CECO Environmental Corp.

Good morning and welcome to the Seco Environmental Corporation first quarter 2022 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. 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 Stephen Hoosier, Investor Relations. Please go ahead.

Thank you for joining us on the SECO Environmental First Quarter 2022 Earnings Call. On the call with me today is Todd Gleason, Chief Executive Officer, and Matt Echol, 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 that slide presentation, which is on our website at secoenviro.com. Presentation materials can be accessed through the investor relations section of the website. I'd also like to caution investors regarding forward-looking statements. Any statements made in today's presentation that are not based on historical facts are forward-looking statements. Such statements are based on certain estimates and expectations and are subject to a number of risks and uncertainties. Actual future results may differ materially from those expressed or implied by the forward-looking statements. We encourage you to read the risks described in our SEC filings, including on Form 10-K for the year ended December 31st, 2021. Except to the extent required by applicable securities laws, we undertake no obligation to update or publicly revise any of the forward-looking statements that we make here today. whether as a result of new information, future events, or otherwise. Today's presentation will also include references to certain non-GAAP financial measures. We've reconciled the comparable GAAP and non-GAAP numbers in today's press release, as well as the supplemental tables in the back of the slide deck. With that, I'd now like to turn the call over to Chief Executive Officer Todd Gleason. Todd?

Thanks, Stephen, and good day, everyone. We're going to start with slide number three of the presentation that Stephen mentioned to follow along with our prepared remarks. We look forward to discussing our first quarter 2022 results in detail, as well as reviewing our full year outlook, which was highlighted for the first time in our earnings release. We will also discuss this morning's announced $20 million share repurchase program and our recent acquisition of Compass Water Solutions, which we closed last week. We issued separate press releases regarding both of these earlier today, and we encourage you to read those releases as they do provide additional information. Let's talk about the first quarter. We are off to a great start in 2022, headlined by a few records. Let's start with our fantastic orders growth, which came in at $161 million, up 75% when compared to the first quarter of 2021. And don't forget, the first quarter of 2021 was up over 20% when compared to the first quarter of 2020. And that quarter in 2020 was only modestly impacted by COVID, so it wasn't a weak quarter. Now, back to the Q1 2022 record orders of $161 million. That level is over $40 million higher than our previous record quarterly bookings. Additionally, our orders growth came in broadly across our portfolio. Matt will cover our backlog levels in detail, but the highlight is that Q1 orders created the largest backlog in company history as well. We are well positioned for future revenue growth as a result. Speaking of revenues, first quarter 2022 revenues were $92 million, up 29% year over year. We have been signaling that our revenue would start to grow in 2022, given we had strong double-digit orders growth throughout each quarter of 2021. We are pleased to deliver such strong organic growth as we kick off 2022 and are confident in our ability to drive this momentum throughout the year and beyond. Gross margins were just under 30%. We have seen new project orders coming in at higher margins than what we produced in the first quarter, so this will help us steadily improve gross margins. Of course, many companies have experienced declines in gross margins given the challenges in global supply chains, logistics, and inflation. We have strategically focused on this and are getting price across the board, especially in our shorter cycle businesses. So again, gross margins throughout our backlog, including recent orders, are at or above current gross margin levels. We will continue to focus on protecting margins by strategically focusing on driving price, performance, productivity, and growth. Now, regarding EBITDA, we are very pleased we produced $9.5 million in the first quarter of 2022. EBITDA was up over 50% versus the same period a year ago. So, a great, great start to 2022. Orders, backlog, revenue, EBITDA, all very strong. As I mentioned earlier and you saw in our earnings release, we will be providing details on our full year 2022 outlook. Historically, we have provided certain frameworks for how investors can think about our yearly performance, but starting this quarter and moving forward, we felt it was important to provide a full year guidance range. The last section on this slide highlights capital allocations. which notes the actions we are taking to deploy capital across accretive M&A transactions and our just announced share repurchase program. Let's talk about each, so please turn to slide number four. Today we announced a $20 million share repurchase program. The authorization goes into effect immediately and is good for three years or until we complete the approved $20 million level. This is the largest share repurchase authorization in SECO's history, and it builds on the $5 million stock buyback we did last year. It reflects the board's confidence that we will continue to execute on organic growth, drive higher levels of profitability, and deliver outstanding free cash flow. We hope investors appreciate that we see the same opportunity in our current share price and that this multi-year authorization gives management the opportunity to remain proactive in this area. Now on the right side of the slide, we highlight the acquisition of Compass Water Solutions. We identified Compass Water Solutions a number of months ago and began to evaluate their niche leadership position in the industrial water treatment market, which we believe is a mid to high single digit growth market. The business fits very well within our growing industrial water portfolio, and we are pleased that we closed the transaction last week. Compass produced $11 million in sales and double-digit EBITDA margins in 2021. And we believe we can accelerate growth by utilizing SECO's existing global footprint and adding our strategic resources. Compass expands our addressable water market by almost a quarter of a billion dollars and adds our third industrial water business to SECO in less than a year. We are pleased to welcome the great Compass employees and leadership team to SECO. 2022 represents a year in which we will pick up the pace a bit with respect to strategic acquisitions. As I mentioned, we've already closed multiple transactions. While Seco has a long history of making acquisitions, we only made a few transactions over the past few years as we wanted to navigate the challenges associated with COVID. The acquisition of EIS in 2020 has been a home run with significant sales growth and the maximization of their earn out associated with driving higher income. We aim to deliver exceptional returns on our acquisitions and believe we have a nice playbook to drive operational excellence. We have also maintained very consistent debt levels and balance sheet health over the past few years, despite the acquisitions of EIS, GRC, as well as share repurchases last year. And we intend to maintain appropriate debt levels. I will now hand it over to Matt and he will walk you through more detail on our first quarter 2022 results.