CECO Environmental Reports Third Quarter 2024 Results
Company Produces Record Q3 Bookings and Highest-Ever BacklogQ3 Revenue and Income Impacted by Customer-Driven Project DelaysAnnounced the Acquisition of Profire Energy (NASDAQ:PFIE) for $125 MillionCompleted Acquisition of WK, in Early OctoberUpdates FY24 Guidance and Introduces 2025 Outlook
DALLAS, Oct. 29, 2024 (GLOBE NEWSWIRE) -- CECO Environmental Corp. (NASDAQ:CECO) ("CECO"), (the "Company"), a leading environmentally focused, diversified industrial company whose solutions protect people, the environment, and industrial equipment, today reported its financial results for the third quarter of 2024. In addition, CECO, announces it has completed the acquisition of WK, an Industrial Air company headquartered in Germany, in early October. Additionally, the Company announced the acquisition of Profire Energy, Inc. (NASDAQ:PFIE) ("Profire"), a leader in burner management technology and combustion control systems that provide mission-critical combustion automation and control solutions and services to improve environmental efficiency, safety and reliability for industrial thermal applications globally.
Third Quarter Summary(1)
Orders of $162.3 million, up 12 percent
Backlog of $437.5 million
Revenue of $135.5 million, down 9 percent
Gross profit of $45.3 million, up 5 percent; Gross margin of 33.4 percent, up 460 basis points
Net income of $2.1 million, down 36 percent; non-GAAP net income of $5.2 million, down 32 percent
GAAP EPS (diluted) of $0.06; non-GAAP EPS (diluted) of $0.14, down 36 percent
Adjusted EBITDA of $14.3 million, down 5 percent
Free cash flow of $11.1 million, down $17.4 million
Subsequent to the Quarter
Completes the acquisition of WK in early October
Announces the acquisition of Profire; expected to close by January 2025
(1) All comparisons are versus the comparable prior year period, unless otherwise stated.Reconciliations of GAAP (reported) to non-GAAP measures are in the attached financial tables.
Todd Gleason, CECO's Chief Executive Officer commented, "While our third quarter produced very strong orders and a new record backlog, we were disappointed that we fell short of the anticipated quarterly revenue and income outlook as a handful of customer-driven delays in larger projects could not be overcome by continued progress with margin expansion and other actions. These delayed projects are expected to begin activity over the coming months and the impact is reflected in our updated full year 2024 and newly introduced full year 2025 outlook. We are excited to have been awarded several large energy transition and general industrial orders in the quarter and we anticipate this trend to continue as we are forecasting a very strong fourth quarter bookings period."
Third quarter operating income was $7.2 million, down $0.7 million or 9 percent when compared to $7.9 million in the third quarter 2023. On an adjusted basis, non-GAAP operating income was $11.0 million, down $1.8 million or 14 percent when compared to $12.8 million in the third quarter of 2023. Net income was $2.1 million in the quarter, down $1.2 million or 36 percent when compared to $3.3 million in the third quarter of 2023. Non-GAAP net income was $5.2 million, down $2.4 million or 32 percent when compared to $7.6 million in the third quarter of 2023. Adjusted EBITDA of $14.3 million, reflecting a margin of 10.6 percent, was down 5 percent compared to $15.1 million in the third quarter of 2023. Free cash flow in the quarter was $11.1 million, down $17.4 million compared to $28.5 million in the third quarter of 2023.
Completes Acquisition of WK
CECO today announced that in early October it completed the acquisition of Germany-based, WK, a leading industrial air business with well-established global customers and a strong Asia-Pacific presence, based out of Singapore. WK designs, engineers and supplies a broad range of cutting-edge technical equipment and systems for process and environmental and surface technology applications, as well as innovative sustainable solutions. This acquisition strengthens CECO's footprint and capabilities within the industrial processing solutions segment and further advances the Company's Industrial Air and leadership positions. WK is expected to deliver full year 2024 sales of approximately $15 million with the potential for high-teen EBITDA margins.
"I would like to welcome the WK organization to our portfolio of leading industrial air solutions businesses," said Mr. Gleason. "Together we will advance our joint capabilities to better serve global customers while penetrating markets with solutions and services from across our diverse enterprise."
Announces Acquisition of Profire Energy, Inc. (NASDAQ:PFIE)
"I am excited that today we announced the acquisition of Profire in an all-cash transaction that we expect will close in January 2025. Profire expects to generate approximately $60 million in revenues with adjusted EBITDA margins of approximately 20 percent in the full year 2024. With an installed base approaching 100,000 burner management systems and a growing industrial market product offering, we look forward to accelerating their global market expansion and introducing their high-efficiency solutions to more customers in the industrial air and water markets. We are confident the increased scale and combined corporate organizations will generate meaningful efficiencies and synergies. The addition of Profire is another important step in our ongoing execution of programmatic M&A and we expect it will further advance our position as the leading environmental solutions provider in industrial markets," added Mr. Gleason.
Updates 2024 Full Year Guidance
The Company updated its 2024 full year revenue guidance to reflect revenue between $575 and $600 million, up approximately 10 percent year over year at the midpoint of the range, and adjusted EBITDA between $65 to $70 million, up approximately 17 percent year over year, at the midpoint of the range. The updated expected full year guidance compares to the previous outlook for revenues of between $600 to $620 million and adjusted EBITDA of between $68 to $72 million. The Company expects 2024 full year bookings guidance to reflect a book to bill rate of or in excess of 1.2x, up from a previous range of 1.05x to 1.1x. The Company maintains its full year outlook for free cash flow of 50% to 70% of adjusted EBITDA.
"Our updated full year 2024 guidance essentially mirrors the initial outlook we provided as we entered 2024. As previously mentioned, unfortunately, the customer-driven delays associated with a handful of larger projects impacted our ability to hit the raised guidance we issued mid-year. This is the first time we have reduced guidance in company history, and although this is disappointing for our short-term results, we remain very pleased with our bookings, margin expansion progress and overall execution. Additionally, the revenue and associated income from the 2024 project delays slide into upcoming quarters, so we remain focused on execution and controlling factors we can influence," said Mr. Gleason.
Introduces 2025 Full Year Guidance
The Company introduced its 2025 full year guidance to reflect revenue between $700 and $750 million, up approximately 25 percent at the midpoint of the range, and adjusted EBITDA between $90 and $100 million, up approximately 40% at the midpoint of the range. The Company expects full year free cash flow of between 50% to 70% of adjusted EBITDA.
Mr. Gleason concluded, "Our full year 2025 outlook reflects the visibility we have with our record backlog, ongoing strong bookings, 2024 related project push outs, and the impact from already completed acquisitions and the pending transaction with Profire. We continue to drive an aggressive operating model that supports strong organic growth, coupled with steady margin expansion and additions from accretive and strategic acquisitions."
EARNINGS CONFERENCE CALL
A conference call is scheduled for today at 8:30 a.m. ET to discuss the third quarter 2024 financial results. Please visit the Investor Relations portion of the website (https://investors.cecoenviro.com) to listen to the call via webcast. The conference call may also be accessed by visiting https://edge.media-server.com/mmc/p/4ui844vi.
A replay of the conference call will be available on the Company's website for a period of one year. The replay may also be accessed by visiting https://edge.media-server.com/mmc/p/4ui844vi.
ABOUT CECO ENVIRONMENTAL
CECO Environmental is a leading environmentally focused, diversified industrial company, serving the broad landscape of industrial air, industrial water and energy transition markets globally providing innovative solutions and application expertise. CECO helps companies grow their business with safe, clean, and more efficient solutions that help protect people, the environment and industrial equipment. CECO solutions improve air and water quality, optimize emissions management, and increase energy efficiency for highly-engineered applications in power generation, midstream and downstream hydrocarbon processing and transport, electric vehicle production, polysilicon fabrication, semiconductor and electronics, battery production and recycling, specialty metals and steel production, beverage can, and water/wastewater treatment and a wide range of other industrial end markets. CECO is listed on Nasdaq under the ticker symbol "CECO." Incorporated in 1966, CECO's global headquarters is in Dallas, Texas. For more information, please visit www.cecoenviro.com.
Company Contact:Peter JohanssonChief Financial and Strategy
Investor Relations Contact:Steven Hooser and Jean Marie YoungThree Part Advisors,
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)September 30, 2024
December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents
$
38,700
$
54,779
Restricted cash
226
669
Accounts receivable, net of allowances of $7,214 and $6,460
100,111
112,733
Costs and estimated earnings in excess of billings on uncompleted contracts
68,500
66,574
Inventories, net
37,760
34,089
Prepaid expenses and other current assets
27,143
11,769
Prepaid income taxes
3,826
824
Total current assets
276,266
281,437
Property, plant and equipment, net
32,306
26,237
Right-of-use assets from operating leases
24,690
16,256
Goodwill
220,026
211,326
Intangible assets, finite life, net
51,547
50,461
Intangible assets, indefinite life
9,598
9,570
Deferred income taxes
287
304
Deferred charges and other assets
6,792
4,700
Total assets
$
621,512
$
600,291
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of debt
$
10,580
$
10,488
Accounts payable
92,316
87,691
Accrued expenses
43,762
44,301
Billings in excess of costs and estimated earnings on uncompleted contracts
64,801
56,899
Notes payable
1,700
2,500
Income taxes payable
—
1,227
Total current liabilities
213,159
203,106
Other liabilities
10,336
12,644
Debt, less current portion
122,818
126,795
Deferred income tax liability, net
9,622
8,838
Operating lease liabilities
19,696
11,417
Total liabilities
375,631
362,800
Commitments and contingencies (See Note 14)
Shareholders' equity:
Preferred stock, $.01 par value; 10,000 shares authorized, none issued
—
—
Common stock, $.01 par value; 100,000,000 shares authorized, 34,979,018 and34,835,293 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively
349
348
Capital in excess of par value
253,590
254,956
Retained earnings (accumulated loss)
1,692
(6,387
)
Accumulated other comprehensive loss
(14,374
)
(16,274
)
Total CECO shareholders' equity
241,257
232,643
Noncontrolling interest
4,624
4,848
Total shareholders' equity
245,881
237,491
Total liabilities and shareholders' equity
$
621,512
$
600,291
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three months ended September 30,
Nine months ended September 30,
(in thousands, except share and per share data)
2024
2023
2024
2023
Net sales
$
135,513
$
149,390
$
399,367
$
391,134
Cost of sales
90,247
106,269
259,921
273,303
Gross profit
45,266
43,121
139,446
117,831
Selling and administrative expenses
34,262
