CECO Environmental Corp. (CECO) Q3 2012 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen and welcome to the Third Quarter 2012 CECO Environmental Earnings Conference Call. My name is Chantallae, and I will be your facilitator for today's call. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to your host for today, Mr. Benton Cook, Interim CFO. Please proceed, sir.

Good morning. Also joining us on the call this morning will be our Chairman, Phil DeZwirek; and our CEO, Jeff Lang. 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 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, including our Annual Report on Form 10-K for the year ended December 31, 2011. 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 you may hear today, whether as a result of new information, future events or otherwise. Before I turn the call over to Jeff, I want to make a few brief comments on the quarterly results. As you can see from our earnings release, CECO operational results, both on a quarter-to-quarter and a year-over-year basis, continue to be favorable. And now a brief review of a few key results for the quarter and 9 months. For the third quarter of 2012, net sales were $33.1 million, as compared to $32.9 million in the same period of 2011. Gross profit increased by 8.6% to $10.5 million, compared to $9.7 million in 2011. Gross margin increased to 31.8% compared to 29.4% for the same quarter in 2011. Operating income increased to $4.3 million in 2012 as compared to $3.3 million in 2011, a 28.4% improvement. Operating margin increased to 12.8% from 10%. Net income was $3.3 million compared to a net income of $2.3 million. Net income per diluted share was $0.19 compared to $0.14. Bookings increased by 17.4% to $41.8 million compared to $35.6 million in 2011, same quarter. Cash and cash equivalents remained strong at $24.5 million compared to $12.7 million as of year end December 31, 2011. And we continue with no bank debt on our balance sheet. Backlog as of September 30, 2012 has increased to $67.6 million compared to $54.9 million as of year end December 31, 2011 and compared to $55.3 million as of the quarter end September 30, 2011. Financial highlights for the 9 months ended September 30, 2012 compared to the 9 months ended September 30, 2011 include: Net sales decreased slightly by 0.7% to $100.7 million as compared to $101.4 million; gross profit increased by 16.3% to $31.3 million compared to $26.9 million in 2011; gross margin increased to 31% from 26.5%; operating income increased to $12.3 million in 2012 as compared to $8.6 million in 2011, a 43.3% improvement; operating margin increased to 12.2% from 8.4%; net income was $7.8 million compared to net income of $5.5 million; net income per diluted share was $0.47 compared to $0.34; and year-to-date bookings have increased by 10.7% to $113.4 million compared to $102.4 million in 2011. And now I'll turn the call over to our CEO, Jeff Lang.

Thank you, Ben. Good morning, everybody and thank you for joining the CECO Q3 Earnings Call today. We appreciate your interest in CECO Environmental. CECO had a good quarter for our shareholders and our employees. As Ben mentioned, $0.19 EPS for Q3 and $0.47 year-to-date EPS. Looks like we'll be exceeding our income framework for the year. We continue to execute on our core strategies that we've been focused on for several years: Profitable growth domestically and globally; operational excellence in all that we do; building a more reoccurring revenue model along with our engineered equipment base; acquisitions; and developing our talent. We're very pleased the CECO team is heading in the right direction and we're very motivated to continue growing and improving our business. And as we've mentioned in many calls before, we're striving to become the clear leader in the air pollution control sector and product recovery markets that we serve. A couple of comments about activity. We see our quotation activity as strong as our RFQ activity intake is as strong and as consistent as it was in Q2. So that's a positive indicator for us. Regarding our sales focus, the teams have reinvented our sales engineering dashboard processes to make sure we have tremendous focus on all our quotation activity and we improve our close rate. We're calling it, sales management intensity, and I'm very pleased that our business development leaders across the company have really found a new gear to help CECO bring in business. Regarding bookings -- regarding bookings, we booked $4 million (sic) [$40 million] in Q3, which is about 17% ahead of last year. We also booked $40 million of bookings in Q2. So that seems to be a very nice trend for us, and we're very focused on doing that in Q4. Along with the $40 million in bookings, we're seeing some nice gross profit and the company's doing a really good job getting more price and a little more value for the great technology and brands that we have. So there's some more positive trends on the gross profit front. Now I'd like to talk a little bit about our businesses and the divisions. Our Parts group -- our Parts business is having a very good year. Nice growth and nice margin expansion and the outlook is solid. This is a reoccurring revenue business that we're committed to growing at a very fast rate. And this business targets the large general industry domestically. Our Utility business, EFFOX, is having a good year and had a good Q3 with nice growth and nice margin expansion and the outlook is very strong from our EFFOX team, as we turn into Q4 into next year. At the same time, our Natural Gas Utility business, the Flextor segment is seeing -- is having a good year, and we're very keen on growing that business, both organically and through acquisitions to build that business up to the same size as our EFFOX division. Our Contract Engineering Services business is having a good year. They had a very strong Q3. Their activity is strong. They've made significant improvements in their operating margins, in their gross profit this year and we've added some positions in that group and we're seeing a tremendous quotation activity here going into the fourth quarter. Our Cyclone Technology division is doing solidly. Our Fisher-Klosterman Cyclone business is seeing an uptick in activity. They target principally petrochemical markets, gasification, metals and some consumer goods sectors. The -- our other cyclone technology division, Buell, which targets the refinery markets globally, is having a good year. They saw a little flatness in Q3 in bookings, but I think the activity going into Q4 is starting to pick up to see some growth there. CECO China is doing well. Activity is good, bookings are up. We're entering our eighth year into China. We have a great team in place there, roughly 60 employees and growing. And we continue to add sales engineering capacity, engineering capacity and introduce new products into the China market and we're very excited about continuing growing in China. Lastly, our CECO Filter business is doing well. We're expanding that business and we're -- and we've added sales -- we're adding sales engineering capacity into that business as we see it growing and the outlook is favorable. Just a comment on our -- the overall markets that we serve. We serve 7 or 8 very large markets. It's a diverse -- diverse markets. They're global markets, and we're very pleased in how that is going, because it balances our portfolio. We're not tied to just one principal industry or 1 principal market. The team has done a very good job diversifying our market segments. To name a few, refineries, utilities, the growing natural gas segment, large industries, petrochemical, mining. Also, the large automotive industries are doing well. And metals and some other specific consumer goods. So we're excited that our markets are diverse and that's a positive fundamental strategy about CECO. Along with the fact that we're building more of a reoccurring revenue business, along with our engineered equipment business. We think we're around 30% parts and service to date and 70% in engineered equipment technology, and we continue to expand that at a good pace. Regarding Q3, bookings were excellent and I'd like to mention a few orders that received -- that we received in Q3 to give you a little color around the types of orders that we're receiving in the regions of the world. Our Flextor division received a $3.5 million damper and diverter and expansion joint order for a large petrochemical plant in Australia. Our Filter business teamed up with our Contracting Services group and was awarded a $1.8 million order for a large asphalt chemical plant here in the U.S. Our Fisher-Klosterman Cyclone division, again with our Contract Services group, was awarded a $1.6 million order for a scrubber upgrade and installation for a large metals plant here in the U.S. Our EFFOX team landed a $1 million damper diverter order for a China utility plant, which is exciting because that team is executing on their strategy and expanding into the Asian market and we see more activity in Q4 and Q1 that could -- we could bring in regarding that model. The Flextor group landed a $0.5 million order for a Canadian mining application at good margins, so that was exciting. And lastly, CECO China landed a Fisher-Klosterman Cyclone order for about $850,000 for a poly-silicon chemical plant in China. So those are -- those were a few orders, to give you a flavor for the types of business we're pursuing, both domestically and globally to expand our business. Some comments regarding operating metrics and things we focus on to drive our business from an operational excellence perspective. Again, we -- year-to-date, we hit $0.47 EPS, which is in the neighborhood of a 38% increase from the previous year. Gross profit is now tracking well into the 30s, well above 30%, I should say. That's an important metric for us. Operating margins, as Benton pointed out, are now tracking well above 10%, close to 12%, so we're starting to see those type of operational metrics come on a consistent basis and we're pleased with that. Cash flow from operations improved from a roughly $5 million to $13.5 million, so some nice operational excellence in cash flow. And we saw similar improvement in the working capital this year from last year to this year, almost a $4 million improvement, so the team is doing a good job with their meticulous attention to project management, working capital and running our business day to day. With $24 million in cash, we see a nice pick up there and that again positions -- we feel we're positioned very well for smart, accretive acquisitions that we continue to make process step towards to help expand the CECO portfolio. Our backlog is at a three-year high at $67 million, so at high gross margins, so we hope to see a nice revenue pick up in Q4 and Q1, given the high backlog. Bookings are up 11% for the year. Our book-to-bill is over 1, so that's a nice trend. Year-to-date, we're at a 31% tax rate. Last year, we were at 29%, so we continue to do the things to improve that. We pay particular attention to our research and development tax credits to improve our tax rate. We picked up a net gain of about $500,000 benefit in Q3 and we continue to look at those areas in Q4 to make sure we're doing all we can to bring our tax rate down, as well as to grow our business globally, where we have lower tax rate countries. In summary, we're confident about our outlook. We're confident about our backlog and our activity and we're excited about the future. I want to thank our employees for doing a great job executing on our strategy. We have a lot more to do and we appreciate all that they do for us. So with that, I'd like to open up for any questions you may have.

[Operator Instructions] Your first question comes from the line of Rob Stone of Cowan.

I wanted to ask you, Jeff, a little bit about your quarterly seasonal pattern. We saw a pretty strong sequential uptick in fourth quarter sales last year. Is there a tendency for some of these customers to want to bring in big projects towards the end of the year? I know you're not guiding for sales per se, but if you could just give a little commentary on how we might think about the sequential trend in the fourth quarter given the strong bookings and backlog.

Yes, exactly. Q4 is typically our strongest, so that plays out. So we're anticipating a very solid Q4, given our backlog and given the nature of our business. Typically our customer base tries to get things wrapped up in Q4 and concludes their budgeting process. So I think everything you said is correct, so we're encouraged about Q4.

Okay. My follow-up question is on gross margins. If you could put a little more color on that in terms of -- I know there's a number of different things that are driving that. Any highlights you might want to mention from this quarter, in terms of mix or what's lifting the margins?

Yes, Rob. Mix is -- it's having a significant impact on our gross margins over the past couple of years. We're focused on the higher gross margin products. But I think we've been doing a really good job getting more gross margin for our products and technology. I think the great brands that CECO has, we're starting to get more value for that. And I think the sales organizations are driving a lot of that. I think our project management is becoming very good. We like to call it, Project Management Precision, so when we start a project at 1 margin, we finish it slightly higher. A lot of divisions have strong metrics around that. So I think we pay attention to it. The mix is better. We're selling at a higher gross margin, and the team's doing a very good job executing on projects. So -- and these are things we've been working on for several years now.

Great. My final question is on the operating expense trend. You've managed to hold that pretty flat, sequentially. As you think about the -- finishing the year, with revenue probably up quarter-on-quarter, is that likely to follow sales? Or are you still trying to control expenses at a certain level?

Right. We talk about that a lot. We're streamlined and we pay attention to that subject. We think we're going to be pretty close to that -- where we were last year? $25 million, $26 million range. So there could be a few things that could pop that up. We're looking to add a couple more sales engineers in some of our divisions, so we could see a little bit there to take on the growth that we're seeing. But all in all, I think we should be pretty close. If not, we should we within the zip code of that, but we should not exceed it too much.

Specifically, are there items that were hit in Q4 as part of your year end process? Or is it just the run rate of people and revenue that you have going now?

Actually, our run rate, and the way we've accrued expenses is quite -- has done much better this year than the past couple of years. So I don't see anything hitting us in Q4 above the normal run rate.

Your next question comes from the line of Dale Pfau of Cantor Fitzgerald.

A couple of questions, how much was China, in terms of revenues and backlog, if you could give us that?

Typically, we don't break that out at this time. I'm sure we might show that in the Q, but China's bookings are up. The metric I've been using is China was 20% of our operating income last year, and our goal is to keep growing that from an operating income perspective. But their bookings this year are up. I don't have that number in front of me.

Okay, and in the past, you've given us at least your top industries in your backlog. Could you do that?

Yes, sure. Power, Utility, Refining, Metals, Chemical and Petrochemical. And I'm sure Large Automotive is going to work its way up there pretty soon too, Dale.

Okay. And the bookings trends are -- have been pretty consistently up across, when you say that the quotation activity is strong.

Yes.

And how much of this do you allude to just a general uptrend in manufacturing and industrial activity, and how much of that is -- would you characterize as perhaps market share gains or improved awareness by your customers out there?

Definitely, we see the market picking up, so that's a piece of it, Dale. I also see the businesses and the divisions and our sales teams doing a better job creating leads and developing markets, expanding market coverage, getting more business globally. That probably has a lot to do with the way the teams are being more aggressive with taking share and creating market coverage opportunities. Probably a blend of both would be the answer.

Okay. And in the quarter, your parts business, you said was up to 30%?

Yes, we looked at it -- if you look at our Parts business from our OEMs, our pure Parts business from our Ducting and our Component Parts business, and then our Contract Services, if you look at all that, we think that piece of it is about 30% of the total.

Now, you also said that 70% is engineered services -- so is there any Contracting revenues at all?

Are there any Contract Services revenues at all in that mix?

Yes.

Yes. In the 30% reoccurring revenue and 70% engineered equipment, yes. Contract Services makes up some of that 30%. But if you look at -- if you break out it -- if you break out the divisions in the total, Contracting Services is about 20%, the Parts business in itself is 25% and then the Engineered Equipment is 55%.

Okay. So parts alone -- standalone is still about 20% and you get the extra 10% if you count probably the stuff going in your Contracted Services business, is that correct?

Exactly, you got it.

Okay. How much more upside do you have on the margins? How much can you squeeze out in terms of operating? Or is that going to have to do with mix in the various contracts?

You know, we study that question a lot. We want to grow our business. We have aspirations to get into that $250 million range and 10% operating income and $1 EPS in the next couple, 2.5 years. That's where, that's our midterm goal. But having said that, the team has done a really good job growing margins. A few years ago, we were 22%, 23%. This year we'll end up well north of 30%. So I'd like to say we're going be a 30% or better gross profit business, but at the same time, we want the ability to pursue all kinds of business that makes sense. So if we want to pursue a business that's a little bit below 30%, we want the ability to do that. So the simple answer is, I like to view us as a 30% gross profit business in general.

And 1 last question. How should we think about bookings trends in the fourth quarter? It's been mixed over the past couple of years in terms of booking strength in the fourth quarter. Because normally, you have a seasonally down first quarter. What are you expecting in the fourth quarter this year?

Well, our aspirations are to continue our trends. We don't give specific guidance in that area, but we had $40 million in Q2, we had $40 million in Q3 and our aspirations are to continue that. That's how we feel about that.

Your next question comes from the line of Steve Shaw of Sidoti & Company.

I got cut off, so forgive me if I get redundant. I know you mentioned the tax credits. Can you provide some more color on those and how we might account for those, going forward?

Sure. We applied for 2011 Research and Development Technology tax credits. We received a tax benefit of around $500,000 in Q3. That includes the cost to pay for the tax credit, as well as the tax benefit. So we picked up $500,000 in Q3. We have aspirations to continue focusing on R&D tax credits in Q4, and we're hopeful of picking up some in Q4, but we can't say for sure.

Okay, and what was the --

Steve, and also recognize that, that amplifies the R&D and the technology that CECO has, and I think that's a nice vote of confidence for CECO's great technology.

Right. And what was the primary driver for cash?

Cash flow?

Yes.

Cash? Well, the business is improving. Income is improving, receivables are coming down. We're managing our inventory better. Our gross profit is increasing, so we're... [Technical Difficulty]

Can you guys just repeat what you said about the cash flow, please?

Yes. Well, first off, the business is performing at a higher level. We're generating more cash. The gross profits are higher and operating costs are coming down slightly. We're just managing our inventory better, receivables are improving. So all those things that improve working capital and cash flow are generating more cash and we're not spending it.

Do you guys have a plan or anything in mind what you might spend that cash on right now, or?

We do, we're very -- as we said, Steve, for several years now, we have a great team focused on acquisitions. And there are several acquisitions that we look at every quarter and there are several that keep moving forward that -- we're looking at. So yes, if we find a nice acquisition, we'll use the cash for that.

Your next question comes from the line of Shawn Severson of JMP Securities.

So, in listening to a lot of other calls and commentary, talking to companies through the third quarter and into the fourth quarter here, there's been a lot of volatility, let's call it, and pushouts and it's been a difficult environment. And I'm just wondering, if you've seen that at all. I mean, would bookings be better? Could they be better? I mean, are you seeing these types of pushouts? Or has it been more "business as usual" for you because of the kind of the lifecycle or stages, I guess, of the business you're booking?

Well, Q2 and Q3 were good bookings quarters for us; 17% improvement in Q3 and 20% in Q2. However, I do think bookings could be better. We have seen some bookings in China that pushed out from Q3 to Q4. So I do think bookings could be better.

And is that -- and I guess, this is general economic conditions is the cause of that in your opinion? Or are there some special situations with those projects or, again, with this general -- general economic hesitation, I guess, where it would look at it?

You know, quite honestly, Shawn, I cannot give you 1 reason why some of those projects were pushed out. It's just the nature, the gestation process of buying engineered equipment. It -- I think it takes a little bit -- a little more time in China, but our quotation activity is very good in several of our divisions, probably modest in a couple of divisions and way up in a couple. I spoke with our business development group last night, and we looked at our sales dashboard and went through those. So some of our businesses are needing to add resources and sales engineers to keep up with the RFQ activity. So when we get to that point, I know our quotation activity is strong, and we're going to make those investments. But I do think our bookings could be better.

Specifically in China, obviously, with the power change coming on and talk about a China stimulus program coming in over the next few months, have you guys been hearing much about that, or specifically from the field in terms of projects that are kind of in the waiting, so to speak, that might pick up? Or have you not gotten that sense that there's sort of some pent-up demand there?

A little bit. We're operating under what -- the China Ministry has put down legislation and regulatory, enacted regulatory statutes that they've had to clean up their air and clean up their water. So we're operating on what they launched several years ago with plant air improvement. And so our product recovery technology is in significant demand and some of the other products that we introduced into China. So I don't think the stimulus is helping or hurting us, but I think the air pollution regulatory improvement in China is what's driving some of our activity.

Great, and then just lastly, on the acquisition front. I know it's an important part of the growth going forward. Has there been any change in the level of activity or pricing or anything new on that front in the last month or so?

Nothing new, other than it's a priority. We continue to make process steps towards our goals, and it is a priority to get to where we want to be.

Your next question comes from the line of Michael Lew of Needham.

Just a quick follow-up on the tax credits here. Jeff, you mentioned you applied for more. If you got it, would it provide this, roughly the same magnitude of a benefit in 4Q as it did in 3Q?

Possibly yes.

And you'd also commented on, just reading on, just comment on China bookings being pushed out a bit. How much of it was pushed out into the fourth quarter? In other words, how much of an impact did that have on the revenues in the third quarter?

There was just a few. There was just a few bookings that were pushed out to Q4. Nothing substantial, but we hope to pick that up in Q4.

Okay. And you've highlighted the strength in EFFOX and also Fisher-Klosterman. Can you give us an idea of how much EFFOX is up quarter -- in sales for the quarter, and also year-on-year? And what percent of sales is it now?

I probably can't give you a specific answer, but as you look at our bookings, we're up 11% for the year. EFFOX is up at least that, or perhaps more.

Okay. And how about on Fisher-Klosterman?

They're on track to have similar -- they'll track with the company, but their current activity is very good.

Got it. And lastly, you also mentioned Buell was a bit sluggish, but you do expect improvement in this current quarter. Is there a lot of pent-up demand that gives you the confidence that -- the business -- where you've already closed deals, currently, that the business should return to growth in 4Q?

Mike, we look at our -- we have a very rigorous sales dashboard that's updated every week by all the divisions. So we look at the data, what quotation activity is coming in, what quotation activity is funded for purchase, what quotation activity is not yet quite funded. So we let that data drive our outlook. Buell, the Buell FCC, they're the, one of the top 3 Cyclone providers for refineries in the world. They're having a good year, but in Q3, their bookings were soft. But as we look at their sales dashboard for Q4, it's improving. So they had a soft spell in Q3, but we're seeing some nice activity out of Buell group today.

Your next question comes from the line of Ajay Kejriwal of FBR Capital Markets.

So, nice gross margins in the quarter; you've now had 3 quarters above 30%. 32% -- touching 32% this quarter. Maybe, share your thoughts on the trade-off between topline growth and margins. I mean, where would you want to be? Would you like to see gross margins trend up higher than where they are? Or would you rather have better topline growth?

The answer is both. The answer is both, Ajay. No, the business leaders, the general managers who run the business are very focused on growing their business, growing the top line. We certainly will not walk away from revenue opportunities at lower margins, particularly if we can bring a project in at slightly lower margin and through project management execution, improve it. But we are very focused on growing our revenue, and we're very focused on improving our gross profit, but we're not going to jeopardize 1 for the other. It's a blend that I probably can't give you a, 1 short answer for everything, but we recognize getting our topline up to a bigger place is a priority for the company.

Got it. And then the way to think about gross margins is, 30% is kind of where you want to be, and anything above that would depend on the projects in the quarter?

Yes, that's a good summary. We want to be a 30% gross profit business. We think to be best in class and be at the top of the peers, you need to be there, but we also recognize you have to give up a little bit of that to pursue certain businesses in certain markets, and we will do that. I think you have it covered, Ajay.

Good. And you talked a little bit about Flextor and the opportunity in natural gas and all what we read and hear about, what the utilities and what the plans are for natural gas and that sounds very impressive. So maybe thoughts on where do you think you could be expanding? I mean, obviously Flextor has good products there, but then just big-picture thoughts on the natural gas industry, where do you think there would be opportunities for you?

If we look at our natural gas quotation activity through the EFFOX-Flextor group, it's strong. Most of it is globally, it's around the world, some of it is domestically, but our natural gas sales dashboard is robust and we have strategic selling partners that we work with to help measure that. So we see that business growing into the future. Significantly, we see, when a new utility plant is added around the world, it's probably going to be natural gas. And we're going to be a big player in that business. We're adding resources organically to grow Flextor, and we're -- we have a few things on the acquisition studying side that will help us there. So it's a part of our growth -- it's 1 facet of our growth strategy for the next few years.

Good. And maybe just want last one for me on the tax rate. Could you clarify what was the expectation for the year? I mean, you're trending at 31% year-to-date, is that a fair rate to use for the full year?

Good question, and the team here studies that regularly. In 2010, we were at a 37% effective tax rate. Last year, we improved it to 29%. Currently, we're at 31%. Ajay, our aspirations are to bring that down as best we can. As we pick up more revenue in China, which we're very proactive on, that's going to bring that blended tax rate down. Given our great technology, we're going to continue applying for R&D tax credits, which we have some in the queue that we're moving along, so that would bring that tax rate down. So, and then other activities around the world also have a lower tax rate. So in summary, we're doing all we can to bring that tax rate down, and we'd like to see it below -- we'd like to see it equal to or better than last year's numbers, but a lot of things have to happen before that takes place.

Your next question comes from the line of Rob Stone of Cowan.

Just a follow-up on -- sorry to beat the dead horse here on taxes. It looks like adjusting for the $500,000 benefit from the R&D credit, the tax rate still would have been trending a little lower this quarter. Did you see that you, as you were accruing, that your full year rate was going to be lower than previously planned?

To some degree, yes. Benton and Jim recognized that. We saw that to some degree. And we want to keep doing the tactical things to bring that down.

Okay, and my final question is a housekeeping one. I guess you have the option to call these convertible notes with the stock reduced lately, is that the plan?

The board will be voting on that here in -- at the right time, and that's -- there's a probability that, that could happen, Rob.

Your next question comes from the line of Sam Bergman with Bayberry Asset Management.

A couple of questions. You had a nice bottom line, topline was a little bit less than I expected. Why was the topline sequentially down from the second quarter, which I believe was at 34.2?

Well, I think the short answer is the bookings keep growing, and the backlog keeps growing, we're at $67 million, so it appears some of that solid backlog did not get translated into revenues for the quarter, and our aspirations are to do that in Q4 and Q1.

Were there any delays in any projects that was supposed to be finished and shipped after the quarter was complete?

No.

No, okay. And in terms of visibility, can you say that these first 6 weeks of the fourth quarter are getting similar bookings that the third quarter has gotten, and it's robust? Or is there any change that you see?

The 2 quick things that we would look at, Sam, are a, the activity today is just as strong as it was a quarter ago, and our business development and sales teams are feeling the same about Q4 as they felt about Q3 and Q2.

And a last question. In terms of acquisitions, I know that was mentioned, and it's been mentioned in the past. Accretive acquisitions, are you currently speaking to anybody and negotiating with any parties? I know you kind of, sort of, can't talk about it, but are 2 people at the table talking about an acquisition at this particular time?

Sam, probably the best way for me to answer that is, M&A bolt-on acquisitions that are accretive to our model and helpful to our technology and global reach are a priority, just as much as a priority as operational excellence and gross profit and other facets of our business. So the board and I are very focused on M&A, and when the time is right, we'll make an acquisition, and make the announcement. But I probably can't say -- I can't say more than that at this stage.

Because getting to $200 million -- $250 million in 2 to 3 years would require an acquisition of substantial size, perhaps in the $50 million a year run rate, and that hasn't occurred yet. I know you're being very cautious, which is great, but organically, how far do you think you could grow the revenues in the next couple of years, without an acquisition?

10% to 15% a year, given the sales footprint that we're building globally and the markets that are -- we're trading in. But the larger question is yes, as we become a $250 million revenue company, M&A will need to be a part of that, and the board and I are well aware of that, and we're rolling up our sleeves and we've got lot of things going on in that area.

At this time, there are no further questions in the audio queue.

Thank you, everybody, for joining our Q3 call and following CECO Environmental. We appreciate that.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a wonderful day.