CECO Environmental’s Earnings Call: Optimism Amid Challenges

Ceco Environmental Corp. ((CECO)) has held its Q4 earnings call. Read on for the main highlights of the call.

CECO Environmental Corp. recently held its earnings call, revealing a cautiously optimistic outlook despite some challenges. The company showcased strong order and backlog performance, significant growth in adjusted EBITDA, and successful acquisitions, all contributing to a positive outlook for 2025. However, revenue growth fell short of expectations due to project delays, and there are concerns about free cash flow and potential tariff impacts. Overall, the sentiment expressed during the call was one of cautious optimism.

Record-Breaking Orders and Backlog

CECO Environmental reported a remarkable increase in orders and backlog during the fourth quarter. Orders reached $219 million, marking a 71% increase year-over-year, while the backlog hit a record $541 million, up 46% from the previous year. For the full year, orders amounted to $667 million, reflecting mid-teens growth year-over-year.

Adjusted EBITDA Growth and Margin Expansion

The company achieved a 9% increase in adjusted EBITDA for 2024, totaling $62.8 million. This growth was accompanied by a margin expansion of approximately 70 basis points, indicating improved operational efficiency and profitability.

Strong Performance in Power Generation and Energy Markets

CECO is poised to benefit from a multi-year capital investment super cycle in the power generation market. This sector significantly contributed to the company’s backlog, with two large projects totaling around $100 million, underscoring the company’s strategic positioning in this market.

Successful Acquisitions

The acquisitions of Verantis and Profire Energy are expected to integrate well into CECO’s operations, bolstering the company’s growth prospects for 2025. These strategic moves are anticipated to enhance CECO’s market presence and operational capabilities.

Revenue Growth Lagging Expectations

Despite the positive developments, CECO’s full-year revenue growth was only 2% year-over-year. This was primarily due to customer-driven project delays that persisted throughout much of 2024, highlighting a challenge the company needs to address.

Free Cash Flow Challenges

CECO faced challenges with free cash flow, which was negatively impacted by working capital timing. A significant number of collections were delayed to early 2025, affecting the company’s cash flow management.

Potential Tariff and Economic Uncertainty

Concerns were raised during the call about potential impacts from tariffs and other legislative items, which could create market uncertainty. These factors remain a point of concern for CECO as they navigate the economic landscape.

Forward-Looking Guidance

Looking ahead to 2025, CECO Environmental provided an optimistic guidance, projecting revenue between $700 million and $750 million, representing a 30% growth rate. Adjusted EBITDA is expected to rise between $90 million and $100 million, a 50% increase. The company anticipates a positive book-to-bill ratio, margin improvements, and a free cash flow range of 60% to 75% of adjusted EBITDA. CECO remains confident about continued order momentum and market opportunities across various sectors.

In summary, CECO Environmental’s earnings call reflected a cautiously optimistic sentiment, with strong order and backlog performance and significant growth in adjusted EBITDA. While challenges such as revenue growth shortfalls and free cash flow issues were acknowledged, the company’s strategic acquisitions and forward-looking guidance paint a promising picture for 2025. Investors and market watchers will be keen to see how CECO navigates potential tariff impacts and economic uncertainties in the coming year.