CECO Environmental Corp
NASDAQ:CECO
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Good morning, and welcome to the CECO Environmental Q3 2023 Earnings Conference Call. [Operator Instructions] Please note, this is being recorded. I would now like to turn the conference over to Stephen 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 Todd Gleason, Chief Executive Officer; and Peter Johansson, 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 cecoenviro.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 included 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 provide the comparable GAAP and non-GAAP numbers in today's press release, and they're provided in the non-GAAP reconciliations in the supplemental tables in the back of the slide presentation. And with that, I'd now like to turn the call over to Chief Executive Officer, Tom Gleason. Todd?
Thanks, Stephen, and thank you for your continued support and interest in CECO. I'm going to go ahead and start with Slide #3, which is entitled "Q3 2023 Earnings Highlights". As we highlighted in today's press release, CECO 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 to Team CECO for your customer focus, accountability and all of your high performance. 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, let's review some of our third quarter highlights. The section on the top left of the 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. 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. With a 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 1.2x, 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 $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 in new verticals and new geographic markets. And each of our acquisitions are performing at or above our targets, which really helps to fuel top line and bottom line results. The bottom section of the slide captures just a few comments around driving higher performance and continuing 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 2023 guidance since we first introduced it back in early November of last year. We are also introducing full-year 2024 guidance today. We believe we have strong visibility to a larger portion of 2024 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 the quarter, we also invested in the acquisition of Kemco Systems, and we are deploying capital for new systems and operational upgrades. 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 exit the quarter with a healthy balance sheet, and we maintain our focused capital allocation strategy. So overall, a great quarter. 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 #4. We'll review a snapshot of CECO's third quarter and trailing 12-month financials. Peter will cover many of these key financial figures and metrics in more detail in a few minutes. However, let me highlight a few key areas. I will mostly stick to the left side of the slide, which covers Q3 '23 results. The panel on the right side of the slide provides a snapshot of our trailing 12-month financials, all of which are very strong. CECO's 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 TTM period and up 8% sequentially. As a reminder to our audience, we have been growing orders steadily since the second half of 2020. So this is definitely not just in the quarter or 12-month phenomenon, but rather a continuation of a positive trend in 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 investments in growth and 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 deliver additional top line growth. Our adjusted EPS in the quarter of $0.22 and our trailing 12-month adjusted EPS of $0.67 is an improvement over last year in the preceding period, and the TTM is up $0.05 over the preceding 12-month period. We will continue to manage our debt and interest payments to drive higher EPS. And as our guidance suggests, 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 2 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 excellent collections activity and improved supplier payment balances. We will maintain our focused efforts on working capital management and continue 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 strategic and accretive acquisition. With so many financial records in the quarter and year-to-date, I would once again stress how pleased I am with our operating and financial performance. And again, thanks to our global teams. They continued to deliver for our customers every single day. Please turn to Slide #5. I'm going to reiterate a few things we have shared as we have highlighted this slide in investor presentations over the past number of quarters. As the title of the slide suggests, CECO is 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 3 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 Kemco 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 as a strategic component of our portfolio. Today, it represents close to 1/3 of our overall business mix, just great transformation to add much more balance 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 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 and filtration and legacy natural gas liquids transport and hydrocarbon processing infrastructure, 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 in engineering services, equipment rental, in-field customer process diagnostics and emergency services. Now staying with Slide #5, let me build off the diverse portfolio we are sharing with this material. While the following examples aren't 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 critical infrastructure investments in liquid natural gas or LNG pipeline expansion and maintenance occurs, who does a leading natural gas company call to provide multimillion-dollar filters and coalescers? They call CECO's separation and filtration platform with its leading Peerless and Transcend brands, which I just mentioned, as we ensure timely and high-quality delivery as well as the ability to work with the energy companies to explore other complex solutions, such as carbon capture and efficient 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 VOCs, are [eliminated] to protect people, protect the environment and protect their investment in capital equipment? They call CECO's Industrial Air platform with its leading Adwest brand to solve this critical VOC 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 Bush branded solutions, to solve their critical problems in aluminum manufacturing. I 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'll continue to be more global, more diverse and more service oriented. I'm very pleased with the results of our investments and our journey of advancement at CECO. Now please turn to Slide #6, 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 are some details and highlights. I'm going to start with 2023. With respect to orders, our book-to-bill has averaged 1.2, and we expect to maintain this for the full-year. We are showing 1.1 to 1.2 because certain opportunities could slide into 2024, 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 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 the 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 2024, 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 2024 guidance. While we understand there are a number of unknowns and market dynamics that create pause with respect to forecasting 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 end-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 our record backlog and our almost $3 billion of sales pipeline, gives us confidence to provide 2024 full-year guidance at this time. So with respect to full-year 2024 orders, we continue to forecast really solid growth, perhaps at a slightly slower pace than 2023, 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 upside from this forecast if certain large projects do, in fact, transpire in energy transition or certain industrial air capital programs that we have line of sight to. But for now, we like high single-digit to low double-digit bookings growth. We are forecasting full-year revenue between $575 million and $600 million at this time, which represents approximately 10% top line 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, but 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, too. The opportunities to drive higher EBITDA and higher margins would be an increase in higher sales, an increase in higher gross margins, as well as productivity that we're working hard to achieve, all things we're 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 all in attendance another set of solid financial results, results that confirm our confidence that CECO is still on track to deliver another strong full year of performance. And with that, please turn to Slide #8 with me. On this slide, I'll 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 best third quarter on record. CECO's 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, vesting the prior high of $377 million delivered in 2022, demonstrating continued strong conversion of CECO's growing opportunity pipeline, examples of which Todd described for you in his prior section. 2023 revenue of $149.4 million, a 38% increase over Q3 2022 and a 15% improvement sequentially, were the highest for any quarter in company history, continuing a 4-quarter trend of record-setting revenue [prints], benefiting from continued strong conversion of CECO's growing backlog and the beneficial impact of the Wakefield Acoustics, Transcend Solutions and Kemco Systems acquisitions. This result increases CECO's trailing 12-month revenue to 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 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 in the 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 year-ago periods, up 180% and 75%, respectively. Please turn to Slide #9 with me for more details on CECO's orders. On this slide, you can see that CECO's order trajectory that began in Q4 of 2020 has continued into the third quarter of 2023, and we have delivered 4 of the best 5 order quarters in company history in the trailing 12-month period. If we look back to Q1 2022, all 7 quarters since that quarter have posted an orders rate greater than $100 million, and the current rolling 4-quarter average of 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 smooths out the lumpiness and more closely matches our revenue realization, I would highlight for you the 2 rows 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, where we'll look at revenue in more detail. On Slide #10, you can see that CECO's revenue growth trajectory began in Q1 2021 and has showed continued sequential improvement, with acceleration in 2022 continuing into the current quarter. Q3 is the sixth consecutive quarter of $100 million-plus delivery in revenue and the seventh consecutive quarter where the year-over-year revenue growth is greater than 20%. As of the third quarter of 2023, average revenue per quarter on a rolling 4-quarter basis is now $127 million, approximately 80% greater than we achieved at the low point in the first quarter of 2021. 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, where I'll walk you through backlog and backlog trends. CECO 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, CECO 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 with 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 70 basis points when compared to the year-ago quarter. Trailing 12-month gross profit is approximately $156 million, representing a 31% greater gross profit delivery than 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 and which is the second best absolute dollar result in company history and an astounding 64% greater number than in 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, a 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 are 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 CECO's 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 Solutions acquisitions closed earlier in the year. The integration of both companies is well underway, with the entirety of the prior management teams 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 2-plus years. Each company is 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 2x to capture a fantastic growth opportunity in the data center backup power segment, initially in the U.K. 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 Transcend team can now execute more demonstration and pilot scale installations to demonstrate its 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 Kemco Systems, a leading industrial water solutions provider. This transaction closed in mid-August, and we are very excited to add Kemco Systems to our growing portfolio of niche leadership industrial water businesses and brands. Kemco's primary end market is in the high-growth food processing sector, where they are a leader in point-of-use applications for water filtration, hot 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 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 in ERP migrations. We have expanded our footprint in Pune, India and initiated operations of 2 recently purchased machining centers in our fluid handling business in the U.S.A., 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 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 Kemco acquisition, make our capital investments, issue select trade finance instruments to secure new project wins and pay down our revolver, all while increasing our cash balance. Net borrowings in the quarter on our revolver were approximately $31 million, supporting growth investments in 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 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 1.7x, approximately 0.25 turn increase from year-end levels and well below our credit facility leverage gap. At current debt levels, before planned debt repayments in the fourth quarter from continued improvement in our collections and operating cash generation, CECO's available investment capacity is in the $37 million range. That concludes my summary of CECO's third quarter 2023 financial results, a quarter in which the company and our teams delivered a very solid set of results. And I will now turn the microphone back over to Todd, who will take 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, which includes our summary slide. Please turn to Slide #16. We have already outlined our revised guidance for 2023 and the initial outlook for 2024. And 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, re-shoring 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, AKA the energy transition, and ongoing regulation, especially in environmental areas. As the target market size visual demonstrates on this slide, a few years ago we were targeting between $1 billion to $1.5 billion of market opportunities. And today, we are more than targeting. We are going after $3 billion or more of sales opportunities. As they say, more at-bats equals more hits. We are not comprising our leadership position in markets. We are just growing our share 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, applications, solutions and services. We think the future looks bright, and we're getting after it. Please turn to Slide #17, which simply reiterates the financials for full-year 2023 and 2024 outlook. I'm only going to read the takeaway that states high-performance focus to deliver sustainable results. And if you think about the previous slide, #16, the growth is a process and not a game of chance is the way I would leave you with it. We have great programs that we're putting in place to deliver the sustainable results. Now let's go to our last slide, #18. On the left side of the slide, we capture 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 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.
[Operator Instructions] Our first question will come from Aaron Spychalla with Craig-Hallum.
Maybe starting first on just backlog and kind of the order pipeline. You kind of talked about it a little bit, but are you seeing any kind of cancellations, pushouts there? And then maybe could you just highlight some of the areas of strength or where you might be seeing some moderation, whether verticals or geographies?
This is Todd. Well, Peter mentioned, there's no cancellations. By the way, that's something we don't normally see any. I mean, we rarely have cancellations, I'll 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 rebooked those orders within 12 to 18 months after they were canceled. So they were actually more pauses than 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 remove it from our backlog. We call that a cancellation. 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 the overall broad industrials we feel good about. There are markets that have ebbed and flowed. You have automotive, which 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 market's softened. And we've sort of replaced that strong market with EV battery or another industrial market of expansion around semiconductor builds. So for us, Aaron, it just continues to pay to be nimble, move into markets that we think are growing, and we'll be there for the other markets when they come back. [Technical Difficulty] Sorry about that. We had a technical glitch, we thought. So 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 derisks 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 and adeptly targeted solving. And as a result, if a market trends down, for instance, beverage can production; which is now out of its buying window, trends down; our team that sells solutions to handle and remove all the 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 larger and more interesting than what they may have focused on in prior periods. And Todd highlighted a very interesting one, with the B-21 bomber program.And so that, for us, is a new application or a new customer, but it's a VOC removal solution using thermal oxidizers, which you've 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, Aaron, and I'd say maybe defense overall could be an interesting market for us, 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 the best opportunities in that space.
And then just second on margins. You touched on a little bit of the supply chain challenges in mix. Can you just talk about a little more detail on what those were and 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 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 that have just been always sort of hampered probably from the beginning on some supply chain challenges. Getting those behind us in the third quarter was a good thing. But otherwise, look, most companies are at least highlighting some challenge. It could be just getting freight and logistics. It could be getting access to certain components in electronics. It's been a choppy environment for 1.5 years or more now. I feel like we probably just wanted to accelerate and get a lot of that behind us.
Our next question will come from Rob Brown with Lake Street Capital Markets.
You started to get some good operating leverage in the quarter. I just want to get a sense of where you think you can take your EBITDA margins as your growth plays out here, and you really get the operating leverage from these acquisitions and scaling that you're getting.
We would have gotten better operating margins, Rob, 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 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, price and good operating excellence, and also the margins that we believe that we're booking.Now look, there's always mix and there's some large important customers that, just in the market that they are in, have slightly lower margins, but we really like our ability to get our gross margins back up. Like I just said with Aaron and I'll just reiterate here, we pushed through to get a lot of our lower gross margin projects executed in the first 3 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. But then back, I think, to the main focus of your point or to your comment, Rob, and that is, look, with our backlogs where they're at and with the margins that we know are in our backlog, it starts with volumes at the top line. 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 we'll really be able to convert at a higher EBITDA margin level as we go forward 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 year-over-year. Could have 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 that, in the next few years, we expect and we're working hard to produce EBITDA margins that are in the teens, potentially in the mid-teens in the next few years. We're committed to that. And the type of value creation that we believe we can have from double-digit top line growth and then 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.
And then on the acquisitions you've been doing, you talked pretty positively about kind of doubling the level of business in Kemco in particular. But could you give us a sense of how you plan to get the business to double and what kind of drivers you can do to make that happen?
Yes. Look, Kemco is very early in our portfolio. Peter can expand on something specific to advancing any of our businesses. But I look at the 8 acquisitions that we've done over the last handful of years, we have already experienced with a good portion of them already doubling. I go back to acquisitions we did when I first joined, the strength of that acquisition helped 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 double it, and 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, ability to add resources and help Kevin, who does a fantastic job running our Wakefield Acoustics business, to really get after data center expansion.So we're taking our time to find businesses that we think we want to invest in. We want to keep the teams. We want to incentivize the teams. We're finding markets that we think have a good 2-, 3-, 4-year growth trajectory in front of them. Industrial water, there's no doubt that this is a very fragmented, growing space, Kemco 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 add capital just because of the size of the company or where they are in their investment model with their previous ownership. We're early in the alphabet. They're 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 want to take them into our high-growth region markets where we have established capabilities and systems, and we already have entities set up in whether it's the Middle East or East Asia. So really, across all of our acquisitions, we're 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 execution across our businesses.
Rob, I'll provide you one concrete example for each of the 3 businesses. So at Wakefield Acoustics, they had an opportunity with a large customer 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 additional manufacturing capacity in facility. That couldn't have been undertaken, or could have been undertaken with prior management, but they couldn't have capitalized that. 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 has now giving them access to that customer, and there's more like it. And the Wakefield Solution story is very interesting.On the Transcend side, they had almost no business in international markets. They were very focused on the Gulf Coast, as you would expect with a small business working in hydrocarbon processing. We give them access now and have begun to book customers at the [Ras Laftan] project in the Middle East and are talking to customers in Indonesia on gas sweetening, all very large opportunities they couldn't have accessed on their own, but where CECO has people and existing relationships. And then with the Kemco Systems business, it's a very similar story. At least 2 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 U.K., Ireland and France, easily something they could not have done on their own. Those are big opportunities. We'll begin to start putting pen to paper in 2024. And that's the beauty of buying a focused 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 addition of capital.
Our next question will come from Amit Dayal with H.C. Wainwright.
With respect to the guidance for 2024, I think I heard you say it does not include any potential contribution from acquisitions you may do down the line. Is that correct?
That's correct. That's right.
And then just an adjacent question to that. With the interest rate environment where it is right now, are these deals still penciling out in the fashion you might want them to? Any color on how you are thinking about structuring these deals in the current environment would be helpful.
Well, interest rates are high versus where they have been, probably low, if you think about it over a 30-year period of the industrial businesses that I've been in since the '90s. 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 we have confidence and a track record of high performance once you've completed a transaction.But look, they're more expensive because debt's more expensive. And we're generating strong free cash flows in 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 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 I would say that, with interest rates being what they are, it raises the bar for the transaction to have to make really great economic sense for us. Otherwise, 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 isn't impacted by the slightly higher interest rates over the last few years.
And then your sales pipeline is growing quite substantially, as well. 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 or backlog, how much of the growth expectations is tied to that? I mean, are you more confident that you should be able to improve the conversion rate, I guess, to keep sort of revenues growing?
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. You look at our bookings. You look at 29% bookings growth in 2021. You look at much larger 30%, 40% bookings growth in 2022. You look at the bookings growth that we've had in 2023. That's not because of acquisitions. Acquisitions have helped our bookings, but 75%, 80% of our orders growth have been organic. It's because we're going after more opportunities, and we're either maintaining a good win rate or our win rates certainly remain healthy. Now, when you enter a new market, you learn a lot about those markets, whether it's a new geography or a 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's an electric vehicle in the past, and then we were successful by winning a handful of other electric vehicle industrial air solutions.So again, I guess I'll just say, it's critical that we've gone from $1.5 billion to $3 billion of target market in our sales pipeline. Ideally, in a year or so, we're at 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 transitions. And so by maintaining a leadership win rate and expanding our end markets, we think more pursuits, equals more growth, and that's a big part of our outlook for 2024, and what will likely be a big part of our outlook for 2025.
(Indiscernible) question will come from Jim Ricchiuti with Needham & Company.
This is Chris Grenga on for Jim. You'd mentioned the planned investments in talent and the global execution. Just wondering if you could please elaborate on your priorities there and what you expect in the near-term
Yes. Look, it's a balance set of priorities, Chris. I'd call them in the swim lanes of a growing company, you, of course, have to continue to replenish your ability to execute. So 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 challenge to 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's well spent. And we have the right teams doing that. It's never easy, but we're rolling up our sleeves every day to do that. To add more growth, business development, sales, marketing, that talent continues to fuel the relationships that are critical for our advanced thinking, 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 6 to 12 months, you're going to hear us probably highlight some resources that we'll continue to make in those sales, business development areas as well as probably some areas of I guess I call them sort of new product development, 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 on just the last 18 to 24 months.So we're trying to be smart with adding incredibly talented people, but in areas where it's cost effective and allows us to be more 24/7, as a global company should be, around supporting customers and supporting our areas of innovation and growth. So those are going to be the topics. That's where we're investing. It's more around that. I'd say the last thing is we're building under Dan Berryman, and all of our platform GMs 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 again, for us, it's just about a balanced diet of top line growth organically, adding resources to recent acquisitions, and then the final piece of the diet is making sure that we have margin expansion.
And looking at the healthy pipeline, I'm just curious. How would you characterize the amount of that pipeline, which is discrete projects one at a time versus now that you have this very deep and broad portfolio, going to some of these strategic customers and having them select multiple services and solutions from the broad portfolio to service their full spectrum of needs? I guess trying to understand where do you see the land-and-expand strategy today? And where would you like to take it?
Well, our business mix right now is somewhere in the 70% longer cycle. That includes very long-cycle projects. It also includes what we call mid-cycle, projects that we book but we turn into revenue in 6, 9 months. Long cycle would be revenue between 9 and, let's say, 18 months. 70% of our business mix is that longer cycle projects. For sure, at least 70% of that pipeline are jobs that look like that. They're mid- to longer-cycle projects. They're therefore somewhat more discrete. They're fairly large, million to multi-million-dollar projects that are associated with either an expansion of an existing site or potential a new build, a Greenfield, so to speak. That's at least 70% of that $3 billion. The other 30% would be aftermarket project services, replacement, shorter cycle pumps, filters, things like that.So I'd probably say our pipeline's a little bit more on the medium to long cycle because you can 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.
Our next question will come from Gerry Sweeney with ROTH Capital.
One more question on revenue growth. I think a lot of questions have been asked that's sort of been around the edge of what I wanted to ask. But I really wanted to see if you guys could dig in and discuss what's driving growth. I understand acquisitions. There's capital infusion. There's access to CECO's global sales.But I think in the past, at least, Peter, you and I have discussed I think incentivizing some business heads and maybe reducing some barriers and letting them go after additional opportunities. Can you maybe dig into what's outside of acquisition growth, what's driving growth internally and driving that pipeline?
Well, we have been transforming, and it started actually with the transformation of our business model and our structure and having more accountability at our more nimble fighting units, if you will, the platform units. I think that unshackled their focus on the markets, incentivized them to double, 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 our platform businesses all would be looking at more growth opportunities. At 2 years ago, a year ago and today, they continue to expand into new markets.And that's important. That accountability for them driving into new markets is important, and they know that they can win and lose, and we're going to continue to invest in 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. It's to drive growth and to expand into these geographies and vertical markets. That's equally important. And look, 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 carbon and 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. It's a smart acquisition model that promotes growth versus going at their acquisition model for cost synergies, which can slow down that growth conversation. And then it's just being nimble in end markets that we think are growing, and when one slows down, we move into another one.
I mean, what about on the organic side or investing internally? Can you touch upon that as maybe a growth driver as well?
Yes. Look, again, we know that there's some caution out there in the environment, and that's not lost on us. You don't have a subscription to cable television or the Wall Street Journal and not read about it every day. We say organic growth is the heartbeat of CECO. It's what's going to give us double-digit growth 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 navigate the last few years. And it's been choppy and dicey for quite a while, and a lot of end markets have ebbed and flowed.So for us, organic growth is our main focus. We think that the M&A is additive to double-digit growth in the moment. So we're going to continue to push for that. And again, I think we believe that, with our backlogs and our pipeline, all of that right now represents, as we head into next year, that's an organic number being in the double-digits. So we just like the space we're in at the moment.
Our final question will come from Joe Gargano with TD Cowen.
This is Michael Anastasiou on for Joe. In the prepared remarks, you mentioned the continued strong book-to-bill. Can you give us any breakdown between industrial air, water and the energy transition? And can you give us any color regarding the customer decision timelines and how that's trended over time?
Well, first of all, all three, if you want to call it, of those sort of segments have been growing throughout the year. So our industrial water business is, if you want to call it, our newest collection of businesses because that's obviously where we've been building a position. The acquisitions we've made over the last 18 months with respect to Compass and DS21 and Kemco, et cetera, have built that industrial water. So that's been growing, and that's probably been the most acquisitive area of growth, is in industrial water.So when you're looking at any transformation of our portfolio, it's been in large part industrial water. But therefore, I can't give you a legacy 3, 4 years ago, that the book-to-bill was X and now it's Y. But again, between especially DS21, a business that we think will double in 18 months of ownership; Compass and Kemco and GRC, all businesses that are growing strong double-digits, we believe. So the book-to-bills continues to be good in industrial water. Industrial air, it's what's probably our largest platform, and it represents a big part of what we do. There's a lot of different end markets there, so it'd be hard for me to dissect them and take a lot of time. But between industrial air and the energy transition, again, we're certainly over 1 in terms of that book-to-bill as well. I think one quarter industrial air might be 1.3 book-to-bill and energy transition might be 1, then the next quarter energy transition might be 1.3 and industrial air might be 1. But none of them have been less than 1 for more than 1 quarter. So it's not because of 1 of the 3 that we've had a book-to-bill of 1.2 year-to-date. They've all probably averaged somewhere between 1 and 1.1 and 1.3 any quarter of the year and probably over the last few years. So it's been pretty balanced for us.
There was a second part to the question, I think, in terms of speed for customers to make decisions on orders, or order placement. We're seeing 2 trends. One is our customers are coming to us much earlier in their process, so we help them with the design and even, I'll call it, the technical problem-solving at an early stage in their project planning. And so that gets us engaged early, helps us influence specification and design, which ultimately benefits CECO from a win rate perspective.Once 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 either solution or a technology provider more rapidly. 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, what we've even been finding is, in some larger customers, we are the first person they're calling because they know they'll get the solution and they'll get the quality and durability from the solution they're looking for, and a broad RFQ process, which takes a long time and cost them money is not in their interest. They're getting funding, and they want to move quickly. We believe that trend will continue as stimulus from the government investment program starts rolling out and companies now have to make decisions on how to spend that money. And that's a U.S. or North American phenomenon primarily with the IRA, IIJA and other funds.
And just one more, if I may. You had mentioned about a 1 to 1.1 book-to-bill for next year. Can you just dive in the expected cadence of the year? I know there's been potentially some seasonal or timing of large projects that has influenced the first half of the year. The past couple of years has been a little bit stronger in that area. Any color there would be very helpful.
Yes. It's a fair question. We don't know that we have necessarily seasonal aspects. I mean, first of all, you get projects that let's just say there could be a $20 million, $30 million, $40 million, $50 million project. And 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, or a small part of a very large project or a larger project.So it's not that the customer is just worrying about our solution. They have to think about the supply chain, the timing, the capital investment of the entire solution before they issue POs. So, look, there's a reason we don't give quarterly guidance. It's hard to forecast that, especially this early in next year or even in next year. It would be hard for me to give much more color around it. I'd 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 you're looking at, and I'll just exaggerate to make a point, a disproportionate amount of orders in the first half of the year and then a lower proportion in the second half, nor would I think it could be the flip. I'm not saying it's going to be perfectly, equally balanced or linear, 25%, 25%. But at the moment, there's no reason to believe that we'll have a huge seasonal aspect to our bookings for next year. So if we have a 1.1 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 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 there's really probably no seasonal aspect. And again, we hope that it's relatively consistent throughout the year. I would also remind folks, and it's not a caution, but just because we might have 1 quarter where a book-to-bill could be lower, including even slightly below 1, I don't think that that necessarily means that there's a slowdown, because that just might mean that a handful of orders rolled into the next quarter. Similarly, if we have 1 quarter where our book-to-bill is 1.2 or 1.3, 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 you're looking at fairly large orders.
This concludes our question-and-answer session. I would like to turn the conference back over to Todd Gleason for any closing remarks.
Yes. I'll just be quick here. First of all, thanks for everyone's question and interest in our information today. I know we went over time. I guess that's a good thing when there's a lot of great questions around what we provided in our performance.Also, just thanking our global teams. They're 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 super-critical 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, next week, I'm going to be at the Three Part Advisors Ideas Conference in Dallas, as well as participating at the Craig-Hallum Growth Conference in New York City. And that will be, 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 ahold of us, no doubt reach out, and we look forward to speaking. Have a great day.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.