CECO Environmental Corp.

Good morning, and welcome to the SECO Environmental Third Quarter 2024 Earnings Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star 1-1 on your touchtone phone. To withdraw your question, please press star 1-1 again. Please note, this event is being recorded. I would now like to turn the conference over to Stephen Hooser, Investor Relations. Please go ahead.

Thank you, Liz, and thank you for joining us on the SECO Environmental Third Quarter 2024 Earnings Call. On the call with me today is Todd Gleason, Chief Executive Officer, and Peter Johanson, Chief Financial and Strategy Officer. Before we begin, I'd like to note that we have provided a slide presentation to help guide our discussion. This call is being webcast along with our earnings presentation, which is on our website at secoinviro.com. The presentation materials can be accessed through the investor relations section of the site. I'd also like to caution investors regarding our 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 included on Form 10-Q for the quarter ended September 30, 2024. Except to the extent required by applicable securities laws, we undertake no obligation to update any public, any update or publicly revise any of the forward-looking statements that are made 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 provided the comparable GAAP and non-GAAP numbers in today's press release and provided non-GAAP reconciliations in 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. Let's dive into our material as we have a number of items to cover. Please turn to slide number three, which summarizes today's earnings report. As the slide highlights, There are four key takeaways from today's report. We will spend more time on each of these items throughout our earnings deck, but to summarize, first, we had softer than expected third quarter revenues and associated income as we could not overcome customer-driven delays in a handful of larger projects. Although the delays are frustrating, we expect these projects to begin delivering in Q4 and into the first half of 2025. So, We understand the cause on our third quarter shortfall and we are confident we will deliver these delayed results in upcoming quarters. Second, while our Q3 earnings fell short, new orders of over $160 million in the quarter were a record for a Q3 and essentially tied our largest quarter ever. Our bookings remained balanced across small, medium, and large orders. and we booked a very large energy transition project related to a full emission management solution for the gas power industry. These large energy transition projects have been in our sales pipeline for the entire year, so it was great to see these orders start to convert. Additionally, we have similar opportunities in our pipeline and have already secured another large project this month. In fact, we expect October to likely be a record month with over $100 million in orders, setting us up for a fantastic finish for the year. As a result of these record bookings, our backlog reached a new record level of $438 million. This is the first time we eclipsed the $400 million level in company history. With our Q4 bookings and the significant pipeline of global opportunities across industrial air, water, and energy, we expect to continue to set new record backlog levels as we progress forward. Moving to the third item, today we announced two very exciting transactions as part of our continued programmatic M&A process. Each of these transactions will expand our portfolio and unlock new industrial and geographic markets for robust growth. The first transaction is the acquisition of WK Group, which we closed in early October. WK is an internationally based industrial air business that expands our global reach and leadership position in solving customers' critical exhaust air and waste stream treatment challenges. The company is headquartered in Germany and also has a very strong Asia Pacific presence led out of Singapore. For further details on WK, please see slide number 17 in the appendix. We welcome WK to the SECO organization. Also this morning, we announced a transaction to acquire Profire Energy, our largest acquisition in my tenure with SECO. And I look forward to describing the deal and the company over the next few slides. And to finish out this slide, we will providing you an updated outlook for 2024 and introducing full year 2025 guidance. In summary, while we were never pleased to fall short of expectations, we own it. We continue to execute at a very high level on what we can control. Building a robust sales pipeline, booking record orders, growing our record backlog, expanding operating margins, and executing our programmatic M&A in support of our portfolio transformation. These are all key elements of delivering sustained long-term value creation. Please turn to slide number four. As today's press release highlighted, and I have already mentioned, This morning we announced the transaction to acquire Profire Energy, a NASDAQ listed publicly traded company based in the Salt Lake City area and with operations in Edmonton and various cities in the U.S. Let me walk through this slide to summarize the strategic alignment and long-term value creation opportunity. This transaction is expected to close in early 2025 and the company currently estimates funding net proceeds of approximately $108 million at closing. Pre-Synergies, the deal has an estimated value of approximately nine times EBITDA to enterprise value. After synergies, the deal is expected to be valued at closer to 7 to 7.5 times EBITDA after the elimination of significant company, excuse me, significant public company costs, deployment of operational best practice initiatives, and realization of achievable commercial opportunities. Profire has a strong niche leadership position in combustion management and controls for largely North America customers and predominantly energy markets. This delivers a financial profile consistent with their leadership position. In the past few years, the Profire team has made very effective investments and strategic shifts in sales channels to further expand their revenues in broader, diversified industrial markets, which currently represents approximately 15% of their sales. With our international resources, we expect to accelerate geographic expansion. and we intend to utilize SECO's leadership positions in various industrial air and water markets to rapidly grow Profire's industrial mix. This business currently operates in a manner very similar to our current platform operating model, which will ease the integration and capture the benefits of the transaction. As the takeaway on the slide highlights, we are adding talent. a tremendous combustion management knowledge base, a world-class R&D facility, market leadership, and a strong financial profile. And with our track record of acquiring good growth businesses and investing in their continued success, we anticipate even more growth in Profire for years to come. Can't wait to create more value together. Please turn to slide number five. This is our standard acquisition snapshot slide. I won't read all the information, but you can see we provide more insights on Profire's products and solutions as well as their end markets. We also capture some of their key locations and some detail around their resources. I would highlight that Profire has an impressive installed base that is approaching 100,000 systems, many of which are starting to enter a replacement cycle. This installed base is a significant opportunity and we look forward to ensuring we maximize the full potential by utilizing their current field services team and adding resources as growth supports. As I said, this transaction is expected to close in early 2025 and our teams will remain focused on delivering for our respective customers. With that, I'll now hand it over to Peter to walk us through additional detail regarding financial performance for the third quarter. Peter? Thank you, Todd.