CECO Environmental: Navigating Project Delays and Strategic Transformations

CECO Environmental Corp. (Nasdaq: CECO), a leading environmentally focused, diversified industrial company, recently announced its preliminary fourth quarter and full year 2024 results, along with key strategic transactions. The company's financial performance was impacted by customer-driven project delays, but it remains optimistic about its future prospects.



Preliminary Results and Project Delays

For the full year ended 2024, CECO expects to report revenues in the range of $555 to $558 million, compared to the previous guidance of $575 to $600 million. Adjusted EBITDA is anticipated to be between $62 to $63 million, down from the previous guidance of $65 to $70 million. The company attributed this softness to continued impacts related to delays of customer-driven projects. However, orders for the fourth quarter 2024 are expected to be at or above $210 million, setting a new Company record for bookings and backlog levels.

Todd Gleason, CECO's Chief Executive Officer, acknowledged the disappointment in missing the 2024 outlook but expressed confidence in the company's margin expansion progress and sales pipeline in energy transition and general industrial markets. He also noted that the revenues from the delayed projects and associated income will roll into 2025, further bolstering the company's outlook for the following year.



Strategic Transactions

In late December 2024, CECO completed its acquisition of Verantis Environmental Solutions Group (Verantis), a global leader in engineering services and environmental systems. Verantis had annualized sales of approximately $45 million and operating margins expected to be accretive to CECO. This acquisition strengthens CECO's footprint and capabilities within the industrial air market and aligns with its strategic investments in Air, Water, and Energy Transition.

Additionally, CECO announced its intent to divest its Fluid Handling business, with the sale expected to be completed late in the first quarter of 2025. The proceeds from this divestiture will be used to pay down debt and position the balance sheet for future strategic growth investments. This decision allows CECO to focus on businesses that more closely align with its core competencies and growth areas.

Lastly, CECO's acquisition of Profire Energy closed on January 3, 2025, further expanding the company's portfolio of leading environmental solution businesses.



2025 Full Year Guidance

CECO maintains its previously announced full year 2025 outlook, which includes expected Revenue of $700 to $750 million, up approximately 30 percent at the midpoint year over year, and Adjusted EBITDA of $90 to $100 million, up approximately 50 percent at the midpoint versus 2024. The company also affirms its full year 2025 outlook that free cash flow is expected to be between 50 and 70 percent of Adjusted EBITDA.

In conclusion, while CECO Environmental faced challenges in 2024 due to customer-driven project delays, the company remains optimistic about its future prospects. With strategic acquisitions and a focus on core competencies, CECO is well-positioned to capitalize on growth opportunities in the energy transition and general industrial markets.