CECO Environmental (CECO) Q2 2024 earnings summary

Executive summary

• Achieved record Q2 2024 sales of $138 million, up 6% year-over-year, with gross profit and margins at all-time Q2 highs, driven by operational excellence and strategic investments in Industrial Air, Industrial Water, and Energy Transition sectors.

• Completed the acquisition of EnviroCare International in July 2024 for $17 million, expanding industrial air solutions and expected to add $13 million in annualized sales.

• Growth was constrained by timing delays in large project bookings, but a near-record backlog of $391 million and a robust $4 billion sales pipeline support a positive outlook for the remainder of the year.

• Margin expansion was driven by favorable mix, volume leverage, and operational improvements.

• Raised full-year 2024 revenue and adjusted EBITDA guidance for the second time since initial outlook.

Financial highlights

• Q2 2024 sales were $137.5–$138 million (+6% YoY); gross profit was $49 million (+23% YoY) with gross margin at 35.6% (+480 bps YoY).

• Adjusted EBITDA for Q2 2024 was $16.1 million (+18% YoY), with margin at 11.7% (+120 bps YoY).

• Adjusted EPS for Q2 2024 was $0.20 (+33% YoY); GAAP EPS (diluted) was $0.12.

• Free cash flow for Q2 2024 was $2.6 million, with TTM FCF at $41.4 million and FCF/EBITDA conversion at 65%.

• Backlog increased to $390.9–$391 million as of June 30, 2024, up from $370.9 million at year-end 2023.

Outlook and guidance

• Full-year 2024 revenue guidance raised to $600–$620 million (up ~12% at midpoint); adjusted EBITDA guidance raised to $68–$72 million (up ~21% YoY at midpoint).

• Free cash flow expected to be 50–70% of adjusted EBITDA for the year.

• Second half sales and margin expansion anticipated, driven by a near-record backlog and strong pipeline, despite ongoing timing delays in large projects.

• Substantially all backlog is expected to be delivered within 12 to 18 months.

• Margin expansion and robust M&A pipeline expected to support continued growth.