Good morning, and welcome to the CECO Environmental Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there'll be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Matt Eckl, CFO of CECO Environmental. Please go ahead, sir.

Thank you for joining us on the CECO Environmental first quarter 2018 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 Web site at cecoenviro.com. The presentation materials can be accessed through the Investor Relations section of the Web site. 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 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.

Good morning and thank you for joining us. I'll begin today's call with a summary of our first quarter results, which I am pleased to say shows we're building momentum as a result both in market recovery and the traction gain from the implementation of our 4-3-3 operating strategy. I'll then highlight some specific actions we've taken or completed as we continue to transform CECO to become a market leader in air quality and fluid handling solutions. Matt will then go into the first quarter financial details, and I'll follow that with a wrap up by offering some thoughts on the outlook of our end markets and a couple of examples of our success in protecting the environment while gaining share and creating value. Turning to slide three, it's apparent that we're moving forward and building momentum in the first quarter. And as you'll see, the numbers are beginning to reflect the actions we've taken. Orders were $95 million, which is up 13% year-over-year, and 4% sequentially. I'd like to emphasize that it's the second consecutive quarter of both increase in bookings and a positive book-to-bill ratio after a series of quarters with a book-to-bill of less than one that dates back to Q1 of 2016, swift [ph] key milestone in our turnaround strategy of the company. You'll see that the refinery and fluid handing areas lead the way in our Q1 bookings growth. Our gross margins were also favorable, at 34.5%, which exceeded the 2017 total year average. Our team continues to demonstrate the value of the CECO brands and deliver projects with solid execution. And our non-GAAP operating income and adjusted EBITDA improved versus the fourth quarter of 2017 based on our cost restructuring actions and rebounding refinery market. We completed the sale of two non-core assets in…

Thanks Dennis. As we get into financials, a quick reminder that our non-GAAP adjustments include but are not limited to expenses associated with acquisitions, divestures, executive transition, facility exit, 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. Kicking off with slide eight, I want to echo Dennis’ remark that Q1 results demonstrate a shift towards positive momentum. This team understands the meaning of execution and delivered on many fronts in Q1 coupled with a rebound in our refinery market. Our orders were $95 million which was up 13% year-on-year as our Emtrol-Buell business booked $24 million of orders more than all of 2017 combined. The rebound in Emtrol-Buell has also helped to lift CECO orders sequentially by 4%. Revenue of $74.1 million was down 20% year-over-year primarily due to lower backlog within our long cycle businesses at the beginning of the quarter. What is happening is that revenue has slackened up sequentially. And with orders up over the past couple of quarters, we are poised for growth. Our GAAP operating profit was exceptional at $12.2 million due to the book gain on sale of both Keystone and Strobic. Cash flow from operations in the quarter were $3.2 million which is not a better performance due to depressed revenues. However, I am pleased to with our conversion EBITDA at 55%, which I’ll touch on later. Non-GAAP gross margins at 34.5% were still strong in the quarter and exceed our 2017 average of 33.5%; a good start for the year. Q1 non-GAAP operating margin at 5.4% marked a turning point from prior period loss as our cost restructuring actions are keeping SG&A in…

Thanks, Matt. As you heard, we are building some positive momentum. Our 4-3-3 operational strategy has kicked off with early wins and positive results to show already. This strategy will require more time to fully gain traction and capitalize on the attractive end-markets that we have chosen to operate in. It's all about execution, and also the challenge. Before moving to your questions, I want to share some quick thoughts on the outlook of our end-markets and offer a couple of examples of projects where CECO is shared environment while gaining share and creating value. Slide 17 shows that with the exception of power generation, all of our served markets are trending up. Let me offer some color beginning with our energy solutions end-markets. We anticipated that the refinery segment that we serve and demand for our market share leading FCC cycle will return as maintenance could no longer be differed. As oil prices stabilized, CECO and our highly responsive team remain well-position to capitalize on increasing demand. Midstream oil and gas market segment also continues to be positive with activity picking up in the Middle East in particular. Power generation is still there, and likely to stay down in 2018 based on projections with largest players in this space. However, we have significant opportunities to gain share and we are pursuing those aggressively in the area of silencers and SCR machine controls. CECO's reputation, including strong brands such as Arding and Peerless based on capabilities and staying power make us particularly attractive in the down market where owners need partners to ensure the success of long cycle power plant assets. In the coal power segment, we are accelerating our effort to servicing our largest install base with aftermarket support and resize those operations accordingly. This impact both China and…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And the first question comes from Julius Sanders [ph] from [indiscernible]. Please go ahead.

Great job. You guys have definitely turned the company around and going the right direction. I have one question. With the stock trading at an all-time low is there any reason why we are not taking advantage of stock buyback and purchase at such a low price?

Yes, thanks, Julius. So what you've seen with the proceeds that we generated and the free cash flow that we have, we have had a commitment through our banking agreement to use the first $25 million from proceeds and target that towards debt reduction as a part of our overall banking agreement. And we think that is also prudent in the context of looking at growth investments in the business. So as we look forward we certainly, in the future, would consider those kind of things, especially as you noted, where we find our current share price. But I think the business right now is focused on the best long-term returns. And we think there is a number of areas where we're reinvesting into growth programs that will generate those kind of returns.

Okay, thanks for your answer, and keep up the great work. Appreciate it. Have a nice day.

Thanks, Julius.

And the next question comes from Gerry Sweeney from ROTH Capital. Please go ahead.

Good morning, Matt and Dennis. Thanks for taking my call. I apologize; I'm multitasking on a couple of calls this morning so this may or may not have been covered. But I did hear you talk a little bit about Keystone and Strobic's divestiture, and the positive impact you had on the balance sheet. Could you walk me through maybe some of the -- what that does to the income statement, how much orders were there, maybe the margin profile of those two businesses in comparison to, I guess, the Fluid Handling segment in general?

Yes, thanks Gerry, and good morning. In both cases what we agreed upon with the buyers was that we would not disclose the specific details. However on both our statutory reporting and as well some of the key metrics we did released with the individual releases in both of those transactions. And so I'll let Matt comment a bit on how that really comes out and why we think we both sold a good business to a good future owner, but also why we think we got a good value for our shareholders and the like. What I would tell you first, before I let Matt comment on the specifics around the details there, is that in both cases our strategic assessment last year said our target customer base is heavy industrial. And that's the community that we think we can help. We can help with their growth programs, their expansions, and with helping them run efficient operations. And in both of these the target end markets of both Strobic, which was largely commercial and institutional. A good business, but less of an overlapping fit. And Keystone, which had a residential component to it as well, and somewhat of a consumer oriented component were just the reasons that we said we're probably not the best long-term owners. Matt, you want to update what we can on the financials of the transaction?

Sure. If you take a look at our 8-K filing for the Strobic transaction was published, you'll see that the Strobic operating income was $1.6 million, and revenue was roughly $18 million. And we published the Keystone revenues as well, roughly was a little bit under $4 million for last year, Gerry. And I would just say that as far as operating income goes directionally in line with Strobic. And then your second question was for Fluid Handling, how does the margin profile look, what I'd say is it's -- both those businesses were below the operating -- or sorry, the gross margin profile of Fluid Handling's segment. And then last thing I would say is, while not the best metric, we did disclose revenues on a sales multiple basis. The two businesses generated 1.6 times sales which is more than twice CECO's recent valuation. So I'd say we generated a return significantly above CECO's recent valuation.

Okay, that's helpful actually, got it. And, again apologize if this was covered, but you had been looking at divestitures. Obviously you had Strobic and Keystone. I think you're always sort of maybe looking at some other pieces of the company I know to top performance and there could be [indiscernible], but any other opportunities internally, you think? Are you done with the process? And are there maybe small tagalongs or maybe something larger still out there?

I think that when we think about 2018 we're largely complete with the shaping of the portfolio. The growth platforms are now really what's in focus to get on the front foot to make the necessary investments to continue to lean into what are mostly good markets. There are few areas that we said are not part of what we think are investing or areas in the company that we're investing, like coal and nuclear component of the business. But we're largely aligned with what we think we can drive forward and grow the business. And as I said, get back to gaining market share.

Okay. Switching gears a little bit over to maybe some of the end market stuff, midstream oil and gas -- I mean, obviously upstream is performing very, very well. I think if you listened to the Halliburtons and Schlumbergers of the world they're even talking about money originally earmarked for international investments coming to North America because it's short-cycle oil and it's just easier, quicker to market and a heck of a lot less risk than large offshore fields, et cetera. How much activity are you seeing in midstream? How big was this in the last peak? Any shape, any -- sort of provide any shape around that context if you could?

Yes, well I'll just say first that when you're thinking about our midstream oil and gas segment that we have on our page 17 of the deck that we released, we're a lot more gas oriented than oil. And so a lot of what we're doing throughout the world, both North America, Asia, Middle East is a lot more around gas separation, although we do have some areas to make sure that we can do separation of water from oil which is an important component in the process. There's LNG activity, a lot of which has been earmarked and is moving, but there does appear to be a wave still in front of us. I don’t know if we have data here to talk about last peaks and valleys, but there's a decent amount of activity and it's not just shifting to North America, it is in a balance right now with oil prices well above what people are using for their investment hurdle. It's just making some of those decisions that our customers have deferred more attractive than they would've been at, say, $50.

Got it, that's helpful. And then do you have a targeted sort of leverage ratio where, obviously, lower is better, but at some point just from financial standpoint you want some balance. What are you targeting if you can discuss that?

Sure. So you obviously know that we operate in cyclical end markets, so studying a specific target is challenging. But we would prefer that our leverage ratio not exceed two-and-a-half times at the trough of the downturn, right. And we want to be ahead of a downturn to execute to that level. Obviously we're in the downturn. We think we're coming out of that downturn. And this guideline provides ample capacity in the future to invest, so the upturn when our competitor may struggle. So we want to make sure that we have ample cushion into the future. And that'll be our kind of target range for the foreseeable future.

Got it. And then final question, I mean, if there was one area that you're most excited for in 2018, is it the rebound of, I think, the SCR catalysts or is it just the broad portfolio?

I'm excited across the board. The momentum that we're starting to build into the market, the team's excitement to go out and execute has me excited across the board. It's been amazing even to our own guys who are very close and connected in the refinery segment. The amount of business that's been pulled forward and the success we had in the first quarter alone on new orders off of Emtrol-Buell, which was really a drag on bookings in the last 12 months. So that's exciting. We got a great team; we got a great business, a great franchise. We told most of our team understood that. I think we told most of the investment community that we had a good business, and when the market pulls back we'll demonstrate it. And I think they are demonstrating the strength of we've build over a number of years. So I'm excited across the board. When I think a little longer term, the amount of room to continue to step and lead in industrial air quality improvement in North America, in Asia, and -- are big opportunities for us. And in the longer-term we are inching our way forward really creating the platform that customers want and need and expect.

Got it, that's helpful. I will jump back, thank you very much.

Thanks, Gerry.

[Operator Instructions] Being that there are no further questions, this concludes our question-and-answer session. I would like to turn the call back to Mr. Dennis Sadlowski for any concluding remarks.

Hi, thank you, and thanks again for joining us on our call this morning for first quarter earnings release. I like to just close by repeating that it's clear that we're gaining traction with our 4-3 operating strategy and the focus that brings to our team and approach. And there is momentum that's building. It's modest in terms of the bottom line results, but I believe that's showing that we are getting traction in the market. And our markets appear to be rebounding and relatively solid. Outside of the power-gen space, no excuses, so going forward, we will be pretty bullish. We like what we are doing, and we look forward to speaking with you again in 90 days. Thank you.

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