CECO Environmental Corp.

Good morning, and welcome to the Seco Environmental Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Matt Eckle, Chief Financial Officer. Please go ahead.

Thank you for joining us on the SECO Environmental Fourth Quarter and Year-End 2021 Earnings Call. On the call with me today is Todd Gleason, Chief Executive Officer, and myself, Matt Eckle, Chief Financial Officer. Before we begin, I'd like to note that we have provided a slide presentation to help guide our discussions. The call will be webcast along with our earnings presentation, which is on our website at secoenviro.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 fact 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. And with that, I'll turn the call over to Chief Executive Officer Todd Gleason. Todd?

Thanks, Matt, and good day, everyone. We're going to start with slide three of the presentation Matt mentioned to follow along with our prepared remarks. As we highlighted in this morning's earnings release, SECO had a strong finish to 2021. We previously forecasted in our third quarter earnings material that our growing backlog would start to show up in the financials and deliver solid revenue growth, both year over year and sequentially, and it is. With our continued strength in orders and strong backlog levels, we expect to maintain revenue growth year over year for the foreseeable future. No doubt there remains uncertainty and challenges in the global supply chain, overall inflationary pressures, and the continued labor shortage. However, we remain strategically focused on project execution, cost and change order management, and of course, taking price as appropriate. Down cash flow generation to finish the year was an additional highlight in the quarter. Matt will provide additional details around our cash generation and our utilization of cash to repurchase SECO stock and pay down debt. Turning to slide number four, let's review fourth quarter financials in more detail. Orders of $91 million grew 17% year over year. This marks the fourth consecutive quarter with orders right around $90 million. We will discuss how balanced our orders growth was across the majority of our platforms in just a minute. Q4 sales of $94 million were up double digits, both sequentially and year over year. We forecasted during the third quarter earnings report that we expected our backlog to produce revenues in the range of 85 to $100 million, which I am proud to report we delivered in Q4. Importantly, we continue to sustain near record level backlogs and expect that will deliver continued year over year revenue growth. Gross margins of 30.5% were significantly better than the third quarter of 2021. We remain focused on increasing gross margins even further, but remain cautious given the challenges we are all facing with short-term costs around the supply chain, logistics, and other items outside of our control. The increase in revenue and gross margins helped to deliver over $9 million of EBITDA, an increase of approximately $5.6 million when compared to the third quarter of 2021. Cash flow... of $2.2 million was up significantly year over year, and we remain positive in our ability to continue to generate solid free cash flows throughout 2022. So overall, a great finish to 2021, solid improvement sequentially, and in good shape for growth as we move into 2022 and beyond. Please turn to slide number five. On the left side, we visually show a few snapshots from the third quarter 2021's earnings release and management presentation. In that release, we provided various comments on our outlook for growth. It is important that we say what we're going to do and deliver against what we say. We feel good that across the board, we delivered on our outlook with sales and EBITDA growth and good margins. SECO is committed to a steady portfolio transformation. one that includes investments in organic growth and programmatic M&A. By delivering organic growth, improved margins, and cash flow, we know we will have momentum for the transformation and continued support of our shareholders. We will revisit this topic later in today's presentation as we continue to provide updates on our commitments and our journey. Now, let's move to slide number six. As a company with a significant portion of revenue from long-cycle projects, It was critical we rebuild our backlog in 2021. That mission was certainly accomplished as full year orders were up almost 30% year over year. Because SECO's 2021 starting backlog was depressed as a result of the impacts from lower orders during the COVID-related depths of 2020, we could not overcome margin pressures and lower volumes to grow 2021 EBITDA. But we ended 2021 strong and are navigating the well-discussed challenges. We feel very good about our position as we enter 2022. Please turn to slide number seven. You can see why we are encouraged by the momentum we have built. For 2021, seven out of eight SECO platforms grew orders strong double digits. From the 54% industrial air platform orders growth through the 77% emissions management growth and several other platforms that generated over 50% orders growth as well, we truly have a very balanced growth profile. The one platform that did not grow year over year was our separation and filtration platform. Yet, we expect that platform to have a much stronger 2022 as their pipeline continued to build throughout the year and is poised for future growth. You can read the commentary associated with each platform on the slide. You will see we have a good pulse of the various markets and remain confident We will grow our Q1 2022 orders book overall. I'm going to hand it over to Matt now to run through more specifics on our financials, and then I will wrap up our call with some other observations and comments. Matt?

Thanks, Todd. Starting with slide nine in orders, we are pleased that all three segments grew year over year with sequential growth in both fluid handling and engineering systems. Sequentially, engineered systems grew 7% as we were awarded several wins for our water treatment and thermal acoustic solutions throughout the Middle East. Our fluid handling platform was up 33% versus Q3 as we saw a significant increase in quotes and bookings for our Dean pumps and Mefiag filters that serve the surging U.S. petrochemical and automotive markets, respectively. Both these markets are experiencing growth we haven't seen in years, and we are pleased with the CapEx investments made to improve our cost position and cut our lead times by 30% of that of the competition. It's showing up in the results. Industrial air was down sequentially against tough comparisons, but up 3% versus same quarter last year. Fourth quarter is seasonally this platform's slowest, given our customers' CapEx spend cycles. On the right, revenue moved up into the right in a big way, up 13% year-over-year and 70% sequentially, as we started to see the fruits of all our labors pay off. As Todd highlighted, our long-cycle, backlog-based business takes time to turn to revenue, but once it does, the flow-through to EBITDA is significant. Most of the sequential increase came from engineered systems, where approximately $10 million of revenue slipped out of Q3 and into Q4, as supply chain challenges with our subcontractors started to loosen. While inbound material receipts are still slow, customers are signing off on technical drawings quicker, which is allowing us to procure materials sooner, driving faster revenue recognition. This is a clear correlation between countries opening up as COVID cases subside and customers and our subcontractors getting back to work. For our long cycle platforms, this is welcome news. We are all pleased to see our long cycle project businesses growing revenue. but I'm even more pleased with how our short cycle and recurring revenue businesses are performing. To transform Seco, improve the economics of the company, and garner the appropriate valuation, we must grow our higher margin, more repeatable platforms organically and inorganically. In the quarter, we reported 21 million of short cycle sales up 8% sequentially and an astounding 24% year over year. For the full year, we produced 76 million of short-cycle product sales, up 6% year-over-year, which includes standard equipment like industrial dust collectors, dampers, and pumps, as well as aftermarket parts and services. Just in the past week, we closed on our announced acquisition of GRC, a leader in flow control products such as duct-bill valves and rubber expansion joints. We are excited to add GRC to our portfolio for their superior products, GRC also adds fantastic economics for SECO shareholders and will contribute approximately 12 million more of short cycle sales to SECO in 2022. This increases our short cycle mix to approximately 100 million in predictable, more recurring revenues. We continue to focus on M&A opportunities for the future, concentrated on product businesses with stronger aftermarket and higher margins. Concluding my first slide, I will double down what I stated in our last earnings call. we expect double-digit top-line growth in 2022. Slide 10 shows our backlog is at 214 million, up 30 million year-over-year, and slightly down sequentially on FX. Our book-to-bill ratio was strong in 2021 at 1.1 turns, and our 12-month pipeline shows no signs of slowing down at 2 billion and growing. While today's focus is Q4 results, I would also highlight that we have a very good visibility to the first two months of Q1. We would suggest orders have rarely been this strong at SECO through the first two months of the quarter. We are excited to provide more of an update on our Q1 earnings release in May. On slide 11, we saw a good bounce back in Q4 across all metrics, which improved sequentially on the heels of a strong sales performance. Gross margins rebounded to 30.5%, non-GAAP OI was at 7.6 million, and adjusted EBITDA crested 9 million and nearly 10%. In Q3, I described the quarter's underperformance in thirds, a third on prior year pricing, a third on inflation, and a third on execution. While 30.5% gross margin is up 200 basis points from last quarter, we still have work to do to get back to historical levels or better. I'll comment on each third briefly. Older backlog pricing, with some projects booked in 2020, for example, remains a headwind and will linger through 2022. Larger projects, often turn from backlog to revenue over 9 to 18 months, and certain international projects sometimes extend to over two years. It will take some time for old jobs to roll off and new, higher-priced jobs to roll in. We are confident in our pricing strategy and win rates across key markets, where there is inelastic demand for our engineered systems like FCC Cyclone and DNOC solutions. In some markets, such as power generation, the broader competition is more aggressive given the limited number of pursuits. Conversely, our short cycle businesses have introduced multiple successful price increases in 2021, and we are executing additional price actions in 2022. Yet another reason we are allocating capital to M&A and short cycle businesses. Regarding inflation, it remains a challenge that we are regularly tracking and managing. Steel and metal pricing softened a bit towards the end of 2021, but started to climb again this year. This will be a continued focus of our platforms and project management teams. We've done a nice job getting change orders on a high percentage of projects impacted, and we monitor every quote that goes to the customers, ensuring we've documented the steel price component of our bid in case it fluctuates. And we want to applaud leaders like Eric Lindeman and Kim Ellsworth in the project management and procurement organizations, as they are two great examples of leaders at Seco creatively navigating this inflationary environment. You personally are making a difference for Seco. Thank you. Beyond materials, we're seeing inflation in our labor costs as well. Retaining talent across project managers, sales reps, and all the functional areas is extremely important. I think every company has seen increased competition for talent, especially those roles that are highly fungible and end market agnostic. Ironically, retaining recruiters has been one of the toughest positions to keep. And most companies are learning what it means to operate in a post-COVID environment with virtual employees becoming more the norm. At Seco, people are our number one asset. We are introducing higher merit increases, more hybrid work environments, and lots of new training and development opportunities, along with greater benefits and more equity ownership to better align our entire team with shareholders. We have some great programs in place to reward, retain, and recruit talent, and we'll look to add even more benefits features in 2022. The final third was execution and supply chain. I'm very pleased with our execution in Q4. We completed key FMEA studies, dove into root causes, and remediate critical issues. Ramesh, our COO, also commissioned a third-party-led enterprise-wide project management assessment to identify productivity opportunities. Lastly, we hired Edward LaCompte, our first-ever continuous improvement leader, specifically focused on lean operations. Supply chain challenges associated with logistics, subcontractor, and material availability still persist, but we've course-corrected many of the areas we can control. The effect of these outcomes plus volume shows up in the non-GAAP operating income and adjusted EBITDA graphs. Both improved nearly 3x sequentially. Great results. Year over year, we were down slightly because of challenging comparisons. Non-GAAP SG&A at $20 million was flat sequentially, but up $3 million versus the same period in the prior year on headcount addbacks, merit inflation, incentive comp, and one-time COVID savings in 2020 that didn't repeat in 2021. To summarize our EBITDA, I'm pleased and we expect to see a continuation of EBITDA expansion in full year 2022. Slide 12 summarizes the fourth quarter in total. A few housekeeping items. First, GAAP OI was up $1.6 million year-over-year as expenses such as amortization, earn-out, restructuring, and M&A were lower in 2021. Non-GAAP OI, on the other hand, excluded these non-recurring items and was down $1.2 million year-over-year, mostly on volume and gross margin. Additionally, non-GAAP EPS was $0.10 in the quarter, down $0.06 year over year, attributed to a loss of $0.02 on operations, and down $0.04 on certain foreign projects denominated in euros and rupees that were negatively weakened against the dollar. Slide 13 is a full year view of 2021's performance. Much of this is territory we've already covered. What I'd point investors to is the upper right and the bottom right side of the data table. Orders up $81 million. and free cash flow up $11 million year-over-year. These are great precursors to SECO in 2022. Everything in between outlines that 2021 was SECO's COVID year. In my opinion, we are well-positioned to provide additional growth in 2022. We here at Team SECO are only looking up and to the right. Slide 14. Trade working capital was largely benign in the quarter as WIP turned to ARD. AR aging is in a great place, and teams are working to improve on milestones. In the meantime, free cash flows remain choppy, but did manage to produce $2 million source of cash in the quarter. Lastly, on slide 15, our balance sheet is in the best shape it has ever been after several strategic actions in the quarter. We worked with our syndicate to amend and extend our 2019 credit facility, increasing flexibility for M&A. Thanks to SECO leaders Paul Gore, Jennifer Turner, and our syndicate for the partnership here. We concluded on our announced $5 million share buyback authorization program back in October 2021. And thanks to the team at Needham for executing this for us. Lastly, we paid down $1.5 million of debt in the quarter. We will evaluate future stock buyback programs as we believe in returning capital to our shareholders as part of our overall capital allocation strategy. However, we are currently holding our dry powder for a healthy pipeline at M&A that we believe generates greater total returns. A great example of this is last week's closing of the GRC acquisition. As mentioned, GRC is a flow control leader serving the industrial water markets. It's a solid bolt-on to our damper and expansion joint platform and great economics for the SECO shareholder. We are laser-focused on using our inexpensive cost of debt to make a creative acquisition of smaller to medium-sized industrial leaders with more short-cycle sales, higher margin profiles, and lower capital intensities. Our current M&A funnel is well over 200 million opportunities, and GRC is just one of several we expect to bring to closure in 2022. As we wrap 2021, I'm more excited about Seco's future than I have ever been before. The market demand is hot. Our balance sheet is healthy. We're growing in new adjacencies, and Seco's transformative journey is underway. Todd will elaborate more on what we see ahead. Todd?

Thanks, Matt. I agree. I am pleased with our 2021 results and excited for 2022 and beyond. Now let's go to slide number 17. On the left side is a summary of the general outlook we provided back in November of 2021. The concept, which is highlighted here, is that our average quarterly orders of $90 million would start to produce around $90 million of revenue in future quarters. And as we have been highlighting today, Fourth quarter 2021 reflected that level of sales. We also expected to return to gross margins in the greater than 30% range, which we also did in the fourth quarter. The balance of this slide reiterates that we continue to feel confident about this directional outlook. Certainly, we are aware there are quarterly puts and takes that relate to in-period costs, which do ebb and flow in any given quarter. Additionally, we acknowledge persistent challenges in supply chains and with short-term inflation. but we aim to offset many of these challenges with good cost management, M&A, and other strategic actions. We remain committed to growth and feel very confident in our ability to deliver. Turning to slide number 18, here we show some additional snapshots of several press releases Seco distributed already in Q1 of this year. To tie this slide back to the thematic reason for showing slide five earlier in this presentation, We are demonstrating traction on strategic areas we have discussed regarding Seco's transformation. We have publicly stated that when we were ready, we would start to action strategic accretive M&A. As Matt already covered, we announced and then completed the accretive acquisition of GRC. We have a robust pipeline of M&A targets and will continue to provide transparent updates on our progress. Another snapshot on this slide relates to a large geothermal energy project. We've previously highlighted our focus and internal investments to participate more actively in the energy transition. This term represents the array of sustainable energy initiatives and projects taking off all over the world. In Q1, we already publicly announced SECO's project win in this large geothermal project with engineered solutions from SECO's peerless branded portfolio. we are actively bidding and winning projects that relate to numerous other energy transitions. Given our diverse, highly engineered solutions, you can expect to hear about future hydrogen, carbon capture, and other biogas-related project wins and investments. It is an exciting time to have decades of experience solving complex engineering challenges in the energy markets. SECO's diverse leadership position is a real advantage. Now let's wrap up with slide 19. We made great progress in 2021. We are also glad it is in our rearview mirror. We enter 2022 with a stronger and more diverse backlog than we entered last year. And our pipeline of over $2 billion in sales opportunities remains robust. There are significant opportunities, big and small, that we are pursuing and already doing a great job of winning in 2022. As Matt mentioned, we are off to a very fast start, we feel. That solid backlog and our active pipeline gives us a lot of confidence we will deliver steady growth in 2022. That is our expectation. And adding some M&A activity will obviously add to our expected organic growth. We are very close to publishing our inaugural ESG report. We look forward to that announcement and sharing our ESG goals, objectives, targets, and commitments. Our first report will just be one step in a continual journey towards our commitment to sustainability. Zico is committed to steady transformation, investing to grow organically and move into more sustainable and emerging markets. And with our healthy balance sheet, we expect to be programmatic acquirers of accretive and strategic transactions. Before we open the line to questions, let me just share one last thought We are certainly troubled by the situation in Ukraine. While SICO does not have a direct exposure to material business in Ukraine or Russia, it has certainly a major impact to global markets. On a personal and leadership perspective, our thoughts are with the millions of people that are being displaced and under siege. We are evaluating ways SICO can lend support. We pray for a return to peace. Our hearts are certainly with the Ukrainian people. With that, we welcome your questions and we'll open up the lines. Operator?

We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touch tone phone. If you're using a speaker phone, please pick up your handset before pressing the key. To withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster.

The first question comes from Jim Rashudi with Needham & Company.

Please go ahead.

Thank you. Good morning. Congratulations, by the way, on the improved results, Q4. A couple of questions. First on GRC, I'm wondering if you could talk a little bit more about that business from the standpoint of how much customer overlap there might be potential opportunities that you see for for cross-selling and I wonder if you could also share with us what kind of backlog they have recognizing it sounds like they're more skewed toward short cycle business yeah thanks Jim again appreciate the comments on the quarter a couple comments and I'll hand it over to Matt he'll provide additional color as well so first of all

there's always some overlap in customers. But our big opportunity here, we think, is utilizing both channels, I suppose, but especially the Seco International channel and a lot of our larger projects as well to bring the GRC product line through our projects, our infrastructure projects. We've got a large and developed sales force in the Middle East and other parts of the world. They just haven't had a chance to to branch out internationally as aggressively. So we'll be able to leverage that. And they've got a really good, strong distribution themselves. So our ability to bring, whether it's our flow control products through expanding our distribution, they see projects we don't historically. Just really well-established in infrastructure water, which is an area that we've been investing. We'll continue to invest. So I think it's a really nice balance between the two. Obviously, we're a much larger organization, so we've got certain areas of scale and balance sheet strength to help also accelerate some investments. Matt, if you want to add anything to that. Two million to backlog, Jim. Thank you.

Got it. Thanks. And I wonder if you could talk a little bit about the revenues that you already alluded to that slipped from Q3 to Q4. How much of that Were you able to ship all of that? And to what extent have you seen additional slippage just in light of the ongoing supply chain issues that we're all hearing about and the material shortages?

Yeah, we're seeing, you know, it seems like every quarter we have projects that move around. So we mentioned in the third quarter we had approximately $10 million of revenue that just, you know, got pushed around, pushed out, of the third quarter, I would say we captured that and then we probably lost a few million from the fourth quarter. When I say lost, I mean just got pushed out as well. So it's choppy, Jim. We're still experiencing it in the first quarter. That doesn't mean that these projects are going away. We have a tremendous amount of confidence in our project teams. and the year, but every quarter has dynamics, right? Every quarter seems to have, you know, whether it's $5, $10 million worth of revenue. And when you're a project business, you have to wait not just for your products to come in in your supply chain, but then when we're ready to go, we have to wait for those customers, you know, and all of their other suppliers to have everything in. So there's a lot of variables at play. We really like the momentum we have in the marketplace, but it's choppy.

Got it. And I'll jump back in the queue. One final question, if I may, though, before I do. Nice improvement of gross margin. How should we be thinking about gross margins in the near term? Obviously, you're beginning to get some benefit, presumably, from some of the pricing actions you've taken and some of the other initiatives you have underway. Any way to think about gross margins?

Yeah, I think that's going to continue to be a little choppy too, just because, like you said, the market continues to throw new challenges at us in terms of cost increases, whether it's how much we're paying at the pump. We all saw what happened to nickel in just a very short period of time, so we have to adjust for that, work with our suppliers, work across our logistics. So I think we're in an environment right now where we're doing a nice job of getting price, It has to flow through our backlog, of course, which creates a little bit of an imbalance at times. So think of it as being flat. It could be slightly down a little bit if you want to think about where we're currently at. But again, our long-term aspirations and experience is that we'll get those gross margins back up as we work our way through the year. But it was a nice improvement sequentially, so we appreciate the comment.

Thanks a lot.

Our next question comes from Samir Joshi with HC Wainwright.

Please go ahead.

Yeah, good morning and thanks for taking my questions. Again, congratulations for the good progress. For the near term in 1Q, historically, it is sort of a low quarter of the year. And add to that that you had some spillage from QQ that you recognized in 4Q. Should we expect 1Q to be significantly lower to the 4Q numbers?

Yeah, I think your point around our first quarter, like a lot of companies' first quarters, are sometimes or have proven to be a little bit of a lower quarter. There's a bit of an increase in first quarter costs as we sort of reset the year from an SG&A. There's a lot more cools that happen in the first quarter as you start through the year. And again, like we just said, it's going to be a little choppy out there in terms of our ability to execute on all of our projects and the supply chain and inflation. We're working through these things, and we feel, like I said, great about 2022, but the first quarter will certainly reflect a trend that we've probably had historically, which is, you know, it's sequentially. If you go from the fourth quarter to the first quarter, we just have, you know, we have some pressures that every company, well, I should say every, but a lot of companies, and we certainly have, that just there's going to be a little bit more cost sequentially, but nothing that's different than probably a historic trend has proven.

Understood. And then just a quick question on QRC, the GRC, the acquisition. Is there in that business a sequential and year-over improvement that you have seen? Is there any granularity you can share on that front?

No sequential improvement that's expected. It is a pretty flat-based business every single quarter, no seasonality. really associated with it. Year over year, we are expecting growth out of that business. They're ending the year with a pretty decent backlog, and orders are strong, especially with the infrastructure bill coming through and spending happening in the water market.

Great. And then just one on the M&A front. You reiterated you're looking at small to mid-sized opportunities. Do you have any active discussions that may materialize in the next couple of quarters, or are these longer term, mid to longer term aspirations?

Yeah, you know, we're probably not going to give a huge description of what we're looking at in our pipeline. But other than to say, you know, we will be programmatic. We are looking at transactions that are accretive. from a margin perspective we expect. Give us more short cycle sales. Expand in the areas of industrial air, industrial water, and the energy transition. Those are our focus areas. We think that's where we already have a seat at the leadership table. We're going to continue to invest in our seat at that leadership table. All of the things we're looking at just also continue to bolster sort of our strong commitment to protecting people, protecting the environment, and protecting industrial equipment. So we're staying true to our swim lane, so to speak, on M&A. These are small to medium-sized deals at the moment just because we like that size of transaction for us. as we just kind of continue to shape our portfolio in the right direction in a steady fashion. We'll look at larger transactions, but that's really where we're looking right now. Got it.

Thanks. I'll take my other questions also. Thanks.

Again, if you'd like to ask a question, please press star then 1.

Our next question comes from Bill Desolam with Titan Capital. Please go ahead.

Thank you. Let's begin, if we could, with the strength of January and February orders this year. Would you please provide a little more detail behind that?

Broad-based, Bill. Good to speak with you. Thanks for the question. This is Todd. Pretty balanced across most of our platforms, as we've demonstrated throughout 2021. So Q1 maintains that. We've been talking about our pipeline stayed strong recently. So, I would say two or three things. Balanced across most of our platforms, starting to see in the quarter some larger energy and energy transition jobs that we think are proof of the patience that we've had to stay focused in certain areas, starting to really show up in our order bookings, and we would suggest that The first two months of the first quarter is as strong as we've seen in the first two months of a quarter in a number of years from a bookings perspective.

Great. Thank you. And then what more would you like to add relative to GRC and that acquisition and what it brings to you all in the near term and longer term?

I think it's a great growth opportunity. They are well positioned in the market. We feel that their size and their position in the market is something that we can both work and take advantage of in the sense that there's a lot of opportunities there for both of us to partner across projects. But we think that it's a business that could be 2X its size and with the right investment and the right focus. And their leadership team is fantastic. They really understand their operations, their markets, the opportunities and the challenges. So whenever you make an acquisition and you bring in strong leadership, that's a double plus.

Great. Thank you. Thanks, Bill.

Our next question is a follow-up from Samir Joshi with H.C. Wainwright, please go ahead.

Yeah, thanks, and sorry for missing this question earlier, but just a quick question on the short cycle margins and the sales cycle. Can you... I know the longer cycles are 9 to 18 months and maybe upwards of 2 years, but short cycles, should we consider it 2 to 3 months or less than 6 months, or should we look at it? And then you also mentioned margins will be... Because you can price it not at historical levels, but at current levels. The margins are better, but how much better if you can quantify?

We quantify short-cycle sales in less than four months. It's typically right around one and a half to two. So pumps, filters, aftermarket services, guys with a wrench going out and turning something, we bill them. As far as pricing goes and how we measure it, we've had multiple price... increases where we've sent letters to customers and we've seen anywhere from the range of five to seven percent when you actually look at realized probably around three to four percent so it's been very strong on the short cycle acceptance of price increases got it okay good thanks this concludes our question and answer session

I would now like to turn the conference back over to Todd Gleason for any closing remarks.

Thanks, Sarah, and thanks to everyone for the questions, participation this morning. To our team at SECO, again, as always, we appreciate your focus and leadership to navigate a lot of the choppiness and challenges that continue to be in the marketplace. We've got a great organization of dedicated professionals here to serve our customers and our communities and each other. We look forward to continuing to share our progress as we enter 2022. Again, like Matt and I have articulated, the pipeline remains really strong. That coupled with now us starting to be a little bit more active M&A, we think just continues to support a good growth trajectory for us for the short, medium, and hopefully longer term as well. So with that, we'll end today, and we look forward to speaking with many of you throughout the next few days. Thanks a lot.

The conference is now concluded. Thank you for attending today's presentation.

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