CECO Environmental(CECO) - 2024 Q4 - Annual Report

Financial Performance - In 2024, the company reported net sales of $557.9 million, an increase of 2.8$544.8 million in 2023, and a significant rise of 32.0% from $422.6 million in 2022[186]. - Gross profit for 2024 was$196.1 million, representing 35.1% of sales, compared to 31.4% in 2023 and 30.3% in 2022, indicating improved profitability[186]. - Consolidated net sales for 2024 were $557.9 million, an increase of$13.1 million or 2.4% compared to 2023, driven by growth in industrial processing solutions segment[189]. - Gross profit increased by $25.1 million, or 14.7$196.1 million in 2024, with gross profit as a percentage of sales rising to 35.1% from 31.4% in 2023[190]. - Non-GAAP net income attributable to CECO Environmental Corp. for 2024 was $13.0 million, slightly up from$12.9 million in 2023[186]. - Operating income for 2024 was $35.4 million, an increase of$0.8 million from 2023, with an operating margin of 6.3%[198]. - Non-GAAP operating income for 2024 was $49.4 million, up$1.3 million from 2023, with a non-GAAP operating margin of 8.9%[199]. Expenses and Costs - Selling and administrative expenses increased to $146.7 million in 2024, accounting for 26.3$146.7 million in 2024, an increase of $23.8 million or 19.4$19.6 million to $66.5 million in 2024, primarily due to investments in growth and inflationary increases[212]. Market and Strategic Initiatives - The company aims to expand its product offerings in the air, water, and energy transition markets, driven by increasing demand for cleaner solutions[167]. - The Infrastructure Investment and Jobs Act, with$550 billion in federal spending, is expected to create opportunities for the company's pollution control equipment[170]. - The company is shifting its portfolio towards businesses with more recurring revenue and predictable cash flows[173]. Acquisitions - The company acquired Profire Energy, which had 2024 revenues of 63 million, focusing on emissions reduction and safety in the oil & gas sector[165]. Orders and Growth - Orders booked in 2024 were 667.3 million, an increase of $84.5 million or 14.5$51.5 million attributed to organic growth[191]. - Engineered Systems segment net sales increased by $3.9 million to$384.0 million in 2024, while Industrial Process Solutions segment net sales increased by $9.2 million to$173.9 million[207][210]. Cash Flow and Liquidity - Operating cash flow decreased to $24.8 million in 2024 from$44.6 million in 2023, a decline of 44.4% primarily due to changes in net working capital[228]. - Cash used in investing activities rose to $105.3 million in 2024, up from$56.5 million in 2023, indicating a 86.3% increase driven by current year acquisitions[230]. - Financing activities provided cash of $65.9 million in 2024, significantly higher than$21.1 million in 2023, marking a 212.8% increase primarily from net borrowings under the Credit Facility[231]. Debt and Borrowings - As of December 31, 2024, total outstanding borrowings amounted to $218.9 million, an increase from$137.3 million in 2023, reflecting a growth of 59%[218]. - The Company made repayments of $112.4 million on the term loan and$1.6 million on the joint venture term debt in 2024, with net borrowings of $196.9 million on the revolving credit line[218]. - Total unused credit availability under the Credit Facility increased to$166.9 million in 2024 from $109.4 million in 2023, representing a 52.7$221.5 million[258]. Tax and Regulatory Matters - The Company assesses the realizability of deferred tax assets, considering future taxable income and tax-planning strategies[252]. - Deferred tax liabilities are recognized for taxable temporary differences, while deferred tax assets are recognized for deductible temporary differences and operating loss carry-forwards[249]. - The Company has recorded a liability for deferred taxes on undistributed foreign earnings, primarily due to foreign withholding taxes[254]. - Management must analyze complex tax laws across multiple jurisdictions to assess uncertain tax positions[250]. - The Company has made an accounting policy election to record the U.S. income tax effect of future GILTI inclusions in the period they arise[253]. Risk Factors - The company is experiencing inflationary pressures and raw material shortages, which could adversely affect future financial results[174]. - A hypothetical 10% increase in the estimated weighted average borrowing rate at December 31, 2024 could result in an estimated annual impact of $1.6 million on future earnings and cash flows[258]. - The estimated market risk related to changes in interest rates is significant due to a substantial portion of borrowings being at variable rates[257]. - Transaction losses included in "Other (expense) income, net" were$(4.3) million in 2024, $1.2 million in 2023, and$6.3 million in 2022, indicating fluctuations in foreign currency exposure[259]. - The Company has not hedged its foreign currency exposure, which may impact revenues, operating expenses, and earnings due to future changes in exchange rates[259].