Welcome to the CECO Environmental's Third Quarter 2015 Earnings Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Tracy Krumme, Vice President of Investor Relations. Please go ahead.

Thank you. Good morning, everyone. Thank you for joining us on CECO Environmental’s third quarter conference call. On the call with me today are Jeff Lang, Chief Executive Officer and President; and Ed Prajzner, Chief Financial Officer and Secretary. Jeff and Ed will be reviewing the financial results and will also provide an update on the Company's strategy and outlook. Please note that in addition to GAAP results we provided non-GAAP financial measures in our press release today to enable better assessment of the ongoing nature of CECO's core operations. Jeff comments will primarily focus on these non-GAAP financial measures, while Ed's will address the differences between GAAP and non-GAAP financial measures. Following their presentation, we will open up the call to Q&A. As a reminder, this call is being webcast and can be accessed along with the accompanying Slide Presentation on CECO's website. Before we begin, I would like to caution investors regarding forward-looking statements. Any statements made in today's presentation that are not based on historical facts are forward-looking statements. Such statements are based on certain estimates and expectations and are subject to a number of risks and uncertainties. Actual future results may vary materially from those expressed or implied by the forward-looking statements. We encourage you to read the risks described in our SEC filings, including our Annual Report on Form 10-K for the year ended December 31, 2014. Except to the extent required by applicable securities laws, we undertake no obligation to update or publicly revise any of the forward-looking statements that we make here today, whether as a result of new information, future events or otherwise. Today's presentation will also include references to certain non-GAAP financial measures. We've reconciled the comparable GAAP and non-GAAP measures in today's press release. And now, I'd like to turn the call over to Jeff.

Thank you, Tracy. Good morning and thank you everyone for joining the CECO Environmental conference call to discuss the financial results for the third quarter. We appreciate your interest as we continue to grow and evolve our business into a excellent global industrial company focusing on environment and energy technologies. On today’s call, I’ll provide a brief overview of the quarter and update on the Peerless acquisitions and some other important strategic comments. Ed Prajzner our Chief Financial Officer will discuss the financial results in more detail and Tracy, our New Vice President, Investor Relations will speak about our growth drivers that fuel optimism about our global growth strategies. Let’s please begin with Slide 4. Third quarter revenues increased 55% year-over-year. This record quarterly revenue was driven by a combination of organic growth, sales excellence and revenue from acquisitions including Peerless which closed in September. Revenue contributions for the third quarter were $12.6 million from Peerless and a combined $21.2 million from other acquisitions. Third quarter organic revenues increased 4.5% on a constant currency basis for both the year-over-year and year-to-date periods. Bookings were $88.8 million for the quarter, a 30% increase year-over-year. Year-to-date bookings were roughly $260 million versus $132 million last year, an increase of roughly 97%. On an organic basis, bookings were down 5% year-over-year and essentially flat year-to-date. Backlog grew to a record $212 million at September 30, 2015 up 51% or $72 million sequentially. We are excited about building and extending our business and we continue to trend in the right direction as we move forward into 2016. Non-GAAP gross margin was 31.4%, up 70 basis points sequentially to the project management excellence, price management and a favorable mix within an increase in after-market sales. Non-GAAP operating margin was 13.2% in the quarter compared to…

Thank you, Jeff and good morning everyone. As mentioned, I will highlight in little more detail both the GAAP and non-GAAP performance for the quarter, and the nine month year-to-date period, particularly regarding our three segments. As a reminder, our non-GAAP adjustments include several items including acquisition and integration expenses, the impact of acquisition, asset valuation adjustments on the income statement, including higher depreciation, amortization and earn-out expenses. Our non-GAAP presentation is intended to provide better trend analysis and assessment of our core business performance. Beginning of Slide 12, our revenue was $98.2 million for the third quarter of 2015, an increase of 55% year-over-year and 30% sequentially. Organic revenue grew by 4.5% on a constant currency basis in the quarter. Our revenue gains our being driven by a combination of organic growth and sales excellence as well as revenue from our recent acquisitions. Moving to Slide 13, you will see our booking and backlog trends. We are pleased with our record level of backlog of nearly $212 million as of September 30, 2015. We are also pleased with our 257 million of bookings to the first nine months. Approximately 80 million of our backlog was acquired from Peerless. Continuing on to Slide 14, our gross margins improved sequentially in Q3 over Q2 to 31.6% from 30.7% due to project management excellence, price management and a favorable mix change with an increase in aftermarket sales. Non-GAAP operating margins declined sequentially to 13.2% from 14.2% but were up 30 basis points year-over-year. Moving on to Slide 15, EBITDA reflected a sequential improvement to a record high of $14.1 million for the third quarter from $13.5 for the second quarter. Non-GAAP operating income was $30 million for the third quarter up sequentially from $12.3 million in the second quarter. These improvements are…

Thanks Ed. Before I begin, I’d just like to say that I’m thrilled to be a part of the CECO team and I look forward to communicating CECO’s growth story. Now, if you turn to Slide 21, I will first discuss our strong CECO Asia platform. Asia represents an opportunity for consistent long term growth. It balances our global growth and provides a layer of protection against economic cycles that are specific to North America and Europe. This year marks our 11 anniversary of operating in China and it opens up opportunities to sell to the entire Asia-Pacific region. With 329 employees, although one who are Chinese nationals in our CECO Asia platform, we have the right regional experience and global leadership to drive our growth strategy. Our CECO Asia platform has an annualized current run rate of $67 million of revenues. While we all know that China's economy has cooled down from prior growth rate, it remains on a higher trajectory than U.S. GDP growth. We are a niche player in the $10 trillion Chinese economy. Our expanded portfolio of technologies of Peerless provides dramatic growth opportunities over the next decade. We remain confident that we will achieve significant growth over the next few years in Asia as the market demands for energy, environmental, filtration and fluid handling technologies aligned perfectly with our technology strengths. Our technical sales force is expanding. Our leadership is getting stronger and our brands are becoming recognized with strong technology but with localization and all that we deal. To validate our growth strategy and ensure we are targeting the right end markets, we regularly review research and analysis from a wide variety of external sources, as well as relying upon our own experience within the industry and end user. Next moving to Slide 22.…

[Operator Instructions] The first question comes from Brian Drab of William Blair. Please go ahead.

Hi, good morning. Congratulations on a solid quarter. Lang congrats on being a little bit how to be schedule on the restructuring too, that’s great. The first question I want to ask is just on fourth quarter. I see that you gave us some guidance for PFMG in terms of revenue for the fourth quarter. Can you comment at all on given the bookings were down a little bit in the core business, the legacy CECO business, what should we expect in terms of year-over-year organic revenue growth in the core CECO business in the fourth quarter?

Great question. We'd like to see 4%,5%,6% in the quarter, that’s our aspiration. In some quarters we have delivered on that. The last quarter we weren’t strong due to some timing but we are thinking - our team is thinking 4%, 5%, 6% is our internal aspiration which is tied to our annual operating plan.

Okay, thanks. Again on the fourth quarter margins and margins exceeded the expectations that we had in our model for the third quarter. Given what you see in the backlog and where we are at this point in the fourth quarter, what can we expect sequentially in terms of margins? How should they compare in the fourth quarter with the third quarter?

The way we’re modeling - actually I think the research analyst including yourself have done a nice job on putting off some numbers particularly in cooperating the CECO with Peerless, so nice work on that. We are kind of thinking the consensus numbers where the research analysts have coupled up Peerless to our numbers, make sense to us. So that’s kind of how are thinking about it Brian. We are thinking Q4 is going to be very consistent, very solid with the last couple of quarter's run rate hopefully with a little more bookings and little more revenue. But we put out those Peerless numbers just to bring clarity to how we are thinking about their revenue and gross profit for the quarter to help you modeling.

Okay, thanks. I just want to drill down and bend a little bit further. Looking at the consensus estimate for operating income of $9.4 million, though for the fourth quarter and revenue flat sequentially and you exceeded our expectation for the third quarter - exceeded the analyst community’s consensus expectation in the third quarter. So really if the fourth quarter margins are going to be at the consensus that's forecasting that represent a sequential decline in margins but I’m not sure that’s what you want to communicate is it?

Well, we are still going through a little variability with the Peerless model. We think they are on track with the integration. We think they are on track with the ability to move their margins up. So I don’t see it's coming down in Q4 from Q3 but we are still going through a little work with the Peerless Group to give you a fine tuned number on that with the combined but is your question around CECO's operating margin or the combined?

Well, I'm looking at the combined company. You exceeded revenue expectations but you really exceeded margin expectations in the third quarter and I’m just wondering should I model – into the fourth quarter comparable to third quarter? Or should I expect it to come back down a little bit to what we were seeing previously?

Probably consistent with Q3, that’s how I’m thinking about it.

Okay. It's really helpful. And then thanks for the commentary, Tracey on Asia I think that’s really helpful. I’m wondering if you can just give us a sense for what that region did in the third quarter in terms of growth. You said it’s better than the balance of the business which I guess means that organic revenue growth in Asia exceeded 4.5%, is that accurate?

Asia probably did a little bit better than Q3 Brian in bookings and revenue but for the year we've not met our organic bookings or organic revenues. So for the year it’s below our expectations, we expect a lot more. But they did perform a little bit better in Q3 than Q2 and we are expecting - we have a revenue bridge over the next three years for CECO Asia and with our leadership and our portfolio and we’ve developed a strategy over the next 36 months and how we are going to go from that 67 to 100 million. So we are very strategically focused on that but simply speaking they did a little better in Q3 and we’re very focused on improving that in Q4 and coupled with next 36 months.

Okay. Just to clarify Jeff, Asia did a little bit better than they did in 2Q and Q3 or Asia did a little better than the balance of the business or both?

They did probably both - probably both but specifically they did better in Q3 than Q2.

Okay, all right. And then one last question, across the industrial universe, right now we are seeing a lot of projects pushed out, a lot of delayed CapEx. You put up a nice revenue in that environment. Are you seeing some projects pushed out and you did well despite that?

The way we are thinking about the outlook is very consistent with Q2, Brian. When we look at our sales dashboards, our projects are cold logs all the things that we’ve developed bookings forecast for I’d message that today is looking very similar to the past quarter, very solid.

Okay. That’s good to hear. Thank you.

[Operator Instructions] The next question comes from Gerry Sweeney of ROTH Capital. Please go ahead.

Good morning. Thank you taking my call. I want to dig in a little bit more on margins. Certainly outperforms in the quarter and this is probably what I have characterized as a core CECO margins. Earlier in your energy had been down because I think the large GE project in Saudi Arabia and I think that was pretty into 3Q and then exit after that. Looking at that, that is a pretty negative drag on energy margins. If that's exiting, we should probably see a pretty good jump in energy margins into the fourth quarter. Can you just give us a little detail on what’s happening in that segment and the potential going forward?

I think Q3 and Q4 should be pretty consistent. I think one of the important aspects of CECO is we are very focused on project precision, project execution, operational management. So the DNA of our business is always to try and improve project profitability in everything that we do. So each business is striving to improve on that and I think a little bit of that came out in Q3 but I also think we picked up a little bit of additional aftermarket business that carries a couple of few additional gross profit points with it. The STS job that you’re referring to, we pretty much have digested most of that and we’ve picked up a lot of business, other businesses in that sector with a little better margins. So that’s, kind of, how we are thinking about it but I also think these are pretty solid margins and probably carry through for Q4. As you know over the next mid-term, our goal as a Company is to get the 15% operating margin. That’s what we are preparing for. That's what we are improving our business for in everything that we do. So in the next couple of years, we want to be a 15% operating margin business but I’m, kind of thinking Q4 should be pretty consistent with that if we can do a few more things that we are working in Gerry.

Okay. That’s helpful. I mean I certainly look at that as the energy side sort of positive lead forward. And then bookings, I think at 88 million in the quarter, I think 10 million was from PMFG, so we are looking at 78 million, little weaker than expected I think you entered the quarter with 14 million spilling over from the second quarter and I know there is a little spill over again into the fourth quarter you mentioned, I think about 8 million but what can we do to improve bookings going forward? I mean booked-to-bill, it’s probably a 0.9, a little under 1. What little clarity on that maybe.

Yes, you’re right. You’re exactly right. Actually I expected more bookings in the quarter through a couple of our segments. We did pick up a couple of really nice orders in the early part of October. One being in the $8.4, $8.3 million natural gas turbine power order that are energy technology group, did a terrific job on for a major OEM. So we are really excited about that. That kind of validates our technology and our strategy is working but there is a couple of more orders we expected in Q3 that we didn’t get and everything we are doing is around sales leadership, sales excellence, bringing the portfolio together that we can provide a better end user value proposition. And we expect to grow our business further in the next few years and quite honestly, I was expecting a little more in Q3 on the booking side. So a good point. We have a excellent team in place and everybody has metrics and focus around improving sales productivity. We have added sales leadership in some of our businesses as you know during our fluid handling investor session in Telford and we are on the right track, we need to do a better job.

Okay. Is some of the bookings that I guess came in a little bit under your expectation, is that being beat out on price as I think someone else mentioned, there has been some CapEx pushed out, maybe a little bit more competition. Maybe a little bit more clarity on that front?

Actually my outlook on our business as we study our sales dashboard is very consistent with the past quarter. Activity is solid, our team is very focused and very geared up to capture that business with our great technology. We’re being recognized as a premier engineer technology company with some of the biggest OEM and blue chip companies on the planet are placing orders with us due to our engineered technology. But our outlook is solid and we are very focused on price management. I think some of the increase in the margins had to do with not only project excellence but price management or price realization. We are very focused on optimizing pricing as we bring in good order. So, my outlook is pretty consistent with the past quarter but I do think we are getting stronger. As a business I think we’re getting stronger as a sales organization and our expectations are escalating as we turn into 2016.

Thanks a lot Jeff. I appreciate the detail. I’ll jump back in queue.

[Operator Instructions] The next question comes from Ryan Cassil of Seaport Global Securities. Please go ahead.

Hi guys, congrats on a nice quarter. Just coming to three things together here, as was previously mentioned sounds like organic bookings were flat or down and yet you’re looking for an acceleration in organic growth in the fourth quarter. Perhaps you could just help me bridge the disconnect there and what are the project timing of things you’re shipping whether aftermarket is really going to bridge that gap?

First off I view the outlook in the next quarter to pretty consistent with Q3 in running our business. However there was a couple of orders we picked up in October that we didn’t pull into the quarter. I am also expecting a little more from a couple of our other sectors that might have shown a little bit of – little less bookings intake in Q3. And quite frankly our goals are higher, our internal operating plans are higher than some of the bookings we are delivering. So our expectations are higher, our total logs are strong, but as you can see, you see what the run rate looks like for CECO and that’s kind of how we are looking.

And just to add to that Ryan this is Ed. The backlog right now at 212 million is rather strong. So that is going to drive the revenue in Q4, a lot of that revenue is in the backlog right now. So yes, we need to keep booking intently and we will but the organic revenue growth in Q4 is largely going to what’s in our backlog now which is an all time high. So, we are very confident in that continuing growth here in revenue in Q4.

Okay. All right, thanks for that. Any sense you could give us on what aftermarket grew in the third quarter, I’m sorry if I missed it if you already gave it?

Hi Ryan. We are focused on aftermarket as a company across all the businesses. We have an excellent leader in aftermarket Steve Fritz who is leading that strategic initiative for us. Each business is investing in aftermarket, sales engineers, we know where our installed base is of $5 billion, we have weekly metrics focused on that. All the businesses are doing a little bit better in aftermarket. Some are doing better than others. But I would say it’s across the organization. All the businesses are focused on aftermarket growth and so I would want to just pin point one, it’s a significant initiative at CECO to improve our aftermarket mix and our aftermarket margins.

The percentage you are asking is rather similar, legacy CECO is still at about one-third. Keep in mind that Peerless is lower than that. So your blended average we’ll be talking about aftermarket as a consolidated company now, moving to 25%, we’re going to grow that backup but you need to sort of level set the weighted mix now will be lower than our prior 30% due to factoring in the effective Peerless being significantly lower than legacy CECO had been.

Okay. I guess I was trying to get a sense for what that aftermarket base grew in the quarter for you guys.

The base you’re saying of the installed base?

It’s a great question. We are working on that internally and we’ll provide a couple metrics around that when we wrap Q4 2015. We are working on that and we’ll be publishing some metrics on that on our next call. That’s a great question.

Okay. Thanks guys. Appreciate it.

The next question comes from [indiscernible] of Jefferies. Please go ahead.

Good morning, guys. Jeff I believe in your initial commentary you mentioned, you gave numbers for acquisition in the quarter if you can just repeat those numbers like how many from – how much you got from Peerless and the other acquisitions?

This is Ed, Peerless contributed 12.6 million of revenue in the third quarter. The other acquisitions contributed a combined 21.2 million in the quarter.

Okay. So I take both of those and that’s about like 33.8 and so the course kind of give me like if I compare to last year, that would be 2%, would that be something like or you had like 4.5%, I don’t know if there –

There was significant FX – the 4.5% organic growth rate is assuming a constant FX rate –

So the remainder is FX over there.

Yes.

And we did pull in that very large natural gas tower order a year ago Q3 of 2014, and that has an impact on the comparables.

Okay. Got it. And Ed if you can just give me of the amortization and the earn-out like how much was – we had like 9.3 in this quarter, how much amortization was and how much was earn-out of that?

The split of that – that will be in the 10-Q that filed all the details of that. That has one month of Peerless in there. Obviously Peerless is going to add to the amortization rate going forward. We’ll have that in the queue. There will be projection there of the annualized amounts going forward.

Okay. The other question basically on the asset sale lease back, I think Jeff mentioned this was a greater opportunity from the number of facilities - manufacturing facilities owned by Peerless. How many facilities do they have and how many they own and what’s the opportunity here.

We are looking at the sale lease back across the board CECO and Peerless again for the collaboration. There was a couple of additional opportunities on the CECO side and there is probably a couple of opportunities on the Peerless side. There is a facility we will be – is that for sale now and there is another facility coupled with a CECO facility, I was looking at a potential sale lease back opportunity. We are starting it, we are evaluating it. We can provide more detail in 2016. Those take a little time and we are in the evaluation stage right now.

Okay. And the last question for Tracy. Tracy I believe you spoke about the purification technology, globally I think that market you mentioned grew 5% to 7% or has potential growth going forward of 5% to 7%. Do you know how much China, what’s the growth on China if you have anything on that?

When we look at China - that’s a good question. We have long term commitment to China and our metrics and our industry show over a long period of time they are going to grow a 2x to 3x data of the GDP or the USA. And it’s a significant largest pond for us with very low share. So our answer is it's probably going to be 2x to 3x that will be USA and that’s one of the reason why we are very invested there for the energy, industrial and environmental technology strategies.

Got it. Thank you very much.

This concludes time allocated for questions on today’s call. I’ll now hand the call back over to Jeff Lang for closing remarks.

Thank you very much for joining our call. Have a nice day.

This concludes today’s conference call. You may now disconnect your lines. Thank you for participating. Have a pleasant day.