EX-99.2 3 d924797dex992.htm EX-99.2 EX-99.2
Q1 2015 Financial Results Conference Call
May 7, 2015
A global industrial technology company focused on
environmental, energy, fluid handling industries
Exhibit 99.2


Non-GAAP Financial Information
CECO is providing the non-GAAP historical financial measures in this presentation, as the Company believes that these figures are helpful in allowing
individuals to better assess the ongoing nature of CECO’s core operations. A "non-GAAP financial measure" is a numerical measure of a company's
historical financial performance that excludes amounts that are included in the most directly comparable measure calculated and presented in the
GAAP statement of operations.
Non-GAAP gross margin, non-GAAP operating income, non-GAAP net income, non-GAAP adjusted EBITDA, non-GAAP gross profit margin, non-
GAAP
operating
margin,
non-GAAP
earnings
per
basic
and
diluted
share,
as
we
present
them
in
the
financial
data
included
in
this
presentation,
have
been adjusted to exclude the effects of expenses related to property, plant, and equipment valuation adjustments, acquisition and integration expense
activities including retention, legal, accounting, banking, amortization and earnout expenses, the impact of foreign currency remeasurement and the
associated tax benefit of these charges. Management believes that these items are not necessarily indicative of the Company’s ongoing operations
and their exclusion provides individuals with additional information to compare the Company's results over multiple periods.  Additionally, management
utilizes
this
information
to
evaluate
its
ongoing
financial
performance.
Our
financial
statements
may
continue
to
be
affected
by
items
similar
to
those
excluded in the non-GAAP adjustments described above, and exclusion of these items from our non-GAAP financial measures should not be construed
as an inference that all such costs are unusual or infrequent.
Non-GAAP gross margin, non-GAAP operating income, non-GAAP net income, non-GAAP adjusted EBITDA, non-GAAP gross profit margin, non-
GAAP
operating
margin,
and
non-GAAP
earnings
per
basic
and
diluted
shares
are
not
calculated
in
accordance
with
GAAP,
and
should
be
considered
supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Non-GAAP financial measures
have limitations in that they do not reflect all of the costs associated with the operations of our business as determined in accordance with GAAP. As a
result, you should not consider these measures in isolation or as a substitute for analysis of CECO’s results as reported under GAAP.
In accordance with the requirements of Regulation G issued by the Securities and Exchange Commission, non-GAAP gross margin, non-GAAP
operating income, non-GAAP net income, non-GAAP adjusted EBITDA, non-GAAP gross profit margin, non-GAAP operating margin, and non-GAAP
earnings per basic and diluted share stated in the tables above are reconciled to the most directly comparable GAAP financial measures. Free cash
flow
has
limitations
due
to
the
fact
that
it
does
not
represent
the
residual
cash
flow
available
for
discretionary
expenditures,
since
it
does
not
take
into
account debt service requirements or other non-discretionary expenditures that are not deducted from the measure.  Adjusted EBITDA and Free Cash
Flow are not calculated in accordance with GAAP, and should be considered supplemental to, and not as a substitute for, or superior to, financial
measures calculated in accordance with GAAP  Additionally, CECO cautions investors that the non-GAAP financial measures used by the Company
may not be comparable to similarly titled measures of other companies.
Safe Harbor Statement
2


Forward-looking Statements
Any statements contained in this presentation other than statements of historical fact, including statements about management’s beliefs
and expectations, are forward-looking statements and should be evaluated as such. These statements are made on the basis of
management’s
views
and
assumptions
regarding
future
events
and
business
performance.
Words
such
as
“estimate,”
“believe,”
“anticipate,”
“expect,”
“intend,”
“plan,”
“target,”
“project,”
“should,”
“may,”
“will”
and similar expressions are intended to identify forward-
looking statements. Forward-looking statements (including oral representations) involve risks and uncertainties that may cause actual
results to differ materially from any future results, performance or achievements expressed or implied by such statements. These
risks
and uncertainties include, but are not limited to: our ability to successfully complete the acquisition of PMFG; our ability to successfully
integrate acquired businesses and realize the synergies from acquisitions, including PMFG, as well as a number of factors related to our
business including economic and financial market conditions generally and economic conditions in CECO’s service areas; dependence
on
fixed
price
contracts
and
the
risks
associated
therewith,
including
actual
costs
exceeding
estimates
and
method
of
accounting
for
contract revenue; fluctuations in operating results from period to period due to seasonality of the business; the effect of growth on
CECO’s infrastructure, resources, and existing sales; the ability to expand operations in both new and existing markets; the potential for
contract delay or cancellation; changes in or developments with respect to any litigation or investigation; the potential for fluctuations in
prices for manufactured components and raw materials; the substantial amount of debt incurred in connection with our recent
acquisitions and our ability to repay or refinance it or incur additional debt in the future; the impact of federal, state or local government
regulations; economic and political conditions generally; and the effect of competition in the product recovery, air pollution control and
fluid handling and filtration industries. These and other risks and uncertainties are discussed in more detail in CECO’s filings with the
Securities and Exchange Commission, including our reports on Form 10-K and Form 10-Q. Many of these risks are beyond
management’s ability to control or predict. Should one or more of these risks or uncertainties materialize, or should the assumptions
prove incorrect, actual results may vary in material aspects from those currently anticipated. Investors are cautioned not to place undue
reliance on such forward-looking statements as they speak only to our views as of the date the statement is made. All forward-looking
statements attributable to CECO or persons acting on behalf of CECO are expressly qualified in their entirety by the cautionary
statements and risk factors contained in this presentation and CECO’s respective filings with the Securities and Exchange Commission.
Furthermore, forward-looking statements speak only as of the date they are made. Except as required under the federal securities laws
or the rules and regulations of the Securities and Exchange Commission, CECO undertakes no obligation to update or review any
forward-looking statements, whether as a result of new information, future events or otherwise.
Safe Harbor Statement
3


Important Information for Investors and Stockholders
This communication does not constitute an offer to sell or the solicitation of an offer to buy securities or a solicitation of any vote or
approval.
This
communication
is
not
a
substitute
for
the
prospectus/proxy
statement
that
CECO
and
PMFG
will
file
with
the
SEC.
Investors
in
CECO
or
PMFG
are
urged
to
read
the
prospectus/proxy
statement,
which
will
contain
important
information,
including
detailed risk factors, when it becomes available. The prospectus/proxy statement and other documents that will be filed by CECO and
PMFG with the SEC will be available free of charge at the SEC’s website, www.sec.gov, or by directing a request when such a filing is
made to (1) CECO Environmental Corp., by mail at 4625 Red Bank Road Suite 200, Cincinnati, Ohio 45227, Attention: Investor
Relations, by telephone at 800-333-5475 or by going to CECO’s Investor page on its corporate website at www.cecoenviro.com; or (2)
PMFG, Inc. by mail at 14651 North Dallas Parkway Suite 500, Dallas, Texas 75254, Attention:
Investor Relations, by telephone at 877-
879-7634, or by going to PMFG, Inc.’s Investors page on its corporate website at www.pmfginc.com. A final prospectus/proxy statement
will be mailed to CECO’s stockholders and shareholders of PMFG.
Safe Harbor Statement
4
Proxy Solicitation
CECO and PMFG, and certain of their respective directors, executive officers and other members of management and employees may
be deemed participants in the solicitation of proxies in connection with the proposed transactions. Information about the directors and
executive officers of CECO is set forth in the proxy statement for CECO’s 2015 annual meeting of stockholders and CECO’s 10-K for the
year
ended
December
31,
2014.
Information
about
the
directors
and
executive
officers
of
PMFG
is
set
forth
in
the
proxy
statement
for
PMFG’s 2014 annual meeting of shareholders and PMFG’s Form 10-K for the year ended June 28, 2014. Investors may obtain
additional information regarding the interests of such participants in the proposed transactions by reading the prospectus/proxy
statement for such proposed transactions when it becomes available.


Jeff Lang
President and Chief Executive Officer
5


6
Revenue
Revenue of $81 million, up 41.6% year-over-year
Revenue on an organic basis is up 8.6% vs. 1Q14 using constant FX
Bookings / Backlog
1Q15 bookings of $93.9 million up 48% year-over-year
Organic bookings up 9.3% in Q1, $69.5 million vs. $63.6 million in prior
year
Record
backlog
of
$153.0
million
vs.
$140.1
million
at
year
end,
up
9.2%
EPS
GAAP EPS for 1Q15 of $0.01 compared to $0.12 in 1Q14
Non-GAAP EPS for 1Q15 of $0.21 vs. $0.19 in 1Q14
1Q15 Quarterly Financial Highlights


1Q15 Quarterly Financial Highlights
7
Non-GAAP Gross Margin
Gross margin of 26% compared to 35% in prior year, primarily
attributable to:
Expected shift in mix and 2014 acquisitions which have reshaped our gross profit
The large strategic energy job
Underperformance of Emtrol and Effox in Q1
Non-GAAP Operating Margin
The gross margin decrease adversely impacted operating margins,
However, SG&A declined as a percentage of sales to 17% from a little
over 20% last year, offsetting a portion of the gross profit decline
As such, operating margins decreased 520 bps to 9.3% over last year’s
14.5%
Adjusted EBITDA
Adjusted
EBITDA
of
$8.6
million,
down
from
$9.4
million
in
prior
year


Business Conditions & Strategic Review
8
Overall end markets are unchanged;  we are executing better on our Sales
Excellence and                   
initiatives.
Environmental segment continues to gain momentum
Energy segment –
global natural gas power generation business is up. 
Solid fuel is picking up globally but soft domestically; we are bolstering with
after-market strategies 
Fluid Handling and Filtration is on track for a solid 2015
Integration of Zhongli and Emtrol are ahead of plan
Aftermarket sales continues to gain momentum
Acquisition of PMFG a significant strategic event


9
Strong strategic fit
1.
Key step towards becoming market leader, including natural gas value chain
3.
Enhances global footprint, particularly in China and the Middle East
5.
4.
Provides access to attractive end markets to drive long-term growth
6.
Brings a leading portfolio of highly engineered product offerings
8.
Poised to benefit from a balanced portfolio and diverse end markets
7.
Grows aftermarket & recurring revenue opportunity
2.
Poised to achieve significant sales and cost synergies
Announcement of Proposed Acquisition of PMFG, Inc. -
Key Transaction Benefits & Strategic Rationale


10
(1)
Pro forma for the full year impact of the Emtrol, Zhongli, HEE, and SAT acquisitions.
(2)
Includes $15M of synergies that are expected to be fully-realized in 2017.
(3)
See
Appendix
for
reconciliation
for
Adjusted
EBITDA
and
Adjusted
EBITDA
with
synergies
to
net
income 
Illustrative 2014 Revenues & EBITDA Bridge
($ in millions)
Gross Margin (%)
Gross Profit
Revenues
Adj. EBITDA (w/ Syn.)
(3)
SG&A
SG&A (%)
Adj. EBITDA
(3)
30.0%
28.9%
29.6%
$98.4
$45.7
$144.1
$327.9
$158.1
$486.0
$60.0
(2)
$109.5
$58.0
$51.5
17.7%
32.6%
22.5%
$47.1
($2.1)
$45.0
Pro Forma
(12/31/2014)
(12/31/2014)
Standalone
(1)


Ed Prajzner
Chief Financial Officer
11


12
Record revenue of $81.0 million, up 42% y/y and 6% sequentially
2014 acquisitions added approximately $20.5 y/y
On a constant currency basis, organic revenue grew 8.6%
($ in millions)
1Q15 Quarterly Financial Highlights
Revenue
$34.4
$44.4
$49.8
$68.7
$57.2
$66.6
$63.3
$76.1
$81.0
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15


Backlog
($ in millions)
13
1Q15 Quarterly Financial Highlights
Bookings
Solid 1Q15 backlog of $153.0 million, up 9.2% from year end
Strong 1Q15 bookings of $93.9 million, up 9.3% organically
$75.8
$77.9
$100.4
$98.5
$104.9
$96.0
$106.2
$140.1
$153.0
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
$37.6
$46.5
$48.0
$66.8
$63.6
$57.7
$69.9
$63.7
$93.9
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15


14
1Q15 Financial Highlights
Non-GAAP Gross Margin
Non-GAAP gross margin of 26.2% due to expected mix changes and
acquisitions
Operating margin of 9.3%, down 520 bps y/y and down 160 bps q/q
Good SG&A control
Non-GAAP Operating Margin
32.6%
32.2%
30.1%
32.4%
34.8%
32.3%
33.6%
29.8%
26.2%
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
13.4%
13.9%
11.4%
13.6%
14.5%
14.9%
12.9%
10.9%
9.3%
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15


15
Adjusted EBITDA
Adjusted EBITDA  of $8.6 million vs. $9.4 million in the prior year
Non-GAAP EPS of $0.21, up from $0.19 in 1Q14
We have consistently excluded FX re-measurement in 2014 and 2013
Non-GAAP EPS
($ in millions)
1Q15 Quarterly Financial Highlights
$5.0
$6.7
$6.4
$9.7
$9.4
$11.0
$9.4
$8.9
$8.6
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
$0.18
$0.30
$0.24
$0.23
$0.19
$0.25
$0.25
$0.22
$0.21
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
See supplemental slide for adjusted EBITDA reconciliation and important disclosures regarding CECO’s use of adjusted EBITDA.
Note:


16
Environmental Segment
Revenue
Revenue of $41.7 million was up 56% y/y
Bookings of $51.2 million in 1Q15, up 66% y/y with >15%
due to organic
The OneCECO systems approach is gaining traction with creating
customer value
Aftermarket continues to gain momentum to bolster our P&L
Overall a solid quarter in our Environmental segment
Bookings
($ in millions)
First Quarter Results
$26.7
$32.9
$27.7
$40.3
$41.7
1Q14
2Q14
3Q14
4Q14
1Q15
$30.9
$26.4
$24.6
$33.3
$51.2
1Q14
2Q14
3Q14
4Q14
1Q15


17
Revenue
Revenue of $24.3 million was up 59% y/y
Bookings of $26.5 million in 1Q15, up 81.5% sequentially
Aftermarket and retrofit opportunities continue to grow
Bookings
Energy Segment
($ in millions)
First Quarter Results
$15.3
$16.8
$18.0
$20.2
$24.3
1Q14
2Q14
3Q14
4Q14
1Q15
$17.8
$14.8
$28.4
$14.6
$26.5
1Q14
2Q14
3Q14
4Q14
1Q15


18
Revenue
Revenue of $15.2 million, down 4.4% sequentially
Bookings of $16.2 million, up 2.5% sequentially
Margin expansion and operational excellence continuing on plan
Added strategic Sales leadership resources during Q1
Bookings
Fluid Handling & Filtration Segment
($ in millions)
First Quarter Results
$15.5
$16.7
$17.6
$15.9
$15.2
1Q14
2Q14
3Q14
4Q14
1Q15
$15.1
$16.6
$16.7
$15.8
$16.2
1Q14
2Q14
3Q14
4Q14
1Q15


19
12/31/2011
12/31/2012
12/31/2013
12/31/2014
3/31/2015
Cash & Equivalents
$ 12.7
$
23.0
$  22.7
$  19.4
$  19.0
Total Assets
$ 79.3
$ 94.1
$348.5
$414.4
$417.4
Total Bank Debt
$   0.0
0.0
$  89.1
$112.4
$112.9
Convertible Debt
$   9.6
0.0
$    0.0
$    0.0
$    0.0
Shareholders’
Equity
$ 43.0
$
62.0
$170.4
$181.2
$179.3
Current Asset
Current Liabilities
Net Working Capital
$ 53.5
$(23.6)
$ 29.9
$ 64.3   
$(27.5)
$ 36.8
$124.8
$(59.3)
$ 65.5
$143.0
$(75.4)
$ 67.6
Balance Sheet
.
Selected Balance Sheet
Information
Note: Balance Sheet figures presented as reported in Company filings
$151.0
$(83.9)
$ 67.1
Net Debt to Pro Forma EBITDA = 2.03 Leverage Ratio
Balance Sheet Detail
($ Millions)


Supplemental
20


21
Non-GAAP Gross Margin
($ in millions)
Annual
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Annual
2014
Q1
2015
$           61.6
$            19.7
$            21.4
$              21.1
$             22.6
$              84.8
$            21.0
31.2%
34.4%
32.1%
33.3%
29.7%
32.2%
25.9%
1.1
-
-
-
-
$                     -
-
0.2
0.2
0.1
0.2
0.1
$                 
0.6
0.2
$           62.9
$            19.9
$            21.5
$              21.3
$             22.7
$              85.4
$             21.2
31.9%
34.8%
32.3%
33.6%
29.8%
32.4%
26.2%
with GAAP
with GAAP
Gross profit as reported in accordance
Gross profit margin in accordance
Inventory valuation adjustment
Plant, property and equipment
Non-GAAP gross margin
Non-
GAAP Gross profit margin
valuation adjustment


22
Non-GAAP Operating Margin
($ in millions)
Operating income as reported in accordance with GAAP
$          7.0
$            5.5
$             7.2
$             5.2
$         3.8
$         21.7
$          3.0
Operating margin in accordance with GAAP
3.5%
9.6%
10.8%
8.2%
5.0%
8.2%
3.7%
Inventory valuation adjustment
1.1
-
-
-
-
-
-
Plant, property and equipment valuation
adjustment
0.2
0.2
0.1
0.2
0.1
0.6
0.2
Acquisition and integration expenses
7.2
0.1
0.2
0.1
0.9
1.3
0.3
Amortization and earn-out expenses
6.8
2.5
2.4
2.4
2.8
10.1
4.0
Legal reserves
3.5
-
-
0.3
-
0.3
-
Non-GAAP operating income
$      
25.8
$            8.3
$             9.9
$           
8.2
$         7.6
$         34.0
$           7.5
Non-GAAP Operating margin
13.1%
14.5%
14.9%
12.9%
10.0%
12.9%
9.3%
Annual
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Annual
2014
Q1
2015


23
Non-GAAP NI & EBITDA
($ in millions)
Annual
2009
Annual
2010
Annual
2011
Annual
2012
Annual
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Annual
2014
Q1
2015
Net income as reported in accordance with GAAP
$             (15.0)
$                   2.1
$                   8.3
$               10.9
$                6.6
$                3.0
$               4.5
$               3.7
$              1.9
$          13.1
$         0.2
Inventory valuation adjustment
-
-
-
-
1.1
-
-
-
-
-
-
Plant, property and equipment valuation adjustment
-
-
-
-
0.2
0.2
0.1
0.2
0.1
0.6
0.2
Acquisition and integration expenses
-
-
-
-
7.2
0.1
0.2
0.1
0.9
1.3
0.3
Amortization and earn-out expenses
-
-
-
-
6.8
2.5
2.4
2.4
2.8
10.1
4.0
Legal reserves
-
-
-
-
3.5
-
-
0.3
-
0.3
-
Foreign currency remeasurement
-
-
-
-
(1.1)
-
-
1.7
1.2
2.9
2.7
Tax benefit of expenses
-
-
-
-
(4.6)
(0.8)
(0.7)
(1.2)
(1.0)
(3.7)
(1.7)
Non-GAAP net income
$             (15.0)
$                   2.1
$                   8.3
$               10.9
$              19.7
$                5.0
$               6.5
$               7.2
$                       
5.9
$     
24.6
$              
5.7
Depreciation
2.5
1.8
1.4
1.2
1.6
0.8
0.7
0.8
0.8
3.1
0.7
Non-cash stock compensation
1.0
0.9
0.7
0.7
1.1
0.3
0.4
0.5
0.5
1.7
0.4
Goodwill impairment
17.1
-
-
-
-
-
-
-
-
-
-
Other (income)/expense
0.8
0.1
(0.5)
0.1
0.1
0.1
0.1
(0.2)
(0.6)
(0.6)
(1.0)
Interest expense
1.3
1.2
1.1
1.2
1.5
0.7
0.8
0.7
0.9
3.1
1.0
Income tax expense
(3.1)
1.4
3.4
4.5
4.5
2.5
2.5
0.4
1.4
6.8
1.8
Non-GAAP EBITDA
$                   4.6
$                   7.5
$               14.4
$               18.6
$              28.5
$                9.4
$            11.0
$               9.4
$                       
8.9
$            38.7
$              
8.6
Basic Shares Outstanding
20,116,991
25,606,352
25,643,508
25,691,884
26,057,831
25,750,972
26,271,316
Diluted Shares Outstanding
20,719,951
26,115,512
26,107,648
26,129,427
26,467,984
26,196,901
26,598,799
Earnings (loss) per share:
Basic
$              0.33
$              0.12
$            0.18
$            0.14
$
0.07
$            0.51
$           0.01
Diluted
$              0.32
$              0.12
$            0.17
$            0.14
$            0.50
$           0.01
$
0.07


24
($ in Millions)
CECO
Reported
Pro-forma
(Recent
Acquisitions)
CECO
Standalone
PMFG
Pro-forma
CECO
Combined
GAAP Revenues 
$263.2
$64.7
$327.9
$158.1
$ 486.0
GAAP Gross profit
$84.8
$13.6
$98.4
$45.7
$144.1
SG&A as reported in accordance with GAAP
$51.4
$6.6
$58.0
$51.5
$109.5
GAAP Net income
$13.1
$8.1
$21.2
($33.1)
($11.9)
Amortization and earn-out expenses
$10.1
-
$10.1
$0.9
$11.0
Other
(1)
$5.1
$0.3
$5.4
$26.5
$31.9
Tax benefit of expenses
($3.7)
-
($3.7)
($2.2)
($5.9)
Non-GAAP net income
$24.6
$8.4
$33.0
($7.8)
$25.2
Depreciation
$3.1
-
$3.1
$1.8
$4.9
Non-cash stock compensation
$1.7
-
$1.7
$1.1
$2.8
Other (income)/expense
($0.6)
-
($0.6)
($0.1)
($0.7)
Interest expense
$3.1
-
$3.1
$1.8
$4.9
Income tax expense
$6.8
-
$6.8
1.1
$7.9
Non GAAP Adjusted EBITDA
$38.7
$8.4
$47.1
($2.1)
$45.0
Non-GAAP Adjusted EBITDA (with Synergies)
$60.0
GAAP to Non-GAAP Adjusted EBITDA Reconciliation
(Twelve Months ended 12/31/2014)
(1)    Includes
plant,
property
and
equipment
(PPE)
valuation
adjustments,
acquisition
and
integration
expenses,
legal
reserves
and
foreign
currency
remeasurement