and ongoing regulation, especially in environmental areas.
As the target market size visual demonstrates on the slide a few years ago, we were targeting between one to one and a half a billion dollars of market opportunities and today, we are more than targeting we're going after and $3 billion or more of sales opportunities.
As they say more at bats equals more hits.
Were not comprising our leadership position in markets. We are just growing our share in or participating in new markets, both organically and through strategic accretive M&A.
We have great opportunities in front of us opportunities to do more beyond equipment, such as more services and aftermarket solutions, we have grown our international sales and believe we have a tremendous opportunity to do much more of that and we are rolling out new products application solutions and services, we think the future looks bright and we're getting after it.
Please turn to slide 17, which simply reiterate the financials for full year, 2023, and 2024 outlook I'm only going to read.
The takeaway that state's high performance focus to deliver sustainable results and if you think about the previous slide number 16.
The growth is a process and not a game of chance is the way I would leave you with it.
Great programs that we're putting in place to deliver the sustainable results.
Now, let's go to our last slide number 18.
On the left side of the slide we captured the main takeaway from today's presentation and prepared remarks.
Continued growth in the third quarter and year to date gives us great visibility to raise our outlook for 2023 and introduce 2024 numbers that we believe reflect continued growth.
We are very focused and proud to be delivering value for our customers and obviously also for our shareholders.
And on the right side of the slide we highlight how we have been and will continue to transform CECO with a focus on advancing our leadership in industrial air.
Building, our leadership in industrial water and maintaining our leadership in the energy transition.
We remain laser focused on executing on our programmatic M&A strategy and identifying identifying and penetrating more end markets.
To support further organic growth.
Building a higher backlog. So we can maintain our investments and leverage our scale for higher margins is critical we do all this because we keep our customers happy and our great talent understands they are trusted and valued by all of us at CECO. Once again I appreciate team CECO and I appreciate that we continue to work hard for each other and.
Our customers.
With that I'll now hand, it back over to the operator as we're happy to answer any questions.
We will now begin the question and answer session.
To ask a question you May press Star then one your telephone keypad.
If you're using a speakerphone please pick up your handset before pressing the keys.
To withdraw from the question queue. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question will come from Erin <unk> with Craig Hallum.
You May now go ahead.
Yeah, good morning kind of Peter Thanks for taking the questions.
Hey, Eric.
I'm wondering if you had all the color. Good morning, you know maybe starting first on just backlog and kind of the order pipeline.
You kind of talked about it a little bit but you know are you seeing any kind of cancellations push outs. There and then maybe could you just highlight some of the areas of strength or where you might be seeing some some moderation, whether you know verticals or geographies.
Yeah. So thanks Erin.
Start this is Todd.
Peter mentioned Theres no cancellations by the way that that is something we don't nor.
Normally see any I mean, we we rarely have cancellations I will just say that as a company, even just to remind maybe or to educate somebody that might be new.
Even during Covid, we had very few cancellations and in fact.
Of the 2% to 3% of our backlog that did cancel we successfully re booked those orders.
Within 12 to 18 months after they were cancelled so they were actually more pauses then they were cancellations. So we're not seeing any we don't expect to see anything material on occasion, there will be.
A program that gets delayed and therefore, we have to we have to remove them from our backlog, we called out a cancellation.
But but rarely do we see something canceled for any other reason other than a project delay. So we're not seeing that I think we continue to see strength in the areas that we highlighted.
Just that the overall broad industrials, we feel good about.
There are markets that have ebbed and flowed you have automotive, which you know has a couple of quarters, where it might be softer we've highlighted that in 2022, we had incredible growth in let's say aluminum Bev can and now in 2023 that markets softened and we've sort of replaced that strong market.
With EV battery or another industrial market of expansion that you know around semiconductor build so you know for us air and it just continues to pay to be nimble and move into markets that we think are growing.
And you know and we'll be there for the other markets when they come back.
Are you still there and operator.
Pardon me, yes.
Yes, sorry about that we had a we had a technical glitch we thought so Peter.
Peter will continue.
And Aaron as we've discussed in the past.
One of the key features of our commercial model and how it kind of de risks. Our approach is that we are a solution seller.
We don't target markets, we target customers across a various range of end markets that have a problem that our solution is uniquely in a definitely targeted solving.
And as a result, if a market trends down for instance, beverage can production, which is <unk>, which is now out of its buying window trends down our team that sell solutions to handle and remove volatile organic compounds turn their attention to markets that are in the buying window.
And we ensure that the number of projects that that team is focused on is is larger and more interesting than what they may have focused on in prior periods and Todd highlighted a very interesting one was with the B 21 bomber program.
And so that's that for us is a new application.
Or a new customer, but it's.
<unk> removal solution using thermal oxidizer is what <unk> been doing for I don't know 50 80 years.
In the past the company would probably not have targeted that customer because the approach was very end market specific and not solutions and application driven.
In fact, inspect air and I'd say maybe defense.
Defense overall could be an interesting market for us could be it could be a more impactful market for us in 2024 and that could provide upside, but we're certainly well positioned and we continue to push for our.
The best opportunities in that space.
Right now, we'll stay tuned for that thanks for the color there and then just second on margins you touched on a little bit of a supply chain challenges in mix. You know could you just talk about a little more detail on what those were and you know if those are behind us from a supply chain perspective, and then just some of the confidence that you have in the margin targets as we move forward.
Yes.
I'd start by saying, probably nothing new from a supply chain perspective, we we probably just accelerated pushing through.
Some of our more challenges in the quarter to get them behind us, which gives us visibility to strengthening margins already in the fourth quarter as we are in it obviously and that helps to support our outlook.
For the balance of the year as we head into next year.
And so for US it was just accelerating getting through some of our challenging projects.
They have just been always sort of hampered from probably from the beginning on some supply chain challenges getting those behind us in the third quarter was a good thing.
And but otherwise its look most companies or at least highlighting some challenge it could be just getting freight and logistics it could be getting access to certain components and electronics.
There's it's been a choppy environment for a year and a half or more now I feel like we just probably just wanted to accelerate and get a lot of that behind us.
Understood I appreciate the color thanks for taking the questions I'll turn it over.
Thanks Sharon.
Our next question will come from Rob Brown with Lake Street Capital markets. You May now go ahead.
Hi, good morning, and congratulations on a good quarter.
Thanks, Rob Thank you Rob.
Yes.
You're starting to get some good operating leverage in the quarter I just wanted to get a sense of where you think you can take your EBITDA margins as you your growth plays out here or do you really get the operating leverage from these acquisitions and scaling mitigating.
We would've gotten better operating margins Robb had.
And we're confident in our ability to get gross margins back up to the levels that they were before but let me just be clear that you know having gross margins in the quarter below 30% is not where we're going to be and not where we're heading and not the time and energy that we're putting into productivity.
Rice and good operating excellence and also the margins that we believe that we're booking now look there's always mix and there is some large important.
Customers that just in the market that they are in.
Slightly lower margins, but we really like our ability to get our gross margins back up like I, just said with Aaron and while just reiterate here.
We pushed through to get a lot of our lower gross margin projects executed in the in the first three quarters of the year, including in the third quarter that had a bit of a negative mix to our margin as well as some of the supply chain challenges. So, but then back I think to the to the main focus of your of your point or to your comment Rob and.
That is look you know with with our backlogs, where theyre at and with the margins that we know are in our backlog. It starts with volumes at the topline it moves on through higher gross margins that are going to be coming through our pipeline and therefore positively impacting our P&L on a sequential and year over year basis, and then that volume will really be able.
To convert at a higher EBITDA margin level as we go forward into the fourth and into the fourth quarter of this year and into next year. So we're pleased that EBITDA margins were up 156 basis points I think exactly a year over year could've been higher and our gross margin has been where we know they're going to go. So we're confident in getting that margin.
Expansion look I think we've given a long term target then in the next few years, we expect and we're working hard to produce EBITDA margins that are in the in the teens potentially in the mid teens in the next few years, we're committed to that and you know.
The type of.
Value creation that we believe we can have from double digit top line growth and then a stronger double digit EBITDA dollars and margin growth will be very profound with respect to shareholder value creation. So our long term goals are to get those EBITDA margins up into the mid teens, we're committed to it.
Okay, great. Thank you.
On the acquisitions you've been doing.
Talked pretty positively about kind of doubling the level of business and head count in particular, but could you give a sense of how you plan to get the business to double in what kind of drivers you can do to make that happen.
Yeah look kimco, it's very early in our portfolio Peter can expand on some things specific to advancing.
Any of our businesses, but I look at that.
The eight acquisitions that we've done.
Over the last handful of years, we have already experience with a a good portion of them already doubling.
Back to you now.
Acquisitions, we did and when I first joined the strength of that of that acquisition helped to lead the way towards top line expansion.
And heck, even an acquisition we did earlier this year, we believe within 12 months, we can already doublet. That's the Wakefield acoustics acquisition, just really helping to advance as Peter pointed out in the prepared remarks with some capital investment capital expansion.
Our ability to add resources and help Kevin who doesn't fantastic job running our.
Our Wakefield acoustics business too to really get after data center expansion. So we're taking our time to find businesses that we think we are we want to invest and we want to keep the teams we want to incentivize. The teams. We're finding markets that we think have a good 234 year growth trajectory in front of them.
Industrial water, there's no doubt that this is a very fragmented growing space kimco within food processing, there's a tremendous amount of opportunities. These are also businesses, Rob that have been somewhat limited in their ability to scale into new geographies or or add capital just because of the size of the company are where they are in their investment model with there.
Previous ownership.
We're early in the alphabet. There later in the alphabet. So when we make an acquisition we want to invest in growth, we want to invest in new capital New resources, we wanted to take them into our.
High growth region markets, where we have established capabilities and systems and we already have.
Entities set up and whether it's the middle East or East Asia, So really across all of our acquisitions were ahead of our growth models.
And I'd say in at least 50% of them.
We believe we're going to double those businesses within 18 months of acquisition, we're well on the way to do that and it's an exciting series of of execution across our businesses.
Rob I'll provide you one concrete example for each of the three businesses.
So at Wakefield acoustics.
They had an opportunity with a large customer that.
That required additional footprint in order to be able to deliver 26 package solutions for a very large data center expansion campaign.
That required them to.
Acquire some yard space, but also some ability and some additional manufacturing capacity and facility.
That couldnt have been undertaken or could have been undertaken with prior management, but they couldnt have capitalized debt.
Quick access to CECO capital, our balance sheet, and our ability to provide that landlord the guarantees necessary to provide the building in a turnkey fashion is now giving them access to that customer and theres more like it and that's the way we Wakefield solution story is very interesting on the transcend side they had almost no business in.
International markets that are very focused on the Gulf coast.
As you would expect with the small business working in hydrocarbon processing, we give them access now and have begun to book customers at the <unk> project in the Middle East and are talking to customers in Indonesia, and gas sweetening, all very large opportunities that they couldnt have accessed on their own but we're CECO has people in existing really.
<unk> chips, and then with the Camco systems business. It's a very similar story at least two of their primary applications are applicable in Europe.
Who have very similar codes around.
Sanitation and water use in.
Fat rendering and in beef processing facilities with our teams in Europe, we can bring them into the UK, Ireland, and France easily something they could not have done on their own.
Those are big opportunities will begin to start.
Putting pen to paper on in 2024.
And that's the beauty of buying a focus niche specialist is that they are focused and we can help raise that focus to todd's point, giving them more geographic access or the ability to go deeper in their core markets with the addition of capital.
Okay, great. Thank you for all the color I'll turn it over.
Our next question will come from Amit Dayal with H C. Wainwright you May now go ahead.
Thank you good morning, Todd and Peter.
Congrats of owning it.
Strong quarter.
With respect to the guidance for 2024.
I think I heard you say it does not include an equal potential contribution from acquisitions you Madhu.
Elaine.
Is that correct.
Right Okay.
And then just an adjacent question to that.
The interest rate environment, where it is right now are these deals still penciling out.
And the fashion you might want them to any color on how you are thinking about structuring new deals in the current environment would be helpful. Thank you.
Well you know interest rates are high versus where they have been probably low if you think about it over a 30 year period are you know the industrial businesses that I've been in since the nineties.
So we'll have to think about that obviously in terms of deal valuation I think there's always going to be opportunities for the right accretive acquisition. If you take your time and you have a programmatic approach like we do especially if you know that you can especially with confidence and a track record of outperformance once you've completed the transaction.
Look they are more expensive because that's more expensive and.
We're generating strong free cash flow the last couple of quarters, we're going to continue to pay down our debt to lower our interest expense as we go forward.
That's certainly a consideration for us.
And you know look I think.
It's all about economics, we have to create economic value. When we make an acquisition of course it has to be a good strategic and portfolio fit cultural fit.
So you know.
I would say that with interest rates being what they are it does is it raises the bar for the transaction to have to make really great economic sense for us.
The wise.
We'll pause and we'll wait for a different environment, but right now I think it's not changing how we look at transactions. It just raises the bar associated with that and it does it for everybody. There's not a single company out there that is making acquisitions or looking at making acquisitions that that isn't impacted by the slightly higher interest rates over the last few years.
Thank you for that.
Okay.
Plane sales pipeline is growing quite substantially unions one.
And I may have missed this if you already addressed it and I apologize if I did but in terms of converting that pipeline to orders and backlog like you know.
How much of the growth expectations is tied to that I mean are you.
More confident that you should be able to raise that.
Improve the conversion rate I guess.
To keep sort of revenues.
Right.
We think so look I mean, I guess I'll just point in this case to a little bit of a history lesson you look at our organic growth. If you look at our bookings you look at.
29% bookings growth in 2021, you look at.
Go much larger 30, 40% bookings growth in 2022 and look at the bookings growth that we've had in 2023.
That's not because of acquisitions, which acquisitions have helped our bookings but.
But 75%, 80% of our orders growth have been organic.
Because we are going after more opportunities and worried they're maintaining a good win rate.
Or our win rates are certainly remain healthy now when you enter new market you learn a lot about those markets, whether it's a new geography or new vertical you have to sometimes establish a reference site or a reference project that enables you to then go after the second the third the fourth we've done that whether it is <unk>.
An electric vehicle in the past and then we were successful by winning a handful of other electric vehicle industrial Air solutions. So.
I guess I'll just say, it's critical that we have gone from $1 5 billion to $3 billion of target market and our sales pipeline.
Ideally in a year or so we're at three $5 billion to $4 billion of sales pipeline, even if the market softens, we have a tremendous amount of opportunity to expand our target markets and maintain a win rate that we think represents the leadership position that we have at CECO across industrial air industrial water and energy trends.
<unk> and so by maintaining our leadership win rate and expanding our end markets. We think those more you know more pursuits equals more growth and that's a big part of our of our outlook for 2024, and what will likely be a big part of our outlook for 2025.
I appreciate it that's all I have guys I'll turn it over thanks Amit.
Thanks, we'll talk to you later.
Our next question will come from Jim Ricchiuti with Needham <unk> company.
You May now go ahead.
Hi, Good morning. This is Chris <unk> on for Jim Congrats on the results and thank you for taking the question Chris.
Okay great.
You had mentioned.
The planned investments in talent and global execution, just wondering if you could please elaborate on your priorities there and what you expect in the near term. Thank you.
Yeah look it's a balanced set of priorities Chris.
It's it's.
I'd call them in the in the swim lanes of a growing company you of course have to continue to replenish your ability to execute so late.
Lynn the HR team.
Our business leaders are constantly looking at the natural attrition associated with people, leaving or the fact that we need more talent to execute our projects. When you have 30% top line growth you need to go and add engineering and project management and.
Technicians and all of that so.
We're always trying to keep up with great sales growth and that's a good problem. That's a gold plated problem, but it's still a tough environment. So we're spending the right amount of time energy and focus to invest in bringing in new people retaining people.
It's a it's a challenge for every company, especially in relatively mature industrial markets to do that so that's a big investment of time and energy for us and that is well spent and we have the right teams doing that it's never easy, but we're rolling up our sleeves everyday to do that to add more growth.
Development sales marketing that talent continues to fuel the relationships that are critical for our advanced stinking our better markets.
The acquisitions, we've made we're very fortunate to have kept that top talent and then add some resources to them I think over the next six to 12 months youre going to hear us probably highlight some resources that will continue to make in those sales business development areas as well as probably some some areas of I guess I'd call them sort of new product <unk>.
<unk> engineering application solutions, some of that might be in high growth regions like India, where we've more than tripled our resources from around 30 to over 100 today and just the last 18 to 24 months. So we're trying to be smart with adding incredibly talented people, but in areas, where that's cost effective and.
Allows us to be more 24, seven for as a global company should be around supporting customers and supporting our areas of innovation and growth. So that's those are going to be the topics. That's what we're investing it's more around that I'd say the last thing is we're building under Dan Berryman in all of our platform Gms or are really stepping.
Up now to have more of a focus on productivity and operating excellence. So we're going to be adding a few more resources to deliver that margin expansion to go after operating excellence capabilities. So you know.
Again for us, it's just about a balanced diet of topline growth organically, adding resources to recent acquisitions and then the final piece of the of.
The diet is making sure that we have margin expansion.
Perfect. Thank you very much I appreciate that.
And.
Looking at the helm.
Healthy pipeline.
I'm, just curious how much of that or how would you characterize the.
The amount of that pipeline, which is discrete projects one one at a time versus now that you have this very deep and broad portfolio.
Going to some of the strategic customers and having them Scott.
<unk>.
Multiple services and solutions from the broad portfolio to service their full spectrum of needs.
I guess.
Trying to understand like.
Where do you see like the land and expand strategy today, and where would you where.
Would you like to take it.
Well.
Business mix right now is somewhere in the 70% longer cycle that includes very long cycle projects is also includes what we call above mid cycle projects that we booked but we turned into revenue in six nine months long cycle would be revenue between nine and let's say 18 months, 70% of our business.
Mixes that longer cycle projects for sure at least 70% of that pipeline or jobs. It looked like that there.
Mid to longer cycle projects, there therefore somewhat more discrete there they are fairly large million to multimillion dollar projects that are associated with either a an expansion of an existing site or potentially a new build a greenfield so to speak that's at least 70% of that $3 billion. The other 30% would be after.
A market project services.
Replacement shorter cycle pumps filters things like that so I'd, probably say, our our pipelines a little bit more on the medium to long cycle, because you have more visibility to that that doesn't mean that it changes our business mix going forward, but that's what we see in the pipeline.
Great. Thank you very much.
Thanks.
Our next question will come from Gerry Sweeney with Roth capital.
Oh go ahead.
Good morning, Todd and Peter Thanks for taking my call.
Yes.
One more question on revenue growth I know there's.
A lot of questions have been asked that sort of an around the edge of what I wanted to ask but I'll.
Really wanted to see if you guys could dig in and.
Discuss what's driving.
Understand acquisitions, there's capital infusion, there's access to see it goes global sales, but I think when we Pat in the past at least Peter.
You and I have discussed.
Incentivizing, some business heads and maybe reducing some barriers from letting them go after additional opportunities can you maybe dig into what alpha.
Outside of acquisition growth, what's driving growth, both internally and driving that pipeline.
Well, we have been transforming and it started actually with the transformation of our business model and our structure in and having more accountability at are more nimble fighting units. If you will the platform units I think that on shackled their focus on the markets incentivize them to <unk>.
Bold triple quadruple the markets that we're going after.
Gave them the space and the time to do that and the investment to do that so you know our platform businesses all would be looking at more more growth opportunities.
Two years ago, a year ago and today, they continue to expand into new markets and that's important to that accountability for them driving into new markets is important and they know that they can they can win and lose and we get we're going to continue to invest in there and their growth because eventually they're going to find their stride in those new markets given our leadership position. So that's first and foremost we've already expanded.
I think on the investment that we make on the acquisitions, we make the acquisitions to drive growth. There are some cost synergies and some operating synergies, but that's not the reason we do the acquisitions is to drive growth and to expand into these geographies and vertical markets that's equally important.
Look it's it should be noted obviously, we do feel like we're in good markets.
And we think that they have a good pipeline of opportunity the restoring of industrial capacity and capabilities is not over.
And.
Investment in infrastructure globally is not over.
Investment in energy and energy transition, whether it's a legacy infrastructure that continues to be maintained or new infrastructure that needs to be built for new gases and new capture of of carbon in transport and management all of that is billions and trillions of dollars. We feel like we're really well positioned in those markets. So it's a combination.
Of investing and incentivizing our teams.
And helping them to look at new markets differently.
A smart acquisition model that promotes growth versus.
Going out there acquisition model for cost synergies, which can slow down that growth conversation and then it's being nimble and in end markets that we think are growing and when one slows down we move into another one.
No that's.
That's helpful.
So and.
How much opportunity.
What about on the organic side are investing internally.
Can you touch upon that.
Maybe a growth driver as well.
Yeah look.
But again, we know that there's some caution out there in the environment and that's.
That's not lost on US you don't have a subscription to.
Cable TV or and or the Wall Street Journal and now read about it everyday.
We say organic growth is the heartbeat of CECO. It's you know, it's what what's going to give us double digit growth. This.
This year more than double digit growth. This year, it's going to give us double digit growth next year.
We have a lot of confidence in what the pipeline looks like at the moment and that is producing record backlogs as we as we navigate the last few years and it's been choppy and dicey for quite a while and a lot of a lot of end markets have ebbed and flowed so for us organic growth is.
As our main focus.
We think that the M&A is is additive to double digit growth in the moment. So we're going to continue to push for for that and again I think.
We believe that with our backlogs and our pipeline all of that right. Now is represents as we head into next year, that's an organic number.
Being in the double digits. So we've just like the space we're in at the moment.
Okay.
I'm going to be talking to you guys. Shortly so I'll end it there, but thanks a lot appreciate it.
Thanks.
Our final question will come from Joe Giordano with TD Cohen.
Oh go ahead.
Good morning. Thank you for taking my question. This is Michael <unk> on for Joe.
Good morning, Michael.
In the prepared remarks he mentioned.
The continued strong book to Bill can you give us any breakdown between like industrial air.
Water and energy trends transition in and can you give us any color regarding that customer decision timelines and how that's trended over time.
Yeah.
So well first of all all three if you want to call. It of those sort of segments are have been growing throughout the year. So it's.
Our industrial water business as is or if you want to call it our newest.
Collection of businesses, because that's obviously, what we've been building a position.
The the acquisitions, we've made over the last.
18 months with respect to compass in D. F 'twenty, one and kimco et cetera have built that industrial water.
That's that's been that's been growing and Thats, probably been the most acquisitive area of growth is in industrial water.
So when you sort of looking at the transformation of our portfolio. It's been in large part industrial water, but therefore, we also don't have like I can't give you a legacy you know three four years ago.
That the book to Bill was was X and now it's y.
But again between especially D F 'twenty, one and a business that we think will double in 18 months of ownership compass and kimco and.
And G. R. C. All businesses that are growing strong double digits. We believe so the book to bills continues to be good and industrial water.
Just real error.
It's what's probably our largest platform and it's it represents a big part of what we do.
There's a lot of different end markets. There. So it would be hard for me to dissect them and take a lot of time.
But between industrial air in the energy transition again, where.
We're certainly over one in terms of that book to Bill as well I think.
One quarter industrial air might be one three book to Bill in energy transition might be one and then the next quarter energy transition might be 1.3, and industrial air might be one, but none of them have been less than one for more than one quarter. So it's not because of one of the three that we had a book to bill of one point to year to date.
You've all probably averaged somewhere between one and.
One one and one three any quarter of the year and probably over the last few years. So it's been pretty balanced for us.
Great.
Second part to that question I think in terms of speed for customers to make decisions on orders.
Order placement.
Seeing two trends one is our customers are coming to us much earlier in their process. So we help them with the design.
And even the I'll call it the technical problem solving at an early stage in their project planning.
And so that.
That gets us engaged early helps us influence specification and design, which ultimately benefits CECO from a win rate perspective.
We now move from I'll call. It the front end engineering design phase into the quotation and the costing and then commercial aspects, it's moving faster than in the past.
Because we've got that early look we can move more rapidly and our customers are making choices on the selection of.
Neither solution or a technology provider more rapidly.
Is that for us that is a demonstration of the success of our strategy to become the preferred technology and solution partner for many of our customers and in fact, we've even been finding is.
They.
And some larger customers we are the first person they are calling.
Because they know they'll get the solution and they'll get the quality and durability from the solution. They are looking for.
In a broad RFP process, which takes a long long time and cost of their money is not then their interest they're getting funding and they want to move quickly. We believe that trend will continue as stimulus from the government investment programs starts rolling out and companies now have to make decisions on how to spend that much.
And that's a U S or north American phenomenon, primarily with the IRR AIA J, a and other funds.
Okay.
Great that's super helpful and just one more if I may.
You had mentioned like about a one to one one book to Bill for next year.
Can you just dive into like they expect the cadence of the year I know, there's been some potentially some seasonal or timing of large projects that are his influence like the first half of the year. The past couple of years, it's been a little bit stronger in that area.
Any color there would be very helpful.
Yeah, we don't.
It's a fair question, we don't know that we've necessarily seasonal aspects there or just.
First of all you've got projects that.
Let's just say there could be.
A 2030 $40 million $50 million of projected.
It's hard to sort of say is that going to book in a quarter versus another quarter. Because obviously that has a lot to do with the we're usually a big part at times are a small part of a very large project or a larger project. So it's not that the customers just worrying about our solution. They they have to think about the supply chain the timing the capital investment of the entire.
Your solution before they issue. So I'm always look there's a reason we don't give quarterly guidance it is hard to forecast.
That especially this early in next year and we're not even in next year. It would be hard for me to give much more color around it I would say this there's no reason for me at this point to not say, it's balanced throughout the year I mean, I don't think where I sit today, where Peter and I and the teams sit today that youre looking at and I'll, just exaggerate to make a point a disproportionate amount of ore.
Orders in the first half of the year and then a lower proportion in the second half nor would I think it can be the flip I'm, not saying, it's going to be perfectly equally balanced or linear.
25%, 25%, but there is at the moment. There is no reason to believe that we have a huge seasonal aspect to our bookings for next year. So if we have a.
One one book to Bill next year, it would seem to me like our book to Bill would be.
Somewhat consistent throughout the year now some of that could be influenced by a higher revenue quarter because of the size of some of our revenue quarters can be different historically.
But that continues to be on the more linear trend as well. So again, we think it's there's really probably no.
Seasonal aspect other than we hope that and again, we hope that it's relatively consistent throughout the year I would also remind folks and it's not a caution that but just because we might have one quarter, where our book to bill could be lower including even slightly below one I don't think that that necessarily means that theres a slowdown because that just.
Might mean that a handful of orders rolled into the next quarter. Similarly, if we have one quarter, where our book to Bill is one two or one three.
That doesn't mean that we can sustain that it could just be a certain number of projects moved into that quarter. So timing is really important when youre looking at fairly large orders.
Great. That's super helpful guys. Thank you for your time.
This concludes our question answer session I would like to turn the conference back over to Todd Cleveland for any closing remarks.
Yeah I'll just be quick here first of all thanks for everyones question and interest in our information today I know we went over time.
I guess, that's a good thing when when Theres a lot of great.
Questions around what we provided in our performance.
So just thinking our global teams delivering incredible value to our customers.
As we continue to protect people protect the environment and protect our customers' investment in industrial equipment. These are all really supercritical things for our customers and also for us last but not least we're going to be hosting a number of one on one meetings and presenting at some conferences. This week Peter is going to be at the Baird Industrial conference in Chicago and then.
And the next week I'm going to be at the three part advisors ideas conference in Dallas as well as participating in the Craig Hallum growth Conference in New York City.
And that'll be a like I said next week and we look forward to seeing and meeting with many of you. There speaking with you throughout the day, if you ever want to get a hold of US no no doubt reach out and we look forward to speaking have a great day.
Thank you Dale.
Okay.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.