CECO Environmental(CECO) - 2025 Q1 - Quarterly Results

CECO Environmental Q1 2025 Results Financial & Operational Highlights CECO achieved record orders, backlog, and revenue in Q1 2025, demonstrating strong market demand despite a decline in non-GAAP profitability and negative free cash flow - The company achieved record orders of $228 million and a record backlog exceeding $600 million for the first time, driven by strong demand in industrial reshoring, electrification, and power generation[4] Q1 2025 Key Performance Indicators (vs. Q1 2024) | Metric | Q1 2025 | Change (YoY) | | :--- | :--- | :--- | | Orders | $227.9 million | +57% | | Backlog | $602.0 million | +55% | | Revenue | $176.7 million | +40% | | Gross Profit | $68.0 million | +28% | | GAAP Net Income | $36.0 million | +$34.5M | | Non-GAAP Net Income | $3.5 million | -$0.5M | | GAAP EPS (diluted) | $0.98 | +$0.94 | | Non-GAAP EPS (diluted) | $0.10 | -$0.01 | | Adjusted EBITDA | $14.0 million | +6% | | Free Cash Flow | $(15.1) million | -$13.2M | Management Commentary & Strategy Management expressed confidence in growth, attributing Q1 Adjusted EBITDA decline to strategic investments and planning Q2 cost-saving initiatives for margin expansion - Strategic actions in Q1, such as price increases for tariffs, pulling in inventory purchases, and adding key personnel, negatively impacted short-term Adjusted EBITDA but were deemed necessary to manage the record backlog[5] - The company plans strategic cost actions starting in Q2 2025, focusing on eliminating redundant G&A expenses and expanding productivity initiatives, which are expected to support operating margin expansion[5] - Management believes the company is well-positioned to handle potential tariff impacts because it manufactures a majority of its products in the same regions where they are sold[8] 2025 Full Year Guidance CECO maintained its full-year 2025 guidance, anticipating significant year-over-year growth in revenue and Adjusted EBITDA despite Q1's mixed profitability Full Year 2025 Guidance | Metric | Guidance Range | Midpoint YoY Growth | | :--- | :--- | :--- | | Revenue | $700 - $750 million | ~30% | | Adjusted EBITDA | $90 - $100 million | ~50% | - The company expects its 2025 adjusted free cash flow to be between 60% and 75% of Adjusted EBITDA[6] Financial Statements Consolidated Balance Sheets CECO's balance sheet expanded significantly as of March 31, 2025, with total assets and liabilities increasing, driven by higher cash and long-term debt Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $146,471 | $37,832 | | Total current assets | $476,101 | $330,971 | | Total assets | $957,095 | $759,699 | | Debt, less current portion | $338,037 | $217,230 | | Total liabilities | $667,044 | $507,806 | | Total shareholders' equity | $290,051 | $251,893 | Consolidated Statements of Income CECO reported a 40% increase in Q1 2025 net sales, with GAAP net income surging to $36.0 million primarily due to a significant gain on a business sale Q1 Income Statement (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net sales | $176,697 | $126,332 | | Gross profit | $62,162 | $45,132 | | Income from operations | $61,870 | $7,686 | | Gain on sale of business | $64,502 | $0 | | Net income attributable to CECO | $35,984 | $1,508 | | Diluted EPS | $0.98 | $0.04 | Consolidated Statements of Cash Flows Q1 2025 operating cash flow was negative, while investing activities were positive from a business sale, and financing activities provided significant cash from new borrowings Q1 Statement of Cash Flows (in thousands) | Cash Flow Category | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(11,696) | $1,224 | | Net cash provided by (used in) investing activities | $4,829 | $(2,694) | | Net cash provided by (used in) financing activities | $115,756 | $(6,528) | | Net increase (decrease) in cash | $108,475 | $(8,420) | Non-GAAP Financial Measures & Reconciliations Reconciliation of GAAP to Non-GAAP Measures After adjustments, CECO's non-GAAP operating and net income declined year-over-year, though Adjusted EBITDA increased by 6% to $14.0 million GAAP to Non-GAAP Reconciliation Highlights (in millions) | Metric | Q1 2025 GAAP | Q1 2025 Non-GAAP / Adjusted | Q1 2024 Non-GAAP / Adjusted | | :--- | :--- | :--- | :--- | | Operating Income | $61.9 | $8.6 | $10.2 | | Net Income | $36.0 | $3.5 | $4.0 | | Adjusted EBITDA | N/A | $14.0 | $13.2 | | Free Cash Flow | N/A | $(15.1) | $(1.9) | - The largest adjustment from GAAP to Non-GAAP operating income was the exclusion of a $64.5 million gain on the sale of the Global Pump Solutions business[22] Note Regarding Non-GAAP Financial Measures CECO uses non-GAAP measures to assess core operational performance by excluding non-recurring items, emphasizing they are supplemental and not comparable across all companies - Non-GAAP measures are used by management to better compare results over multiple periods by excluding items not considered indicative of ongoing operations[25] - Forward-looking non-GAAP measures are not reconciled to GAAP because the company cannot reasonably predict certain excluded items, such as acquisition expenses or restructuring costs[28] Additional Information Earnings Conference Call A conference call and webcast were held to discuss Q1 2025 results, with a replay available on the company's investor relations website for one year - A conference call was held at 8:30 a.m. ET on April 29, 2025, to discuss the financial results[10] - A replay of the conference call will be available for one year on the company's website[11] Safe Harbor Statement This legal disclaimer identifies forward-looking statements, cautioning investors about risks and uncertainties that may cause actual results to differ materially - The press release contains forward-looking statements based on management's current views and assumptions, which are subject to risks and uncertainties[30] - Key risks include economic conditions, inflation, supply chain challenges, integration of acquisitions, and the ability to realize synergies from transactions[30]