CECO ENVIRONMENTAL CORP Q1 FY2025 earnings call

• Bookings in Q1 were $228 million, up 57% YOY, with no large orders in power generation or produced water treatment markets. The sales pipeline is over $5 billion, with a dozen opportunities over $50 million.
• Acquisitions of Profire Energy and divestiture of Global Pump Solutions were executed. Profire is off to a strong start with high bookings and integration synergies.
• CECO's portfolio includes leading niche businesses in industrial air, industrial water, and energy transition, with a global capability. The sales pipeline has a balanced mix of short, medium, and longer cycle revenue streams.
• Addressed tariff impacts by working with customers and fabricators, identifying inflationary impacts to mitigate, and leveraging a supply chain model where much of the cost is not imported.

In the first quarter, CECO delivered record bookings of approximately $228 million, up 57% year-over-year. Backlog ended the quarter at $602 million, up 55% year-over-year and $60 million sequentially. Revenue for the quarter was $177 million, up 40% year-over-year. Adjusted EBITDA was $14 million. The sales pipeline topped $5 billion for the first time ever, with over a dozen opportunities each greater than $50 million. The three recent acquisitions contributed approximately 28 points of the 40% year-over-year revenue growth. The backlog includes about $65 million related to recent acquisitions.

• Maintained full-year 2025 guidance. Orders are expected to exceed full-year revenues, delivering a positive book-to-bill.
• Revenue guidance is $700 million to $750 million, a 30% YOY growth, with half organic and half from acquisitions.
• Adjusted EBITDA guidance is $90 million to $100 million, up ~50% at midpoint.
• Adjusted free cash flow conversion guidance is 60% to 70% of adjusted EBITDA.

• Uncertainty around tariffs, potential impact on supply chain costs and the economy.
• Dynamic nature of tariff environment, hard to predict future changes.
• Potential inflationary impacts from supply chain disruptions and distribution price increases.

Q: Talked about bookings not including large power projects, how does the power-related pipeline look?

A: Powers sector has large opportunities including natural gas, nuclear, alternative power, wind, solar, etc. Expect large contract awards in next few quarters, with some potential in Q2.

Q: How do you deal with cost changes and tariff impacts after booking a project?

A: Most contracts allow pass through of tariff increases. Work with suppliers to revisit quotes. Uncertainty with general distribution product inflation, but working to model and react accordingly.

Q: Mix of $228 million orders, any pull forward demand due to tariffs?

A: No material pull forward, orders steady from Jan, Feb, Mar. Balanced across platforms, gas infrastructure and nuclear momentum strong. Q2 starting well with good pipeline.

Q: CapEx and investment areas?

A: Largest investment in IT infrastructure to move to Microsoft D365. Profire may need spending for capacity expansion in Houston. Mostly capital investment light, focus on working capital and customer growth.

Q: Defense spending impact?

A: Indirect benefits from factory construction for armament, and European investments in power infrastructure due to reduced Russian gas dependence.

Q: Acquisitions outlook?

A: Partly digesting recent acquisitions, but still open to acquisitions, timing depends on finding strategic, accretive opportunities.

Q: Margin impact from price actions?

A: Price actions not super material to guidance, guidance kept steady as early in year. Passing through prices on projects, but revenue recognition may be delayed.

Q: Bookings from acquisitions in quarter?

A: ~$45 million to $50 million of orders from acquisitions over last 12 months, ~25% organic growth in orders.