Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CECO Environmental Corp (CECO, Financial) achieved record bookings of over $160 million in Q3, marking the highest for any Q3 in company history.
- The company's backlog reached a new record level of $438 million, surpassing the $400 million mark for the first time.
- CECO Environmental Corp (CECO) announced two strategic acquisitions, WK Group and Profire Energy, which are expected to expand their portfolio and unlock new industrial and geographic markets.
- The company is forecasting a strong finish for 2024 with October expected to be a record month for orders, setting up a positive outlook for 2025.
- CECO Environmental Corp (CECO) is projecting significant growth for 2025, with revenue expected to increase by 25% and adjusted EBITDA by 40% year-over-year.
Negative Points
- CECO Environmental Corp (CECO) experienced softer than expected Q3 revenues due to customer-driven delays in large projects.
- The company had to adjust its 2024 revenue and EBITDA guidance back to original levels due to these delays.
- There is a wider range in the 2025 guidance due to uncertainties in project execution and timing.
- The company faced challenges with working capital timing and higher capital expenses, impacting cash flow.
- Supply chain and resource availability issues continue to pose challenges, affecting project timelines and execution.
Q & A Highlights
Q: Can you clarify the opportunity set in large power plant projects and what has been booked versus what is still outstanding?
A: Todd Gleason, CEO, explained that there is a significant need for additional power and energy transition projects, such as converting coal to natural gas-fired power plants. CECO has booked a natural gas-fired power plant project and similar projects in October. These projects range from $25 million to over $50 million, and the company expects more efficient movement in this area. Peter Johansson, CFO, added that there are 15 to 20 active opportunities with a potential value of $450 million over the next eight quarters.
Q: What are the expected synergies from the Profire acquisition, particularly in terms of sales or revenue?
A: Peter Johansson, CFO, stated that Profire is primarily a North American business, and CECO anticipates substantial upside by introducing Profire's business into Middle Eastern and Southeast Asian energy channels. The industrial side also presents a significant opportunity, potentially increasing the industrial mix to 40% of overall sales. Todd Gleason, CEO, emphasized the potential for growth through CECO's international resources and existing infrastructure.
Q: Can you discuss the confidence in customer delays closing in Q4 and Q1, and the wider ranges in 2025 guidance?
A: Todd Gleason, CEO, acknowledged the repetitive theme of project delays but expressed confidence that these projects are starting. The guidance range for 2025 is wider due to the visibility of the backlog and the timing of project execution. The company is prepared for either more activity in Q4 or a shift into the next year.
Q: How does CECO plan to manage capacity and resources given the growing pipeline and backlog?
A: Todd Gleason, CEO, explained that CECO is focused on operational execution and maintaining a rightsized organization to manage the backlog and new bookings. The company is cautious about adding costs ahead of bookings but ensures it has the necessary resources to execute projects. Peter Johansson, CFO, added that CECO is monitoring supply chain and fabrication partners to ensure flexibility and availability.
Q: What is the impact of larger deals on project delays, and how might this affect early 2025?
A: Todd Gleason, CEO, noted that while delays are common, larger projects have experienced delays due to various factors such as supply chain issues and resource availability. These delays could impact early 2025, but CECO is working through plans to manage quarterly linearity. The company remains confident in its backlog and customer commitments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
