CECO Environmental(CECO) - 2025 Q2 - Quarterly Results

Executive Summary Second Quarter 2025 Performance Highlights CECO Environmental reported a record second quarter in 2025, driven by exceptional orders growth of 95% year-over-year, leading to the highest-ever quarterly revenue and an all-time high backlog. The company also achieved significant increases in gross profit margin, operating income, net income, and Adjusted EBITDA Q2 2025 Key Financial Highlights (YoY Growth) | Metric | Q2 2025 Value | YoY Change | | :-------------------------------- | :-------------- | :--------- | | Orders | $274.1 million | +95% | | Backlog | $688.1 million | +76% | | Revenue | $185.4 million | +35% | | Gross Profit Margin | 36.2% | +37% (Gross margin $67.1M) | | Net Income (GAAP) | $9.5 million | +$5.0 million | | Net Income (non-GAAP) | $8.7 million | +$1.3 million | | GAAP EPS (diluted) | $0.26 | | | Non-GAAP EPS (diluted) | $0.24 | | | Adjusted EBITDA | $23.3 million | +45% | | Free Cash Flow | $(3.0) million | -$5.6 million | CEO Commentary CEO Todd Gleason highlighted the company's record quarter, attributing it to tremendous orders growth, a robust backlog, and the strong performance of its diverse environmental solutions portfolio. He emphasized the company's ability to capitalize on "mega-theme opportunities" in industrial air, water, and energy transition markets, while maintaining high execution levels and strategic investments despite macro challenges - Record orders, highest-ever quarterly revenue, and all-time high backlog of $688 million[4] - Booked CECO's largest-ever order for emissions management in a large power generation project[4] - Diverse portfolio gaining traction in key markets and new geographies, including natural gas, water infrastructure, and energy transition[4] - Achieved highest-ever gross margins and expanded income margins while investing in commercial growth, new geographies, and operating efficiencies[5] Full Year 2025 Outlook CECO Environmental has raised its full-year 2025 revenue outlook to $725 million to $775 million, representing approximately 35% growth at the midpoint. The company maintained its Adjusted EBITDA outlook of $90 million to $100 million and a free cash flow conversion outlook of greater than 60% of Adjusted EBITDA, driven by a strong backlog and a growing sales pipeline 2025 Full Year Guidance (in millions) | Metric | Previous Outlook | Revised Outlook | Change | | :-------------------- | :--------------- | :-------------- | :----- | | Revenue | $700 - $750 | $725 - $775 | Raised | | Adjusted EBITDA | $90 - $100 | Maintained | | | Free Cash Flow | >60% conversion of Adjusted EBITDA | Maintained | | - Confidence bolstered by record backlog and a robust $5.5 billion sales pipeline[7][8] - Strong demand for power generation, natural gas and water infrastructure, semiconductor expansion, and general industrial markets[8] Company Information About CECO Environmental CECO Environmental is a leading global industrial company focused on environmental solutions for industrial air, water, and energy transition markets. It provides innovative solutions and expertise to help businesses grow safely, cleanly, and efficiently, improving air/water quality, optimizing emissions, and increasing energy efficiency across various highly-engineered applications - Core Business: Leading environmentally focused, diversified industrial company[13] - Solutions: Innovative solutions and application expertise for industrial air, industrial water, and energy transition markets[13] - Impact: Helps companies protect people, the environment, and industrial equipment through safe, clean, and more efficient solutions[13] - Key End Markets: Power generation, hydrocarbon processing, EV production, polysilicon fabrication, semiconductor, battery production/recycling, specialty metals, beverage can, water/wastewater treatment, and other industrial sectors[13] Investor Relations & Conference Call The company scheduled a conference call for July 29, 2025, to discuss Q2 2025 financial results, with webcast and replay options available via its investor relations website. Investor contact information is also provided - Conference Call: Scheduled for July 29, 2025, at 8:30 a.m. ET[10] - Access: Available via webcast on the Investor Relations portion of the website (https://investors.cecoenviro.com) or directly via https://edge.media-server.com/mmc/p/ox29vy4b[10](index=10&type=chunk) - Replay: Available on the company's website for one year[11] - Investor Contact: Marcio Pinto (VP - Financial Planning and Investor Relations) and Three Part Advisors, LLC[14] Consolidated Financial Statements Consolidated Balance Sheets As of June 30, 2025, CECO Environmental reported an increase in total assets to $876.6 million from $759.7 million at December 31, 2024. Total liabilities also increased to $573.4 million from $507.8 million, while total shareholders' equity grew to $303.2 million from $251.9 million over the same period Balance Sheet Snapshot (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :-------------- | :---------------- | | Total assets | $876,582 | $759,699 | | Total liabilities | $573,363 | $507,806 | | Total shareholders' equity | $303,219 | $251,893 | | Cash and cash equivalents | $36,823 | $37,832 | | Accounts receivable, net | $161,498 | $159,572 | | Costs and estimated earnings in excess of billings | $91,262 | $69,889 | | Inventories | $59,792 | $42,624 | | Goodwill | $288,043 | $269,747 | | Intangible assets – finite life, net | $106,871 | $74,050 | | Accounts payable | $125,971 | $109,671 | | Billings in excess of costs and estimated earnings | $93,045 | $81,501 | | Debt, less current portion | $236,877 | $217,230 | Consolidated Statements of Income For the three months ended June 30, 2025, net sales increased by 35% to $185.4 million, and net income attributable to CECO Environmental Corp. more than doubled to $9.5 million from $4.5 million in the prior year. For the six months, net sales grew to $362.1 million, and net income surged to $45.5 million, significantly higher than $6.0 million in the comparable prior year period, partly due to a gain on the sale of the Global Pump Solutions business Income Statement (in thousands, except per share data) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $185,391 | $137,522 | $362,088 | $263,854 | | Gross profit | $67,108 | $49,047 | $129,270 | $94,179 | | Income from operations | $18,061 | $9,257 | $79,930 | $16,943 | | Net income attributable to CECO Environmental Corp. | $9,510 | $4,485 | $45,494 | $5,993 | | Diluted EPS | $0.26 | $0.12 | $1.24 | $0.17 | - Significant Item (Six Months): Gain on sale of Global Pump Solutions business: $(64,502) thousand (income) for the six months ended June 30, 2025[18] Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash used in operating activities was $(19.4) million, a decrease from $7.9 million provided in the prior year. Net cash provided by investing activities was $3.8 million, primarily due to net cash proceeds from the sale of the Global Pump Solutions business, offsetting cash paid for acquisitions. Net cash provided by financing activities was $14.2 million, driven by net borrowings on revolving credit lines Cash Flow Summary (in thousands) | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Net cash (used in) provided by operating activities | $(19,363) | $7,891 | | Net cash provided by (used in) investing activities | $3,813 | $(6,811) | | Net cash provided by (used in) financing activities | $14,197 | $(16,565) | | Net decrease in cash, cash equivalents and restricted cash | $(1,292) | $(18,534) | | Cash, cash equivalents and restricted cash at end of period | $36,909 | $36,914 | - Key Investing Activity: Net cash proceeds for sale of Global Pump Solutions business: $105,860 thousand. Net cash paid for acquisitions, net of cash acquired: $(97,615) thousand[20] Non-GAAP Financial Disclosures Reconciliation of GAAP to Non-GAAP Measures The report provides reconciliations for non-GAAP operating income, net income, Adjusted EBITDA, and free cash flow, adjusting for items like amortization, acquisition and integration expenses, and the gain on sale of the Global Pump Solutions business. For Q2 2025, non-GAAP operating income was $18.3 million, non-GAAP net income was $8.7 million, and Adjusted EBITDA was $23.3 million Non-GAAP Financials (in millions) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Non-GAAP operating income | $18.3 | $12.6 | $26.9 | $22.8 | | Non-GAAP operating margin | 9.9% | 9.2% | 7.4% | 8.6% | | Non-GAAP net income | $8.7 | $7.4 | $12.4 | $11.5 | | Adjusted EBITDA | $23.3 | $16.1 | $37.3 | $29.3 | | Non-GAAP diluted EPS | $0.24 | $0.20 | $0.34 | $0.32 | | Free cash flow | $(3.0) | $2.6 | $(18.0) | $0.7 | - Key Adjustments: Exclusions include amortization expenses, acquisition and integration expenses, gain on sale of Global Pump Solutions business, other operating (income) expense, net, foreign currency remeasurement, and tax (benefit) expense of adjustments[22][23][26] Note Regarding Non-GAAP Financial Measures CECO provides non-GAAP measures to offer a clearer view of its core operations, excluding items deemed not indicative of ongoing performance. The company emphasizes that these measures are supplemental to GAAP, have limitations, and may not be comparable to those of other companies. Forward-looking non-GAAP measures are not reconciled to GAAP due to the unpredictability of certain impacting items - Purpose: To help individuals better assess the ongoing nature of CECO's core operations and compare results over multiple periods[25][26] - Limitations: Not calculated in accordance with GAAP, should be considered supplemental, and do not reflect all costs[27] - Items Excluded: Amortization, contingent retention/earnout expenses, restructuring expenses, acquisition/integration expenses, foreign currency remeasurement, and other nonrecurring/infrequent items[26] - Forward-Looking Reconciliation: Not provided due to unreasonable efforts and inability to predict with certainty the type and extent of items impacting GAAP measures[29] Legal Disclosures Safe Harbor Statement This section serves as a cautionary statement regarding forward-looking statements made in the press release. It outlines that such statements are based on management's views and assumptions, involve inherent risks and uncertainties that could cause actual results to differ materially, and the company undertakes no obligation to update them unless required by law - Definition: Statements other than historical fact, including beliefs and expectations, are forward-looking[31] - Risks: Involve risks and uncertainties that may cause actual results to differ materially, including economic conditions, raw material prices, inflation, fixed-price contracts, supply chain issues, litigation, debt, regulations, and catastrophic events[31] - No Obligation to Update: The company undertakes no obligation to update or review any forward-looking statements, except as required by federal securities laws[31]