Core Viewpoint - CECO Environmental Corp. has successfully completed the divestiture of its Fluid Handling business, known as Global Pump Solutions (GPS), to May River Capital for an enterprise value of approximately $110 million, effective March 31, 2025 [1][2][4]. Group 1: Transaction Details - The transaction was executed for a cash payment of approximately $110 million at closing [2]. - Proceeds from the divestiture will be utilized to pay down debt and fund future strategic growth investments [2]. Group 2: Business Overview - The GPS business includes three niche brands: Dean, Fybroc, and Sethco, specializing in severe service industrial pumps [3]. - GPS operates from locations in Indianapolis, Indiana, and Telford, Pennsylvania, serving over 1,500 customers globally [3]. Group 3: Strategic Implications - The divestiture allows CECO to better align its portfolio with high growth opportunities in energy and industrial markets [4]. - The sale follows recent acquisitions of Verantis Environmental and Profire Energy, creating additional capacity for further investments in CECO's growth and business expansion [4]. Group 4: Company Background - CECO Environmental is a diversified industrial company focused on environmentally friendly solutions across industrial air, water, and energy transition markets [5]. - The company provides innovative technology and application expertise to improve air quality and optimize the energy value chain [5]. Group 5: Buyer Information - May River Capital is a private equity firm based in Chicago, focusing on lower middle-market industrial growth businesses [6]. - The firm invests in advanced manufacturing, engineered products, specialized industrial services, and value-added industrial distribution services [6].

Core Insights - CECO Environmental Corp. is participating in the 37th Annual ROTH Conference on March 17, 2025, hosting one-on-one meetings throughout the day [1] - The company focuses on providing environmentally friendly solutions across various industrial sectors, including air and water quality improvement, emissions management, and energy efficiency [3] Company Overview - CECO Environmental is a diversified industrial company established in 1966, headquartered in Addison, Texas, and listed on Nasdaq under the ticker symbol "CECO" [3] - The company serves multiple markets, including power generation, hydrocarbon processing, electric vehicle production, semiconductor manufacturing, and water treatment [3] Investor Relations - The presentation from the investor conference will be accessible on CECO's Investor Relations website [1] - Key contacts for investor relations include Peter Johansson, Chief Financial and Strategy Officer, and the team at Three Part Advisors, LLC [4]

Financial Data and Key Metrics Changes - Full-year revenue reached $558 million, marking a record year for the company, with a year-over-year growth rate of only 2% due to customer-driven project delays [9][10] - Adjusted EBITDA for the year was $62.8 million, an increase of approximately 9% compared to the previous year, with adjusted EBITDA margins expanding by approximately 70 basis points [10][38] - The company reported a record backlog of $541 million, up 46% from the previous year [32] Business Line Data and Key Metrics Changes - Fourth-quarter orders totaled $219 million, representing a 71% increase year-over-year, contributing to full-year orders of $667 million, which were up mid-teens year-over-year [12][33] - Gross profit margin for the fourth quarter was 35.8%, an increase of 120 basis points year-over-year, driven by productivity and project execution initiatives [36] Market Data and Key Metrics Changes - The company identified strong opportunities in markets such as power generation, natural gas infrastructure, and industrial air, contributing to the robust order growth [14][15] - The sales pipeline grew from approximately $1.5 billion at the end of 2021 to $4.5 billion at the end of 2024, indicating significant market expansion [22][57] Company Strategy and Development Direction - The company is focused on niche leadership in industrial markets, with a balanced portfolio across industrial air, industrial water, and energy transition businesses [27][28] - The management emphasized the importance of a multi-year perspective and a focused value creation strategy, despite not meeting all performance metrics in 2024 [18][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the 2025 outlook, expecting revenue between $700 million to $750 million, which represents a 30% growth rate year-over-year [58] - The company is monitoring potential impacts from tariffs and economic uncertainties but believes the financial impact will be minimal due to established business relationships [90][92] Other Important Information - The company experienced a free cash flow outflow of $4 million in the fourth quarter due to working capital timing, but expects a turnaround in 2025 [39][40] - The integration of recent acquisitions, including Profire, is progressing well, with expectations for significant growth and synergies [75][78] Q&A Session Summary Question: Order momentum and pipeline strength for 2025 - Management noted strong order momentum in power generation and industrial infrastructure markets, with a vibrant orders market continuing into 2025 [72] Question: Opportunities and integration of Profire - The integration of Profire is going well, with expectations for growth and collaboration across markets, particularly in energy [75][78] Question: Backlog visibility and guidance confidence - Management indicated that a higher backlog entering 2025 provides greater confidence in achieving revenue guidance compared to previous years [82][85] Question: Margin outlook and tariff impacts - Margins are expected to improve, with operational efficiencies offsetting potential tariff impacts, which are currently uncertain [88][90] Question: Tracking larger, complex projects in backlog - The company is implementing standardized ERP systems for better visibility and tracking of project costs and progress [99][102] Question: Activity levels in short-cycle versus long-cycle business - Management reported stable activity levels in both short-cycle and long-cycle businesses, with consistent growth in short-cycle sales [112][116] Question: LNG market interest and urgency - There has been increased interest in LNG projects, with expectations for robust project work in 2025 and 2026 as previously deferred projects resume [120][123]

Financial Performance - In 2024, the company reported net sales of $557.9 million, an increase of 2.8% from $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%, to $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% of sales, up from 22.6% in 2023[186]. - Selling and administrative expenses rose to $146.7 million in 2024, an increase of $23.8 million or 19.4% compared to 2023[192]. - Corporate and Other segment operating expenses increased by $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%, with $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% increase[226]. - The carrying value of the Company's total long-term debt and current maturities of long-term debt at December 31, 2024 was $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].

Group 1: Earnings Performance - CECO Environmental reported quarterly earnings of $0.27 per share, exceeding the Zacks Consensus Estimate of $0.22 per share, but down from $0.28 per share a year ago [1] - The earnings surprise for this quarter was 22.73%, while the previous quarter saw a negative surprise of -36.36% with actual earnings of $0.14 per share against an expectation of $0.22 [2] - Over the last four quarters, CECO has surpassed consensus EPS estimates two times [2] Group 2: Revenue Performance - CECO posted revenues of $158.57 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 1.59% and up from $153.71 million year-over-year [3] - The company has topped consensus revenue estimates only once over the last four quarters [3] Group 3: Stock Performance and Outlook - CECO shares have declined approximately 25.1% since the beginning of the year, contrasting with the S&P 500's gain of 1.7% [4] - The current consensus EPS estimate for the upcoming quarter is $0.16 on revenues of $149.33 million, and for the current fiscal year, it is $1.16 on revenues of $692.09 million [8] - The Zacks Rank for CECO is currently 3 (Hold), indicating expected performance in line with the market in the near future [7] Group 4: Industry Context - The Pollution Control industry, to which CECO belongs, is currently ranked in the bottom 40% of over 250 Zacks industries, suggesting potential challenges for stock performance [9] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact CECO's stock performance [6]

Financial Results - CECO Environmental Corp. announced preliminary financial results for Q4 and full year 2024 on January 16, 2025[5]. - The report does not specify detailed financial metrics or performance indicators in the provided content[5]. - The financial results are not deemed "filed" under the Securities Exchange Act of 1934[6]. Company Information - The company is listed on NASDAQ under the trading symbol CECO[4]. - The report was signed by Kiril Kovachev, Chief Accounting Officer, on January 17, 2025[11]. Strategic Outlook - No information on user data, future outlook, or new product developments is available in the current documents[5]. - The company has not indicated any strategic transactions or market expansions in the provided content[7]. - There is no mention of mergers or acquisitions in the current report[5]. - The report does not classify CECO as an emerging growth company[4]. Documentation - The press release detailing the financial results is included as Exhibit 99.1[7].

Core Viewpoint - CECO Environmental Corp. reported record bookings of $219 million in Q4 2024, leading to a year-end backlog of $541 million, and reaffirmed its full-year 2025 outlook with expected revenue growth of approximately 30% year-over-year [1][9][10]. Summary by Relevant Sections Highlights for the Quarter - Fourth quarter operating income was $11.3 million, down 11% from $12.7 million in Q4 2023. Adjusted non-GAAP operating income was $15.6 million, down 4% from $16.3 million [5]. - Net income for the quarter was $4.9 million, an increase of 26% compared to $3.9 million in Q4 2023. Non-GAAP net income was $9.9 million, down 2% from $10.1 million [5]. - Adjusted EBITDA was $19.0 million, reflecting a margin of 12.0%, down 2% from $19.4 million in Q4 2023 [5]. Highlights for the Year - Full year operating income was $35.4 million, up from $34.6 million in 2023. Adjusted non-GAAP operating income increased to $49.4 million from $48.1 million [6]. - Total revenue for the year was $557.9 million, a 2% increase from $544.8 million in 2023. Gross profit rose to $196.1 million, up 15% from $171.0 million [6]. - The company completed three acquisitions, enhancing its market leadership in the Industrial Air sector [6]. 2025 Full Year Guidance - CECO maintains its 2025 revenue outlook of $700 to $750 million, representing a year-over-year increase of approximately 30% at the midpoint. Adjusted EBITDA is expected to be between $90 to $100 million, up approximately 50% at the midpoint compared to 2024 [9][10]. - The guidance reflects strong visibility from the record backlog and robust bookings, alongside the impact of recent acquisitions [10]. Strategic Initiatives - The company has completed four strategic acquisitions in the past six months, including Profire Energy, which are expected to enhance growth markets and service capabilities [8]. - CECO upgraded its credit facility to include a $400 million revolver and anticipates finalizing the sale of its Fluid Handling Business in late Q1 2025 [8].

Group 1 - CECO Environmental Corp. will report its fourth quarter 2024 financial results on February 25, 2025, premarket [1] - The earnings call will start at 8:30 a.m. Eastern Time on the same day [2] - Financial results and presentation will be available on the company's website [1] Group 2 - CECO Environmental is a diversified industrial company focused on environmentally friendly solutions [3] - The company serves various industrial markets including air, water, and energy transition through its Engineered Systems and Industrial Process Solutions segments [3] - CECO aims to improve air quality and provide custom solutions for multiple applications such as power generation, petrochemical processing, and battery recycling [3]

Investors in CECO Environmental Corp. (CECO) need to pay close attention to the stock based on moves in the options market lately. That is because the May 16, 2025 $25 Put had some of the highest implied volatility of all equity options today.What is Implied Volatility?Implied volatility shows how much movement the market is expecting in the future. Options with high levels of implied volatility suggest that investors in the underlying stocks are expecting a big move in one direction or the other. It could ...

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