Good morning, and welcome to the CECO Environmental Corp. Conference Call. All participants will be in listen-only mode. [Operator Instructions]. I would now like to turn the conference over to Matt Eckl, Chief Financial Officer. Please go ahead.

Thank you for joining us on the CECO Environmental fourth quarter 2017 conference call. On the call today is Dennis Sadlowski, Chief Executive Officer; and Matt Eckl, Chief Financial Officer. Before we begin, I'd like to note that we have provided a slide presentation to help guide our discussion. The call will be webcast, along with our earnings presentation, on our website at cecoenviro.com. The presentation materials can be accessed through the Investor Relations section of the website. I would also like to caution investors regarding forward-looking statements. Any statements made in today's presentation that are not based on historical facts are forward-looking statements. Such statements are based on certain estimates and expectations and are subject to a number of risks and uncertainties. Actual future results may vary materially from those expressed or implied by the forward-looking statements. We encourage you to read the risks described in our SEC filings on Form 10-K for the year ended December 31, 2017. 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 have reconciled the comparable GAAP and non-GAAP numbers in today's press release as well as the supplemental tables in the back of the slide deck. And now, I'll turn the call over to Dennis.

Thanks and good morning. I want to kick off today's call by summarizing our fourth quarter results and offering some thoughts on our overall 2017 results as we faced challenges, made tough choices and undertook aggressive actions, which have already begun to show positive returns. I will then review our go forward strategy that we discussed on last quarter's call aimed at transforming the company, and I will add some specifics regarding the most significant actions and results we have already achieved down that path. Matt will then go into the financial details for the fourth quarter and full year 2017. Turning to Slide 3, it is clear that CECO continued to struggle in the fourth quarter as it did throughout 2017. Revenue declined to $73.5 million and was off about 27% year-over-year. Correspondingly non-GAAP operating income also declined to $3.5 million with a drop of 76%. On the positive side, our orders increased to $91 million during the fourth quarter. This represents a significant inflection point because it is the first time in seven quarters where our book-to-bill ratio is greater than 1. For the total year 2017, our revenue was $345 million, which was down 17% from 2016. Clearly these results were disappointing, but not at all unexpected given the challenges that CECO faced throughout the year. First off the end markets in power generation in the niche refinery segment that we serve experienced increasingly steeper cyclical downturns. Coming into the year, we foresaw the downturn in FCC cyclone demand after a couple of strong years. The downturn reached historical lows as oil and gas refinery operators continued to maximize their capacity utilization and deferred maintenance investments. Fortunately, we are seeing indications that this slump may have bottomed out and is now recovering. On the other hand, the…

Thanks, Dennis. As I walk through the financials I'll highlight some of the finer points that will include both GAAP and non-GAAP performance for the fourth quarter of 2017, as well as the full year. As a reminder, our non-GAAP adjustments include but are not limited to expenses associated with executive transition, facility exits, acquisition and integration, earn-outs, legacy design repairs, restructuring and goodwill and intangible asset impairments. Our non-GAAP presentation is intended to provide trend analysis and assessment of our core business performance. A bridge of non-GAAP items is referenced in the appendix. Starting with Slide 10, I'll restate that Q4 results were below last year and continue to be impacted by strong headwinds in the markets we serve, but as Dennis outlined, we initiated decisive actions last quarter and our execution on restructuring is already yielding positive financial results. Our orders are at $91.4 million, which was up 18% year-over-year based on power generation, refinery and air quality growth. Moreover, it was up 29% sequentially as our team executes in the rebounding refinery market and achieved share gain wins in the depressed power generation market. Revenue at $73.5 million was down 26% year-over-year primarily because of lower backlog resulting from slower orders during the first half of last year. Our GAAP operating profit reflects a loss of $8.2 million. I will note that this loss reflects a $7 million goodwill impairment, mostly on Zhongli, a $2 million restructuring charge and $1 million liability earn-out reduction. Cash flow from operations in the quarter of $7.7 million was significantly improved versus Q3 on aggressive accounts receivable collections. This is certainly good news and we remain confident that our business model and team can continue to produce solid cash conversion from earnings. Non-GAAP gross margin of 35% was strong in the…

Thanks Matt. In closing there is no sugar coating our poor results during 2017 despite the end market headwinds we have to do better. And we intent to. With slide 19, I would like to reinforce the early wins and positive momentum that took place since our last update and then highlight the outlook of our end market as 2018 begins. Guided by our 433 operational strategy we either continued or kicked off a range of actions and investments to enhance our value creation enablers. We substantially reshaped and strengthened our senior leadership team to enhance our capability to execute to win market share and create value. Our [indiscernible] sharp in the focus CECO to active portfolio management is underway and resulted in the recent sale of the Keystone filter unit with proceeds applied to reducing our debt. And we have the potential for an additional transaction involving a larger unit in the near future. We began streamlining our organization to be more efficient and responsive to customers and new opportunities by eliminating 10 legal entities and one ERP. And we implemented a downsizing the people and several location to adapt to current market conditions. Investment in our growth platforms is now prioritized and designed to gain advantages in our three end markets. The common investment spread across the platforms was extending our brand and their differentiation improving our customer service by realigning the sales team offering more lifetime value to aftermarket supports and technical expertise and making capital investments to improve quality in lead time to the manufactured product as sales volume pick up. The fourth quarter also serves as a positive inflection point in our performance that points to improve results going forward specifically orders increased by more than 28% during the fourth quarter. This helped drive the…

Thank you. [Operator Instructions] Our first question comes from Sean Hannan with Needham & Company. Please go ahead.

Good morning folks. Can you folks hear me?

Yes. Good morning Sean.

Hey Sean.

Good morning. Thanks so much for taking the question here. So first question I have for you is if I look at the slide Dennis that you just put out at the end of presentation it looks like as you break down the market segments you guys are actually looking for a revenue rebound here in ‘18, that ‘18 should be appear and so, you know you are not going to guide towards that but if these directionally does that seem like something that we should all be kind of thinking about and considering the model.

Thanks Sean. The first stuff let me say thank you for joining us and I hope you are getting through the weather trouble you are having there in the Northeast safely weather and power…

I am actually stranded in Toronto as a result. In any case.

I am sorry to hear that. And I know you have others in the Northeast as well as long as some of our own colleagues being stranded through the tough weather in the last couple of weeks. But as far as our outlook I would say that when we look at the bookings outlook between the rebounding areas for refinery the strength that we see in industrial and the ability to pick up share in some of the other segments I would say yes we are looking for bookings increased as we go throughout the year relative to last year’s numbers, last year's markets and last year's outlook. That said I wouldn't say also tell you that last year we came in to the year with a stronger starting backlog position and so it always takes time before revenue catches up with our bookings in that you understand a good portion of the company has relatively longer cycle product areas and so from the standpoint of how quickly those bookings increases start to turn the revenue increases that will be something that I think in the first half what we will still have higher comparables and then the backlog supports hopefully in the second half we will absolutely be ahead in lapping last year’s performance.

Okay. So is this slide, do we interpret this slide in terms of mixed market dynamics? Is this a new point for or is there a set of new points for ‘18 that are more relevant to bookings or is it specific for revenues? Just trying to make sure I understand this.

Yes. What we attempted to do here for you and all the others who follow the company is to better give you with depiction of where are we linked to the end markets and what’s our view point or what’s happening in those end markets so this would be our view of how we see the end market activity in aggregate and that would then be an indicator of where our bookings and our new orders should follow provided where we either gaining market share and way we can even out perform some of that directional information. And so yes this is something about outlook which then first translates to bookings before it translates to sales.

Okay. So that being said maybe Dennis if I can ask looking through some of the end market shares when do you sense bookings within power generation could hit an inflection point? Do you feel that you have a handle on when that perhaps, A, either stabilizes, or B, has an opportunity for pickups or what are some of your thoughts on that?

Yes. So the power gen market in aggregate I would tell you that our pipeline of opportunities has resembled kind of what we are hearing from the bigger OEMs in the market and from what we are seeing. So it's down starting maybe year late spring last year and it's continued to be a lot softer. Now that said, you can see in the fourth quarter our bookings were actually up. So that is in part because of the what we are experiencing is customers needing people who can absolutely deliver even in tough conditions who will stand behind what they do, who have great technology, and who understand the applications to really dial in the best solution on a variety of applications and so we are confident that in the fourth quarter we are picking up shares. That subdued pipeline however, it's likely to continue in the power gen segment through much of 2018 that's what we are anticipating. Our actual bookings therefore will be a result of our ability to execute and continue to gain share but we do have some sizable projects that if they get funded could both well for the company but overall the pipeline is matching what we are showing on the chart and likely to be fairly subdued in the aggregate.

Okay. That's helpful. All right. Two more questions here and then I will pop out of the way. So last well, first of the two on the bookings front what are you seeing thus far two months now into the March quarter. What are you seeing thus far? Is there a continued trend or anything to green off of that activity and then the second question is based on understanding the lag that we can go through from bookings to revenue activity do you have a sense in terms of when the inflection point could be not necessarily holding you to this but is there an opportunity where say the June quarter could be a revenue inflection point we start our uptake again. Thanks so much for taking time folks.

Yes. So I might let Matt comment on the second part of your question as best as we can at this juncture. Normally we don't talk about the quarter we are unlike but since you asked we are two months into the new year. And all I can say is that the momentum is positive in the segments that I outlined on the market dynamics page that you asked about are showing decent amount of support. They are showing activity both domestic. We are seeing some oil and gas projects picking up in the middle East that we have a very good team and a very good focus on. Power gen I already mentioned is not in the best shape but still there is work going on and there are people coming to us in support of the great work that our team can do in support of the reliability and trust they have through our organization and the refinery segment I mentioned again against the year ago what we are seeing pickup in expectations across the board there as well. And so we have muted expectations there to a degree but a lot of activity is picking up. So on with that I could say yes momentum is in our favor. There are few areas that they could create significant movement. The 232 tax on metals actually has a mix bag. We have a number of metals customers planning investments and I think some of those the payback could get immensely improved and therefore perhaps move the pace forward on investments and at the same time there is at least one project I think it is sorry in NLMK Russian subsidiary who is planning on investing 600 million but their whole premises is based on bringing in slabs from the Russian parent. Those are subject to the 25% tear off and so that too could create a little bit of the mix bag. It's way too early to say where that will settle and how it will impact us. But that's an important segment when they are investing. That I think was a question about the ability to translate bookings to revenue and what if anything we can help Sean with.

Sure. So we will to think of it that we can start recognize revenue on orders booked anywhere from three to nine months basically depending upon the mix of which businesses those orders are placed on. If you were to look back in Q4 and say hey where these orders booking for early Q4 then you may be argue that maybe we can start to see the revenue recognizing Q1 and Q2. So I would say the inflection point is probably in the middle of the first half Sean.

Okay. Very good. Thank you so much. That's very helpful.

Okay.

[Operator Instructions] Our next question comes from Gerry Sweeney with ROTH Capital Partners.

Good morning Matt and Dennis.

Hey Gerry. Good morning.

I apologize. I [indiscernible] due to some other calls but so if anything were done I apologize in advance. But Dennis just maybe jumping back to the slide 20 the dynamics the market dynamic slide obviously we are starting to see some end market improvements but I was just curious as to a lot of changes going on at CECO and historically CECO a little bit challenged on some of the organic sales front. Do you have the right people in place to capture some of this uptake and then also can you add improved to sort of sales that maybe increase some of this opportunities that is starting to develop?

Yes. So thanks Gerry. So the question really about organic sales growth is both a do we have the people in the front end, we have the coverage to the right talent pool and the like as well as are we positioning that properly and the like. And so I would tell you that on absolutely we have a great team and our engineers, equipment platform who really have come together globally a lot better than the past utilizing the depth of expertise that's behind them and really demonstrating a number of team wins. A project that Matt referred to and that we had a brief commercial announcement on what was peerless led SCR project to help make sure that we control and reduce Ozone [indiscernible] but it was really the entire exhaust chain that we are supplying for this particular client in that it uses the depth of expertise on dampers an expansion joints from [indiscernible] the stack silencer expertise that we have within our unit. So really it was integrated win for the company with peerless hit the front end because the core technology was [indiscernible] reduction. So those kind of things and that kind of team work is gives me a lot of optimism that we can continue to gain shares within the market. When we go across the industrial air quality solution set we have a variety of very talented application unit people and what we are doing is continuing to invest and build that out so that we can be recognized in key industries and key customers as not only an oxidizer leader with their adverse line not only it does collect earlier with our flex clean line but really as the experts in industrial air quality solutions with the ability to apply the right product and understand that the customers process for whatever those air quality needs are. And that's where we are supplementing our team right now I am still reading that segment and that's an area where we are going to be upgrading and adding to both the commercial team but ultimately I will be turning that over to another leader in the near future as well.

Got it and then I apologize if this was talked about but obviously the [entire] business was under a lot of pressure last year. Refinery turnarounds were down. And it sounds like that is certainly picking up I think even now with couple of wins. What can you remind me -- I think that business went from 15 million to 10 million or something like that. And could you maybe give us an idea of how much that business could come back this year. Could it be on an annualized run rate back to the historical levels which would maybe round of 15 million maybe a little bit detail around that if possible?

Yes. Let me just make a couple of comments there quickly. I think the understatement of the call would be that [indiscernible] was under pressure because we were experiencing a 30 year low in new demand. And so we -- I believe were in the neighborhood of 60 million in bookings in ‘15 and ‘16 and went to a period where we had in four straight quarters I think we had 10 million of bookings so it was an enormous drop and our data would suggest even with that enormous drop we actually gained a few points from market share. So this was very much a market issue and not a performance issue. That said, if you look over a longer term history the businesses operated in the neighborhood of 15 million annually and we think that gradually over an 18 months to two year period that will work its way back up to those levels and so right now what we are seeing some pretty good demand and really strengthening as we did in the fourth quarter and we hope that that something that can continue into the quarter and into the rest of ‘18.

Got it. Okay. I really appreciate it. Thank you.

Yes. Again no [indiscernible] that I have the caution to all of that optimism is last year we did ship quite a few projects early in the year and quite a lot of backlog and so that is one of the areas where we will be in rebuilding that before it translates to revenue most of our projects execute over at least to 12 month period.

Great. Great. Thank you very much.

[Operator Instructions] At this time I am seeing no further questions. So I would like to turn the conference back over to Dennis Sadlowski for closing remarks.

Okay. We thank you all again for joining us and specially those of you in the major storm hit and affected areas. I look forward again to sharing our further progress as we talk to you again on our next call. What we are experiencing some pretty good momentum we are investing behind our 433 strategy and again I look forward to giving you update in 90 days or so. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.