Q1 2025 CECO Environmental Corp Earnings Call
Yeah.
Speaker Change: Good day, and thank you for standing by welcome to the CECO Environmental first quarter 2025 earnings call.
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Speaker Change: And I'd like to hand, the conference over to Steven Hooser Investor Relations. Please go ahead.
Speaker Change: Thank you Liz and thank you everyone for joining us for the CECO Environmental first quarter 2025 earnings call on the call with me today is Todd Gleason, Chief Executive Officer, and Peter Johansen, Chief Financial and strategy Officer before we begin I'd like to note that we have provided a slide presentation to help guide our discussion this call will be webcast along with that earnings presentation.
Speaker Change: <unk>, which is on our website at CECO in viral dot com.
Speaker Change: The presentation materials can be accessed through the Investor Relations section of our website.
Speaker Change: I'd also like to caution investors regarding forward looking statements any statements made in today's presentation that are not based on historical fact are forward looking statements.
Speaker Change: Such statements are based on certain estimates and expectations and are subject to a number of risks and uncertainties actual future results may differ materially from those expressed or implied by the board looking statements. We encourage you to read the risks described in our SEC filings included on Form 10-K for the year ended December 31, 2024, except to the extent <unk>.
Speaker Change: Mired by applicable securities laws, we undertake no obligation to update or publicly revise any of the forward looking statements that we make here today, whether as a result of new information future events or otherwise.
Speaker Change: Today's presentation will also include references to certain non-GAAP financial measures. We've provided the comparable GAAP to non-GAAP numbers in today's press release and provided in a non-GAAP reconciliation in the supplemental tables in the back of the slide deck.
Todd Gleason: I'd now like to turn the call over to Todd <unk>, Chief Executive Officer Todd.
Todd Gleason: Thanks, Steven and good day, everyone and thanks for joining.
Todd Gleason: Go ahead, please turn to slide number three.
Todd Gleason: These are some of the highlights we're going to cover on today's call.
Todd Gleason: We're pleased to share that we delivered multiple financial records in the first quarter, perhaps the most impressive off our Q1 achievements was a record.
Todd Gleason: Bookings of approximately $228 million up 57% year over year we.
Todd Gleason: We generated these tremendous bookings without a large order in either the power generation, our produced water treatment markets.
Todd Gleason: And these records reflect the continued strength of our entire portfolio.
Todd Gleason: We still see very large opportunities in these water and power sectors.
Todd Gleason: And we anticipate very exciting order bookings related to these opportunities in the coming periods.
Todd Gleason: Overall, our sales pipeline, which tracks future potential orders looking forward up to 18 months remains very strong and continues to grow sequentially. Just six months ago. Our sales pipeline was roughly $4 5 billion and now topped $5 billion for the first time ever.
Todd Gleason: And that new level of note are almost a dozen opportunities that are each greater than $50 million in value.
Todd Gleason: As we will discuss in a few minutes the key growth themes, we have been discussing for over a year all remain very much intact and while there was a lot of noise and uncertainty related to tariffs and the potential impact on supply chain costs and the economy, we have not seen a material slowdown in our market and customer activity I would suggest that the same themes that we have.
Todd Gleason: Driving she goes growth over the past year or more our only reinforced by the state of the goals of the current administration and we remain bullish on these themes regardless of how old they are promoted.
Todd Gleason: The need for more industrial manufacturing or re shoring remains critical more natural gas infrastructure is required to deliver the fuel to power. This new manufacturing activity more power generation from the electrification to satisfy growing consumer and commercial applications and more investment in water.
Todd Gleason: <unk> and broader infrastructure is required on a global basis. These are just a few examples of the powerful trends and are very broad and highly diversified opportunity set it remain front and center on our agenda.
Todd Gleason: As a result of all these highlights we are maintaining our full year 2025 guidance.
Todd Gleason: We have initiated price and productivity measures to help offset the known impacts from the current tariffs and we are monitoring this very dynamic situation as well as any impacts to the overall economy.
Todd Gleason: CECO does benefit from a vast majority of our supply chain being being geographically aligned with our customers and projects, which does help to minimize our exposure more on this topic in just a few minutes.
Todd Gleason: Now please turn to slide number four for a quick summary of the highlights of the quarter.
Todd Gleason: Before diving in please note that our first quarter results include a full quarter of Profilers impact as well as our fluid handling or global pump business being removed because we divested that business being included excuse me because we did not divest that visit so till the very end of Q1.
Todd Gleason: Starting with backlog, we exited the quarter with $602 million, which is up 55% year over year and approximately $60 million higher sequentially driven by another record quarter of new orders our.
Todd Gleason: Our Q1 orders again is an exclamation point to the diversity of our business and well position leadership in growth sectors and the $5 billion pipeline that I. Just mentioned continues to reinforce our confidence that we will continue to deliver very high bookings levels up.
Todd Gleason: Of note over the past three quarters, we have booked over $600 million in orders, which we expect will yield a near term quarter will produce sales over $200 million for the first time ever.
Todd Gleason: Now moving to revenue, we recorded a $177 million for the quarter up about 40% year over year of which 28% was driven by our most recent acquisitions.
Todd Gleason: If you recall in the second half of 2024, our execution was impacted by a handful of significant projects that were delayed due to customer timing and although we saw some recovery in the quarter, we're expecting to accelerate and recover entirely from those delays over the next handful of months.
Todd Gleason: Moving to adjusted EBITDA of $14 million of results slightly above expectations, driven by volume drop through and gross margins in the mid thirties, which are in line with recent quarters. Our EBITDA was modestly depressed by timing of resource investments in the business related to the <unk>.
Todd Gleason: Significant increase in our backlog and pipeline.
Todd Gleason: We also had some transaction headwinds related to integration and an increased level of process normalization, which we accelerated in the quarter.
Todd Gleason: And adjusted EPS of <unk> 10.
Todd Gleason: Is above consensus as well.
Todd Gleason: Finally, the first quarter was also about executing on our strategic transactions with the acquisition of profile energy and the divestiture of our global solutions business I want to take a moment to thank the great team at the global pump solutions business for their dedication to CECO and to their.
Todd Gleason: Customers, we wish the newly branded TUSK industrial much success as they embark on an exciting new journey.
Todd Gleason: I am also pleased to report that profile is off to a very strong start as part of CECO. The business produced very very high levels of bookings in the first quarter as well as revenues and are delivering on the integration synergies that we've identified we are very energized by the addition of profile pardon.
Todd Gleason: <unk> and look forward to sharing additional updates in the future.
Todd Gleason: So to wrap up this slide CECO had a strong start to the year, especially given all the noise in the market at the moment and we head into Q2 with a strong backlog and lots of momentum now please turn to slide number five.
Todd Gleason: Just mentioned the noise in the market everyday we are confronted by new headlines associated with tariffs potential impacts.
Todd Gleason: The economy trade Wars international negotiations, just so much noise in new headlines every day.
Todd Gleason: Granted it can be a little exhausting, but it is also an opportunity to remind our audience of seacoast business resilience and how we believe we can and will navigate this uncertainty.
Todd Gleason: How with CECO able to drive 57% orders growth in the midst of so much potential turmoil I suggest it is because over the past three years to four years, we have steadily invested to position, our niche leadership businesses and geographic and vertical markets with the highest potential growth profile.
Todd Gleason: As this slide highlights we entered 2025 with our diverse portfolio of leading niche businesses in industrial air industrial water and energy transition and have established a truly global capability to serve our customers most demanding environmental challenges.
Todd Gleason: Additionally, we entered the year with a very strong financial profile with a then record backlog a significant sales pipeline and a track record of delivering multiple straight years of solid organic and inorganic growth as well as margin expansion.
Todd Gleason: And in each of these areas we've hit the ground running in 2025, we added more diverse leadership, including the profile business and expanded our footprint in resources in Southeast Asia, India, and Europe, our sales pipeline has grown.
Todd Gleason: To exceed the $5 billion and.
Todd Gleason: And we have taken early action to address our preliminary assessment of tariff related inflation and costs essentially our portfolio and financial profiles are stronger and more diverse than even 90 days ago.
Todd Gleason: And perhaps most importantly, we have been talking about the same focus growth theme for many quarters if not several years in these same growth themes remain our focus today.
Todd Gleason: The more resource more power more electrification and so on all the points I highlighted just a minute ago with respect to our $5 billion sales pursuit.
Todd Gleason: These are all powerful trends important investments that need to occur in this agenda is clearly the focus of the U S administration, and we believe leading economies around the world suffice it to say.
Todd Gleason: We arent changing our focus yes, there is a fair amount of uncertainty at times and yes, it's a dynamic environment.
Todd Gleason: But what we think the market liked about CECO as we entered 25, we believe we should be even more powerful today. So we appreciate your interest and we feel we are very well positioned for tomorrow.
Todd Gleason: Now please turn to slide number six.
Todd Gleason: I've shown this slide and in various investor presentations and also in previous earnings the.
Todd Gleason: The reason for revisiting it is just to reiterate some of the data and also of course to continue to highlight are our $5 billion sales pipeline, which was only $1 5 billion four years ago.
Todd Gleason: On the left side of the slide you can see that our sales are balanced across short medium and longer cycle mixes of business, starting with 30% of our sales which are shorter cycle in nature. They provide a relatively consistent flow of sales from aftermarket service and standard product shipments as we have stated.
Todd Gleason: In prior calls we continue to evolve the portfolio to a greater shorter cycle mix of business with the goal that this 30% reaches 50% in the next few years.
Todd Gleason: A similar amount of revenue is generated from what we consider to be lightly configured engineered solutions.
Todd Gleason: This mix of revenue that we often reference as mid cycle because from the minute. We book the order to when we're generating revenue. These projects usually last somewhere between six to nine months in backlog.
Todd Gleason: And finally, the balance of our sales is from larger or longer cycle projects. These are highly engineered and CECO has a world class reputation for engineering and delivering these complex very custom built solutions. These projects start to turn to revenue approximately three to six months after entering backlog.
Todd Gleason: And they might stay in backlog up to 18 months.
Speaker Change: On the right side of the slide is fairly self explanatory sales pipeline visual with supporting information. This sales pipeline is a combination of replacement systems from our large installed base through to the ability to enter new markets and support existing or new customers. Peter is going to highlight our very successful.
Speaker Change: Asphalt track record of orders growth and book to Bill expansion. It just a few minutes, but it is important to understand that not only is our portfolio of diverse but our business generates revenue through a relatively balanced mixture of short medium and longer term revenue streams.
Speaker Change: Now please turn to slide seven.
Speaker Change: Going to walk you through our view of the evaluation of the current tariff environment.
Speaker Change: I'm going to be brief on this chart, but we wanted to outline the current state of exposure relative to tariffs by region as well as some corresponding operational actions.
Speaker Change: Again, I'm not going to read through this slide but the key points here are.
Speaker Change: One we are working with our customers and fabricators to ensure contractual language is understood and protections are sufficient.
Speaker Change: Second we have identified direct inflationary and tariff impacts that we are working to mitigate.
Speaker Change: And third we are naturally prepared to weather a bulk of the current or known turbulence associated with tariffs given our operating model of managing our supply chain in the same region as the customer or project location and in essence much of our costs are just not imported.
Speaker Change: Now, let's move to slide eight so we can talk.
Speaker Change: About the estimated financial impacts associated with these tariffs.
Speaker Change: Everything's shown on this slide and modeled here is based on current tariff rates in public data as of April 28.
Speaker Change: As we have already mentioned this is a pretty fluid situation hard to predict what tomorrow my brain.
Speaker Change: That said, let me start with the key assumptions baked into our estimates under the current tariff policy most of our goods and services are compliant with the U S. MCA agreement between the U S, Mexico and Canada.
Speaker Change: We are also modeling a 25% tariff rate on raw steel and aluminum that remains in place throughout the rest of the year as well as an additional 10% reciprocal tariffs as we understand it today.
Speaker Change: The current tariff rates include a 90 day pause on incremental reciprocal tariffs and our analysis assumes these remain in place through the balance of 2025.
Speaker Change: Talking about the impacts as we see them percolating and three sourcing areas as you can see on the left side of the slide. The first area is listed as materials and is essentially.
Speaker Change: Directly imported purchases largely reflect the impact of our steel and aluminum purchasing impacts current estimates have our exposure at somewhere around $2 million to $3 million.
Speaker Change: The next on the list is what we call components, which you should think about as finished goods such as pumps valves and similar these are products, we buy to help complete the package solutions, we are selling to our customers with minimal work for us or our fabricators. This category is mostly exposed to the global reciprocal tariffs being <unk>.
Speaker Change: Cross being applied across the different geographies and if we see the cost increases it will simply be supplier price rising.
Speaker Change: We estimate this could be up to $2 million.
Speaker Change: In the full year of 2005.
Speaker Change: The final item on this list is our fabrication exposure, which is exactly what it sounds like we partner with fabrication companies in regions around the world and they help us fabricate a portion of our finished product fabric.
Speaker Change: Fabrication exposure can be up to $5 million, we expect and is made up of two categories. The first level is direct fabrication exposure associated with ongoing projects or very recent order awards.
Speaker Change: The way. These are currently in our backlog and we can quantify if there is tariff exposure. This category has a minimal tariff impact because many of these imported products are from Canada, and Mexico, and we believe our U S. MCA compliant the.
Speaker Change: The second category with fabricators is inflation risks associated with our fabricators being forced to raise their prices, giving given.
Speaker Change: Other tariffs or inflationary items.
Speaker Change: This is how we get to a potential exposure there could be up to $5 million or potentially even slightly higher.
Speaker Change: The element of risk is hard to quantify as you can imagine and we are focused.
Speaker Change: And we excuse me we are forced to speculate a little bit we are working closely with our supply chain to understand the risks and of course drive productivity and associated price actions.
Speaker Change: All in we estimate our gross tariff exposure to be between $3 million to $10 million.
Speaker Change: We aren't just sitting idly by and keeping our fingers crossed we are implementing mitigation programs and evaluating additional actions as I already said, we believe most of our contracts enable us to price through cost increases associated with these impacts in many of our purchases are in region for region. So in those cases.
Speaker Change: Little to no impact.
Speaker Change: However, we are taking proactive steps to mitigate the current estimated tariff impact as I mentioned earlier and in our press release, we have taken some Q2 cost actions to reduce certain redundancies in our G&A structure.
Speaker Change: And we are driving additional productivity actions in our supply chain and we have raised prices and likely will be raising prices, where possible and applicable to these tariff increases each of these actions will help protect our bottom line and we will monitor the situation determined if more actions are necessary.
Speaker Change: With that please turn to slide number nine we can walk, but all we can walk you through what all this means to our 2025 outlook.
Speaker Change: As todays press release highlighted we are maintaining our full year 2025 guidance.
Speaker Change: But we are obviously monitoring closely how the situation around tariffs and the overall economy evolves.
Speaker Change: <unk> top to bottom we are reaffirming our 2025 orders guidance to exceed full year revenues, thus delivering a positive book to bill for the year extent, extending our multiyear run a book to bill greater than one.
Speaker Change: This was supported by a strong start to the year and the pipeline growth discussed in my previous slides.
Speaker Change: For revenue, we are reiterating our outlook for a range of between $700 million to $750 million.
Speaker Change: Which is a 30% growth rate year over year.
Speaker Change: If you take the midpoint of that range.
Speaker Change: About half of the growth is organic and half is from the acquisitions, we have already completed.
Speaker Change: You recall this outlook already considered the divestiture of our global pump solutions business. Therefore, no changes required from a strategic transaction standpoint.
Speaker Change: For adjusted EBITDA, We are also maintaining that range between $90 million to $100 million.
Speaker Change: Up approximately 50% at the midpoint versus prior year.
Speaker Change: And for adjusted free cash flow.
Speaker Change: We are maintaining our conversion guidance of 60% to 70%.
Speaker Change: Of adjusted free cash of adjusted EBITDA excuse me <unk>.
Speaker Change: <unk> is committed to driving high performance and while there is a lot of noise in headlines in markets. Today, we believe our guidance reflects a solid outlook for the year.
Speaker Change: I'll now hand, it over to Peter and he'll walk you through some additional details on the quarter and more color on the state of the business Peter.
Peter Johansen: Thank you good day, everyone. Thank you for attending <unk> first quarter 2025 earnings call.
Peter Johansen: Please turn to slide 11, where I'll cover provides some additional color and insight into <unk> financial results for the quarter.
Peter Johansen: I'll start with backlog as Todd mentioned, we closed the quarter with a record backlog of $602 million up 55% versus prior year.
Peter Johansen: And which represented an 11% increase sequentially.
Peter Johansen: Like to point out. This is the first time in company history with our backlog.
Peter Johansen: With a six handle quite an impressive result.
Peter Johansen: Of the total approximately $65 million related to the recent acquisitions of profile, our energy branches environmental the WK group and a very care International all concluded in the second half of 2024 and early in January of this year.
Peter Johansen: In quarter, one represents the nine or 10 quarters, where we realized a backlog increase quite a run of future results setting us up well for future growth.
Peter Johansen: For the second consecutive quarter.
Peter Johansen: CECO delivered orders in excess of $200 million.
Peter Johansen: With our first quarter orders results of $228 million.
Peter Johansen: But figure up 57% versus prior year, and a 4% sequential increase from the fourth quarter of 2020 for delivering a book to bill of approximately one three times.
Peter Johansen: On a trailing 12 month basis orders totaled $750 million.
Peter Johansen: Up 29%, representing a book to Bill for the trailing 12 month period of nearly $1 two five and.
Peter Johansen: And a record for any 12 month period and customer history.
Peter Johansen: I'd like to point out that for the past six months, we have booked approximately $450 million of new orders.
Peter Johansen: An amount that exceeded our annual total for each of 2020 and 2021, respectively.
Peter Johansen: This performance along with our recent TTM result gives us a great deal of confidence in our future revenue generation capacity that Todd.
Peter Johansen: Just briefed you on relative to 2025 outlook.
Peter Johansen: Revenue in the quarter of $177 million was an increase of 40% year over year and up 11% sequentially.
Peter Johansen: This is by far the best revenue quarter in company history.
Peter Johansen: Of the 40 points of growth year over year, approximately two thirds or 28 points of that growth was generated by the company's three recent acquisitions.
Peter Johansen: And approximately one third was organic growth due to project execution against our record backlog and book to ship in the quarter, including approximately $10 million from the now divested global pump solutions business.
Peter Johansen: TTM revenue of $608 million was a record for any 12 month period and customer history in excuse me in company history, and an increase in the high single digit range over prior year period.
Peter Johansen: The $14 million of adjusted EBITDA delivered in the first quarter.
Peter Johansen: And they are approximately $64 million.
Peter Johansen: Adjusted EBITDA on a TTM basis, or an increase of 6% and 9% respectively over prior year periods.
Peter Johansen: Adjusted EBITDA margins in the quarter of approximately 8%.
Peter Johansen: Short of our expectations due to higher selling engineering and project execution expenses.
Peter Johansen: That were added to the business over the past two to three quarters to allow us to continue to execute on the growing opportunity pipeline and to set us up well to execute against our growing backlog.
Peter Johansen: We have added technical and commercial resources in key spots globally to support our growing bid and proposal activity as we see the acceleration of interest and CECO solutions that are underpinning the key growth trends and macro drivers previously highlighted by Todd.
Peter Johansen: To put this activity in context over the past six months, we booked $450 million of new orders.
Peter Johansen: In order to handle this level of activity and deliver sustainable rate of growth in orders.
Peter Johansen: It was required that we added additional resources to generate the additional sales and performed the front end engineering work.
Peter Johansen: And with these additional resources of course, we added salaries travel expenses and sales incentive compensation.
Peter Johansen: Adjusted EPS in the quarter was essentially flat year over year, primarily driven by an increase in interest expense and.
Peter Johansen: And higher share count and was down five pennies on a trailing 12 month basis.
Peter Johansen: Now, let's turn to page 12, where we'll discuss briefly backlog.
Peter Johansen: As you can see on this chart our backlog continues its steady upward climb as we convert on the growing opportunity pipeline.
Peter Johansen: At $610 million backlog is up approximately threefold since the end of 2021.
Peter Johansen: We expect our 600 plus million dollars of backlog to fully convert to revenue over the next 30 months with the majority is scheduled to deliver over the next 18 months.
Peter Johansen: What is not reflected in this backlog figure as the book and ship revenue that we generate in each quarter and generated in the first quarter from our brands that have a shorter cycle revenue profile, which includes sales by a profile CECO filters and our transcend solutions business.
Peter Johansen: And includes in the short in that book and ship profile or the aftermarket and consumable sales we generate from the installed base of our many previously executed industrial air and industrial water brands.
Peter Johansen: Now, let's flip to page 13, and we'll briefly discuss gross profit and gross margin.
Peter Johansen: This slide is similar to previous earnings deck, where we presented Zika as gross profit and gross margin results by quarter since the fourth quarter of 2022 on a trailing 12 month basis, which allows us to normalize for quarter to quarter fluctuations and to provide a look back.
Peter Johansen: Check of two plus years of continued improvement and expansion from the point, where our sourcing and productivity initiatives were initially launched.
Peter Johansen: Since the fourth quarter of 2022, CECO has expanded gross profit margins by approximately 500 basis points with.
Peter Johansen: With the gross profit dollar impact of approximately 67%.
Todd Gleason: Todd and I and our platform business leaders feel that we have now reached a steady state gross margin level in the 34% to 36% range, where we feel comfortable our portfolio of businesses and their respective end markets and customer mix can comfortably and sustainably operate.
Todd Gleason: And this was borne out in the first quarter of 2025, where our businesses delivered gross profit of $68 million and a gross margin of 35, 2%.
Todd Gleason: On a TTM basis, our gross profit margin results of 35, 2%.
Todd Gleason: Figure firmly within that range in the mid Thirty's.
Todd Gleason: This improvement over the past two plus years.
Todd Gleason: <unk> is principally attributed to our operational excellence efforts that have realized annualized savings in the range of $10 million to a sustained focus on better project execution and to an improving business mix with a greater share of short cycle sales and the inclusion of acquisitions with accretive.
Todd Gleason: Gross profit margins.
Todd Gleason: As we move through 2025.
Todd Gleason: We will continue our cost savings pursuit through additional sourcing opportunities that we have identified and by increasing our focus on G&A productivity and.
Todd Gleason: And continuing our efforts to further improve <unk>.
Todd Gleason: <unk> planning and execution.
Todd Gleason: Now, let's move to slide 14 will quickly discuss cash flow and indebtedness.
Starting on the left side of this slide we present, our schedule of free cash flow walking down from GAAP net income to free cash flow on a year to date basis.
Todd Gleason: In this schedule, we have the noncash event related to the gain on the sale of our global pump solutions business in the quarter.
Todd Gleason: We adjust GAAP net income for the sale, we would've been in a negative net income position in the quarter, largely driven by higher integration and M&A expenses as well as higher interest payments, resulting from the recent acquisitions of profile our energy in branches environmental.
Todd Gleason: The impact of these items are a headwind of approximately $12 million to operating cash flow in the quarter.
Todd Gleason: Working capital was a positive contributor in the quarter and we continue to see positive cash generation from higher billings and collections from our customers that are partially offset by inventory.
Todd Gleason: Capital expenditures were essentially flat year over year at $3 $4 million in the quarter as we continue to invest in upgrades and harmonization of our global systems platforms and solutions.
Todd Gleason: <unk>.
Todd Gleason: On the right side of this slide is a schedule summarizing <unk> gross indebtedness position.
Todd Gleason: With the primary drivers of change from year end 2024.
Todd Gleason: We ended the quarter with gross debt of approximately $337 million.
Todd Gleason: Which was driven primarily as a function of the timing around the closing and funding of the global pump solutions business.
Todd Gleason: Sale.
Todd Gleason: Net debt at quarter end was approximately $190 million, an increase of $10 million from our position at the end of 2024.
Todd Gleason: Due to the timing of the closing and the receipt of funds from.
Todd Gleason: From the global pump solution sale.
Todd Gleason: We used those proceeds early in April to reduce reduce our gross debt balance to approximately $238 million and we intend to prioritize our capital deployment in the second quarter towards further reducing our debt and leverage levels to <unk>.
Todd Gleason: Further strengthen our balance sheet improved liquidity and optionality.
I have one final chart in my section to share with you before include please turn to slide 15.
Todd Gleason: I do not intend to spend much time on this page, but because of the many moving pieces in the most recent quarter I felt it may be helpful to incorporate a page with additional items for your review and place them onto a single page.
Todd Gleason: So that these items, which are spread throughout our Q for the quarter would be positioned for you in one simple chart.
Todd Gleason: I'd like to highlight for you one item on the page and Thats.
Todd Gleason: The leverage we exited quarter, one 2025 width was approximately $2 7 million to two seven times.
Todd Gleason: Our target range is slightly lower than that and we'll continue to work on deploying operating cash flow.
Todd Gleason: And our.
Todd Gleason: Other cash management efforts towards returning to that leverage level.
Todd Gleason: And that concludes my review of <unk> first quarter 2025 financial results and now I would like to return the discussion back over to Todd.
Todd Gleason: Thanks, Peter So, let's turn to slide 17. This is our last page before the Q&A section.
Todd Gleason: To conclude.
Todd Gleason: We are proud to have generated back to back record bookings quarters by a wide margin versus our previous record level as.
Todd Gleason: This continues to demonstrate our leadership position in niche growth industrial markets.
Todd Gleason: We continue to invest to support growth drive gross margin expansion through productivity and quality and we're committed to EBITDA margin expansion, which is why we are taking additional actions on our G&A cost structure.
Todd Gleason: We are pleased to maintain our full year outlook, even in the face of so much uncertainty.
Todd Gleason: And not every three to six month period will be as busy as the last few quarters with multiple acquisitions, a large divestiture and navigating these unique times.
Todd Gleason: As always I want to thank team CECO for delivering for our customers navigating these challenging markets you inspire me every day and every time, we meet with customers. They talk about the great professionalism and quality that we deliver for them.
Todd Gleason: So with that I'd like to open it up for questions I'll hand, it over to the operator, and then I'll conclude with some final remarks.
Todd Gleason: As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced.
Todd Gleason: Withdraw your question. Please press star one again.
Todd Gleason: Please standby, while we compile the Q&A roster.
Rob Brown: Our first question comes from Rob Brown with Lake Street capital markets.
Rob Brown: Hi, good morning, congratulations on a good quarter. Thanks.
Ralph: Thanks, Ralph good morning.
Ralph: You talked a little bit about your bookings really didn't include a lot of the power projects that are out there how does the power related pipeline look at this point in terms of timing and visibility.
Ralph: I mean, it looks as strong as his previous comments I mean, theres a dollar figure associated with it certainly over a $1 billion.
Ralph: Of the pipeline.
Ralph: That can include.
Ralph: Emissions that.
Ralph: That are probably represent the largest dollar level for projects.
Ralph: But it also incorporates a variety of other solutions that we sell in thermal acoustics.
And even some of the gas infrastructure powers also past expanse from natural gas power includes.
Ralph: Our growing momentum that we're seeing in nuclear.
Ralph: Continued.
Ralph: Support for.
Ralph: Alternative power wind and solar for backup power solutions and peak or power. So it's a busy space.
Ralph: Still associated with with just getting Baseload power up to the required needs continue to support data center expansion.
Ralph: The AI topic, while it kind of moves around a little bit continues to be real.
Ralph: And look the timing is just these are big projects that we're involved in a lot of.
Ralph: A lot of approvals need to be in place.
Ralph: Whether it's permitting or other so we're not we didn't anticipate our Q1 bookings were very close we think to several awards.
Ralph: We are well positioned for.
Ralph: We expect the second quarter could reflect some of that certainly in the next few quarters, we see some some large contract awards coming our way in the power sector.
Ralph: Okay great.
Ralph: Indeed, you linked a lot of good information about tariffs and I know, there's a lot of uncertainty, but as you when you book a project.
Ralph: At risk then for cost changes or how do you how do you deal with sort of cost changes and tariff impacts that happened. After you book most of our contracts as you know.
Ralph: Allow for pass through of these types of increases.
Ralph: That are.
Ralph: That are related to tariffs.
Ralph: We are working with all of our suppliers to revisit any of their quotes that are firm to us as well. So we continue to work to ensure that we have visibility there is a look.
Ralph: The supply chain is complicated right.
Ralph: I'd say from a contractual perspective, when we have a fair bit with our customer they understand that.
Ralph: This could still change as a result of tariffs we go back to our fabricators and our suppliers and we revisit our cost structure.
Ralph: Learned a lot coming out of Covid and 2021 about contract language management associated with ever changing supply chain costs, and so I feel we feel good as a team in terms of that level of call. It protection, but we buy a lot of systems and components.
Ralph: For a variety of our.
Ralph: Constant flow business as well that inflation is a little bit more uncertain and I think we're trying to bake that into our analysis <unk> why we're saying the range.
Ralph: Is the things that are known around our fabricators and our component suppliers and the contracts. We have that's a number that we know and we feel comfortable offsetting with either productivity or passing it through from a price perspective now it's a pass through right I mean, our customers are going to demand to understand the pass through so we're not getting margin on that pass through.
Ralph: Anything that kind of almost a modest margin contraction because we're just passing through the cost if you do the math on that.
Ralph: It's one we're going to we're buying.
Ralph: Related products.
Ralph: For pumps and motors and electric electronics et cetera, just through general distribution. That's the inflation that we're uncertain of everyone's talking about raising prices may that's a generic statement when I say, everyone, but if you listen to earnings calls on industrial companies and commercial companies many of them are articulating.
Ralph: Price increase associated with the higher cost. So look we think that we haven't seen yet the impacts of the inflation per se we're sensitive to it we can model in what we can model in today.
Ralph: Just we're going to we're going to keep our eyes on supply chain costs like everyone is and continue to react accordingly.
Ralph: Okay. Thank you I'll turn it over thanks.
Rob Brown: Thanks, Rob.
Speaker Change: Our next question comes from Bobby Brooks with Northland capital markets.
Bobby Brooks: Hey, good morning, guys. Thank you for taking the question.
Bobby Brooks: First I just wanted to ask could you discuss the mix you saw in the $228 million of orders a bit more I know you mentioned that no large orders from power water were baked into that so curious to hear what our markets. We're seeing strength and was was there any kind of pull forward demand with upcoming tariffs where people wanted to send you the.
Bobby Brooks: Order prior to those.
Bobby Brooks: That's the first question that I have a follow up yes, so let's go with that first.
Bobby Brooks: We had such a large pipeline coming into the year and our orders have been pretty steady for January February and March in Q1 that.
Bobby Brooks: We don't think there was a pull forward or.
Bobby Brooks: Our prices in these contracts take quite a while and in most cases to do the bids.
Bobby Brooks: The engineering approvals.
Bobby Brooks: And to get things finalized from a Ts and CS So the pull in isn't something that we think had a material impact on the quarter and we're seeing a very nice start to Q2 also not hearing.
Bobby Brooks: Feeling that people are pulling things in or pushing things out there. Good news is there is no. There is no movement. There that we can see and hear and we asked the question a balanced across most of our platforms frankly in terms of orders I think it's because the themes are balanced.
Bobby Brooks: To reiterate the re shoring of in general industrial.
Bobby Brooks: Power, even though we didn't have a large power job we continue to have good power jobs.
Bobby Brooks: Not a booked a big one, but we booked many medium sized jobs that are still important for us we might not have booked a large water project, but we continue to book nice water projects.
Bobby Brooks: I guess I would say if there was one or two highlights in the quarter.
Bobby Brooks: That would be stronger than the rest I might suggest guests infrastructure <unk> natural gas pipeline, maybe even just the momentum that we're seeing the activity I'd say, we're seeing on nuclear.
Bobby Brooks: <unk>.
Bobby Brooks: Just the infrastructure associated with power what we do.
Bobby Brooks: Separation infiltration that is probably our was our strongest pocket of Q1.
Bobby Brooks: Got it excellent and then just a follow up and I think you're kind of already answered that but told ordering trends you saw in January.
Bobby Brooks: January February March kind of continued so far through the first four weeks of <unk>.
Bobby Brooks: Yes, we feel good about how Q2, starting I mean, obviously, we haven't closed April yet, but we see our bookings were in constant communication with our businesses on their pipeline I don't know Peter if you want to add anything to what we're hearing and seeing we're reviewing.
Bobby Brooks: With our business as more and more contracts that hit our radar screen than we have probably ever.
Bobby Brooks: That continues to give us a lot of visibility.
Bobby Brooks: Two to our customer activity.
Bobby Brooks: CECO is uniquely positioned versus a lot of industrial companies, because we don't sell a lot through distribution, we sell a lot direct.
Bobby Brooks: To the end customer or potentially to the EPC firm that basically is the end customer in essence and so we.
Bobby Brooks: We're in regular dialogue with our businesses on projects that require a review and approval.
Speaker Change: And Bob one thing I would ask.
Speaker Change: Everyone listening too.
Speaker Change: To consider is our portfolio is not a north American portfolio.
Speaker Change: We're getting to the point, where we will soon be half of our business will be non U S.
Speaker Change: And the dynamics outside of the U S are different.
Speaker Change: And they tend to be less politicised and more focused around industrial development and economic development.
Speaker Change: Our high growth region businesses, which we.
Speaker Change: Consider the Middle East, India Southeast Asia parts of East Asia still in developing mode continue to have exceptional accelerating demand profiles.
Speaker Change: What's happening in India, It looks like China at the turn of the century.
Speaker Change: So we've got at least 30 years in India to continue to harvest and grow.
Speaker Change: <unk>.
Speaker Change: Yes.
Speaker Change: Some color I appreciate it and it's very exciting with a non U S opportunities such as expanding and so kind of tie into that a little bit I was just curious if we could get an update a little bit more of an update on the integration of profile I know you touched on a little bit in the prepared remarks, but I was really curious about how the cross selling opportunities.
Speaker Change: First the industrial customers are and then secondly, the international oil and gas customers have kind of developed so far.
Bobby Brooks: Bobby I would say.
Bobby Brooks: Functionally I'll, let Todd Tom at the commercial side functionally the integration is going as well as can be expected probably better when we bought a company that already had.
Bobby Brooks: Strong processes it had strong.
Bobby Brooks: Governance and compliance we didn't have to take a founder or a private company mindset and help them understand what it needs to be part of a public company and the expectations and so I look across accounting and an.
Bobby Brooks: In HR and finance and all the aspects of integrating our platform into CECO going very very well know public company costs have been eliminated.
Corporate redundancies are being evaluated and being we're taking actions on those and.
Bobby Brooks: The.
Bobby Brooks: Is the ambition that the business has for growth and to make this integration positive is very very strong.
Bobby Brooks: The cultural fit is fantastic.
Bobby Brooks: I would also just add one powerful data point I think.
Bobby Brooks: Because data is.
Bobby Brooks: Always always helpful. They had record first quarter bookings profile right and I'm not suggesting that that is just because of the opportunities that we're already bringing to the table in just 90 days, but it speaks to a team thats focused the team is well positioned a market that theyre in that strong.
Bobby Brooks: We saw really good results in several of our recent acquisitions, but since we're talking about profile.
Speaker Change: They are still all in a very good mood up in Edmonton Oilers are hanging in there.
Bobby Brooks: And that will continue.
Bobby Brooks: But.
Bobby Brooks: Certainly in Q1 the record bookings was.
Bobby Brooks: The example of the strength of the business.
Bobby Brooks: Thank you very much.
Speaker Change: Agree with that and I'll return it back to the queue. Congrats on the great quarter guys. Thank you.
Speaker Change: And Bobby you are while they are doing well too.
Speaker Change: Alright.
Erin: Our next question comes from Erin <unk> with Craig Hallum.
Erin: Yes, good morning, John and Peter Thanks for taking the questions and for all the good color on the call and in the deck.
Erin: First for me at a high level can you just kind of talk about.
Speaker Change: Capex in kind of areas of investment in the business as we kind of look.
Speaker Change: For the rest of 2025 and just for the next couple of years, just given backlog and kind of early stages of this power Super cycle that you've kind of talked about just just where might we see the focus of investment there.
Speaker Change: Currently our largest single investment is in it infrastructure.
Speaker Change: And that will continue through this year and into 2026.
Speaker Change: Our focus there is to get that.
Speaker Change: A majority if not all of the company on a single.
Speaker Change: <unk> and data infrastructure.
Speaker Change: And we've made the decision that will be the Microsoft D 365 platform, which has a lot of power and is equally.
Speaker Change: Yes.
Speaker Change: And.
Speaker Change: It works equally well in our project business or a manufacturing business, which was one of the reasons we selected the tool.
Speaker Change: And that will continue for.
Speaker Change: We've got another seven to eight quarters.
Speaker Change: As far as the traditional capital expenditures and plant or equipment.
Speaker Change: We still have a very modest demand modest requirement and with the sale of the global pump business that who is the largest consumer or salad spender of capital equipment.
Speaker Change: We will see that capital spend moderate we have a couple needs.
Speaker Change: That arise and I think.
Speaker Change: <unk> will probably need some spending as we expand capacity and improve operations in our.
Speaker Change: Separation of filtration activities in Houston.
Speaker Change: They continue to see increased demand and we were looking at putting in some process automation equipment, there to help with accelerating or reducing lead times and increasing capacity, but we still continue to be a capital investment light firm majority of our operating asset investments will be in.
Speaker Change: Working capital and growing.
Speaker Change: Our businesses with customers.
Speaker Change: Understood. Thanks for that and then maybe second for me just with <unk>.
Speaker Change: Defense spending.
Speaker Change: The news around there on the budget and things like that can you just talk about what that might mean for your business areas that you focus today and kind of the outlook there.
Speaker Change: Don't know if there is any direct impact says we're not.
Speaker Change: A defense contractor, we do supply technology to the Navy and for both combat and non combat vessels and we expect the supplemental bill.
Speaker Change: And the shifts that they anticipate.
Speaker Change: Building more of to benefit us.
Speaker Change: An indirect benefit is likely to be.
Speaker Change: Factory construction.
Speaker Change: We're going to see more factories built in the U S to produce more armament or produce more smart weapons.
Speaker Change: Theyre going to need CECO solutions in those facilities.
Speaker Change: In Europe, they are making substantial investments as they raise their.
Speaker Change: They're spending substantially to.
Speaker Change: To the 2% plus or greater target that NATO members are supposed to achieve.
Speaker Change: And that will benefit our industrial air business.
Speaker Change: Europe, and the UK and Germany principally.
Speaker Change: We're also seeing <unk>.
Speaker Change: <unk> and power infrastructure in Europe as they further.
Speaker Change: Did they move further and further away from dependence on Russian gas.
Speaker Change: We've got some interesting investments that we're supporting in Romania, Poland and elsewhere on nuclear.
Speaker Change: Nuclear capacity and on new LNG import capacity those are all in.
Speaker Change: Indirect benefits of kind of a good geopolitical situations that will provide Europe with.
Speaker Change: No.
Speaker Change: A more stable situation.
Speaker Change: And one of the reasons Peter mix naturally flowed to let's go with nuclear.
Speaker Change: Is the certifications and the engineering and the experience the reputation required is very related to the defense space for us the separation filtration the components the manufacturing all need to be an approved certified locations all need a lot of experience no ones and the defense.
Speaker Change: And the naval shipyards is gambling with.
Speaker Change: With their contracts same thing with nuclear and it's.
Speaker Change: It's not the same team. It's the same leadership team that has got a lot of sophistication and knowledge about that and we benefited from that in the first quarter was so while naval might not be a direct Dod budget item per se we are.
Speaker Change: Seeing more volume in that space and its good margin.
Speaker Change: Alright understood.
Speaker Change: Thanks for taking the question I'll turn it over thanks Erin.
Speaker Change: Our next question comes from Gerry Sweeney with Roth capital.
Gerry Sweeney: Hey, good morning, guys congrats on a good quarter.
Speaker Change: It wouldn't be a earnings call without.
Speaker Change: More and more tariff questions.
Gerry Sweeney: I'll give you one more.
Gerry Sweeney: I'm not really so much worried about <unk>.
Gerry Sweeney: <unk> per se, but I am just interested if you're able to talk to some of your companies and maybe some of the impacts that we're seeing.
Gerry Sweeney: And is there a potential for a derivative sort of follow on impact later in the year. That's I think my main concern not so much Q2 Q3, but as we look a little bit further out on the curve with some of this uncertainty.
Jerry: Yes, well look Jerry I think.
Jerry: I might start by answering by saying I think most companies and we're not and we're not dissimilar would have the same concern meaning it's not so much the what we know because first of all what we know is that things change quickly from day to day.
Speaker Change: The things are in place and they are reversed.
Speaker Change: So look at it is it is important to just sort of understand that.
Speaker Change: That it is it's a dynamic situation, which is fine.
Speaker Change: And frankly, an interesting situation because I think we we like as we've articulated the goals and objectives of much of this is to drive investment in areas that we've been saying for years CECO is well positioned for that investment. So this is just another potential exclamation point on the investment that could be.
Speaker Change: Delivered as a result of some of this noise more re shoring more power and similar and so as far as.
Speaker Change: Kind of just sort of sifting through this dynamic situation.
Speaker Change: I would say we continue to see great pipeline, great orders not a lot of change in the market activity associated with our our customers.
Speaker Change: And so that all seems to be either.
Speaker Change: Either or.
Speaker Change: Positive all this somehow or not a negative now look from an inflation perspective.
Speaker Change: I think that's our concern as well is that you know.
Speaker Change: The ramifications of the supply chain, which we've seen.
Speaker Change: In recent years it can sometimes happen quickly it can sometimes take a while to work through if there is.
Speaker Change: A lot of price increases going through distribution and the distribution is going to raise prices at some point that hits consumers that hits company's supply chains.
Speaker Change: That hits logistics, and so we're monitoring it.
Speaker Change: Our bigger concern if we are concerned Jerry is it the sort of what we know today and how our contracts protect us. It is is there going to be a real economic impact and is there going to be more inflation than it is possible to model in we could be.
Speaker Change: We can speculate and we are a bit which is some of the price actions and cost actions or things that we're trying to be proactive with.
Speaker Change: We just don't know.
Speaker Change: And I think Thats fair, yes.
Speaker Change: Jerry one thing to keep in mind as many of our customers.
Speaker Change: Look at this as a transient event because they are investing in.
Speaker Change: Buildings building infrastructure, putting in productive capacity that they'll utilized for the next 30 to 50 years.
Speaker Change: And they are accustomed to.
Speaker Change: Planning through some of these disruptions.
Speaker Change: These are not consumer companies these are not.
Speaker Change: Dot com companies these are companies like Exxon.
Speaker Change: Companies.
Speaker Change: Like.
Speaker Change: TSMC.
Speaker Change: We are planning for many many decades or are there.
Speaker Change: Outside of the U S. There are companies that have been given.
Speaker Change: A lot of money by their respective governments to ensure that they are building infrastructure and manufacturing and industrial capacity to employ that many people in their countries.
Speaker Change: And so their motivations are different then we'll see.
Speaker Change: A 1% increase in my cost of steel.
Speaker Change: Got it that's fair.
Speaker Change: Power sites.
Speaker Change: Could you talk a little bit about it on the call.
Speaker Change: Larger opportunities fair to say that.
Speaker Change: Some of those opportunities are more 2026 oriented by the time you get the orders.
Speaker Change: And then yes. There is there is majority of our power jobs that we will be booking will be <unk>.
Speaker Change: Revenue in 2006 and 2007, there is a few that we're still in discussion.
Speaker Change: There could be some modest.
Speaker Change: Positive impact to 'twenty fives forecast as a result of of a handful of projects and there's always a little bit of revenue that's associated with some upfront engineering and various items, but.
Speaker Change: Yes, if we let's say booked a large set of power related projects in Q2 or Q3. The majority of that revenue starts next year and into 2007, depending on the project and depending on the size.
Speaker Change: In the past you've sort of given some stats on I think the power pipeline I apologize lots of information in the call today.
Speaker Change: I mean do you have any.
Speaker Change: Sort of stats on how big that pipeline is or how many orders youre pursuing I think.
Speaker Change: Did my words not yours.
Speaker Change: Assuming 20 power jobs, I think last quarter, which was maybe four years to buybacks historical norms.
Still fair I think that's still fair okay.
Speaker Change: A lot in the velocity.
Speaker Change: And we're beginning to see an international projects fill in as well not just the domestic.
Speaker Change: Surge of opportunities.
Speaker Change: Yeah on the international side is that AI, driven or is that just AI, driven plus sort of economic development.
Speaker Change: Less data center, driven it's more they need power.
Speaker Change: Okay.
Speaker Change: India's an interesting example, Saudi Arabia other parts of the middle East, where they're making investments in.
Speaker Change: In industry and modernization in gas power.
Speaker Change: Electronic choice.
Speaker Change: Got it.
Speaker Change: Think of a large.
Speaker Change: <unk> theme and power.
Speaker Change: I'm not I'm not here to discount or to reduce the excitement around data center or AI for sure seems like that is.
Speaker Change: Top of mind on power.
Speaker Change: Industrial manufacturing re shoring munis. These are data centers now almost right.
Speaker Change: The automation and in the.
Speaker Change: Mechanical needs associated with with manufacturing facilities. I mean these are these are fairly large complicated systems now and they demand a lot of power and the people that are working their demand a lot of power. So.
Speaker Change: It's it's a power hungry environment at the moment.
Speaker Change: Got it that's fair.
Speaker Change: One more question <unk>.
Speaker Change: G&A I think $58 million in the quarter, 30% plus of revenue.
Speaker Change: I know this profile there I think you touched upon it.
Speaker Change: Theres, probably some integration.
Speaker Change: Opportunities in there maybe to cut a little bit grow into some of that as well but.
Speaker Change: What should we be thinking along those lines because historically, we've been thinking trying to get up into the sort of mid teens EBITDA.
Speaker Change: Margin, so maybe a little thoughts roadmap on that front.
Speaker Change: Yes, I think still our goal is to get into the mid teens EBITDA margins.
Speaker Change: It's interesting with our business model when we have such a large backlog, we do have costs in advance of <unk>.
Speaker Change: Recognizing some of those revenues and margins. So it's great as our revenues were in the first quarter I would argue that when you book multiple quarters in a row over $200 million.
Speaker Change: That means theres, a future quarter of those bookings turned to revenue of over $200 million and we sort of start to get our cost structure in line with that ahead of maybe being at that volume level.
Speaker Change: It's not every day that you have a company that can sort of say look our backlog.
Speaker Change: Unless something dramatically changes is presenting future growth that is double digits sequentially potentially maybe not Q1 to Q2, but coming up right. So we have to.
Speaker Change: We have to ready ourselves for that with resources project management et cetera.
Speaker Change: No.
Speaker Change: It is the tricky as part of our EBITDA margin expansion journey is when your growth can kind of work against us in the short term and then yield long term benefits.
Speaker Change: It's why we don't give quarterly guidance because you know explaining this quarterly can be a little choppy, we like staying with annual guidance because we believe that these things smooth out over a multi quarter period.
Speaker Change: That's fair.
Speaker Change: Guys I appreciate it I'll jump back in line. Thanks.
Speaker Change: Our next question comes from Jim Ricchiuti with Needham <unk> Company.
Speaker Change: Alright. Thanks.
Jim Ricchiuti: I know you don't like to talk about quarterly guidance, but it does seem to suggest you're anticipating a pretty significant step up in adjusted EBITDA margins for the Q2 and I'm just wondering how we might think about the cadence of revenues and adjusted EBITDA over the course of 'twenty five.
Speaker Change: Yes.
Speaker Change: There's a step up we expect.
Speaker Change: Q1 is always a softer quarter typically than there is a nice step up historically we.
Speaker Change: We think we know that that's going to happen.
Speaker Change: In the coming quarter sequentially look it's a ramp throughout the year I think is what the way I would look at it Q2.
Speaker Change: Nice step up from Q1.
Speaker Change: Now Q3 isn't always that step up I expect it to be this year and then going up to Q4 again it has to do with just our probably volume step up as well throughout the year.
Speaker Change: Productivity.
Speaker Change: And getting some of these actions through that we're taking in Q2.
Speaker Change: So still a busy Q2 balanced I guess I'd call. It as we step up sequentially. We will show margin expansion I think nicely, but then the second half of the year, we expect to be very strong.
Speaker Change: And then just one quick one you saw bookings could you say how much of the bookings came from acquisitions in the quarter.
Speaker Change: We did not say yet but.
Speaker Change: Do we have.
Speaker Change: Yes.
Speaker Change: We will.
Speaker Change: I want to say.
Speaker Change: We'll get you the data somehow I want us in fact I have the day to give me a second here.
Speaker Change: I have the data.
Speaker Change: Because our because we did the work.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: We did the work on this and it is it's a little less it's a little less than $50 million in the quarter that was.
Speaker Change: We would consider to be orders from the acquisitions over the last 12 months call.
Speaker Change: Call it $45.
Speaker Change: $45 million to $50 million.
Speaker Change: If you back that out if you backed that out obviously you are at one call it $1 85 ish or so.
Speaker Change: 180% to 185% of orders, which would have been a record under most circumstances.
Speaker Change: And but again.
Speaker Change: That's pulling data here that.
Speaker Change: On the way, we're looking at it so 24% organic.
Speaker Change: Give or take obviously congrats on organic so again very similar to our guidance for the year, where we said about half of our top line will be from acquisitions and half will be from our base organic business that sources similar to our orders growth in the quarter about half of it was from the acquisitions and half was from our base business without a big power or water.
Speaker Change: Which would come from our base business.
Speaker Change: Okay, great. Thanks, guys. Thanks.
Speaker Change: Our next question comes from Sameer Joshi with H C Wainwright.
Sameer Joshi: Hey, good morning.
Sameer Joshi: Thanks for taking my question congrats on a good quarter.
Sameer Joshi: Yeah.
Sameer Joshi: So the last three four quarters acquired.
Sameer Joshi: The amount of company.
Sameer Joshi: I think you might have a boost.
Sameer Joshi: Repayment of around $47 million.
Sameer Joshi: On the balance sheet.
Sameer Joshi: Are you still going to be looking at acquisitions in the coming quarters or are you going to try to digest.
Sameer Joshi: Integrated these companies.
Sameer Joshi: In the next couple of quarters.
Sameer Joshi: Yes.
Sameer Joshi: Part of the answer is probably as it should be related to our debt in our balance sheet and just making sure that we're managing that as we as we always do the other part of the answer is look we've been very active.
Sameer Joshi: With our.
Sameer Joshi: Acquisitions in the last six months.
Sameer Joshi: It's Ben.
Sameer Joshi: It's been a busy time for a lot of our resources inside of CECO as well as the businesses we've acquired.
Sameer Joshi: Not only that but youre, obviously entering a new calendar year. There is a lot of noise in the marketplace, probably some uncertainty you bundle all that together and my point is it's not about a pause because of our balance sheet, it's not about a pause because of the number of acquisitions. We did it is a collection of its own.
Sameer Joshi: Good opportunity for us to digest, it's a good opportunity for us too.
Sameer Joshi: Tightened up our balance sheet appropriately to the level, where we're usually comfortable operating it is.
Sameer Joshi: An opportunity for us to rebuild our pipeline with what we know is some very attractive opportunities that could happen this year.
Sameer Joshi: That could move into next year timing isn't a goal. It's an outcome of finding a transaction that is strategic that is accretive that helps us advance our strategies in air water and energy.
Sameer Joshi: And obviously, a cultural fit for us where we know that we have a business that wants to grow in CECO can help enable that growth. So as we rebuild our pipeline, which we're doing.
Sameer Joshi: The timing will will.
Sameer Joshi: Answer itself.
Sameer Joshi: But I would say for sure. Our view is it's if we're starting to do acquisitions.
Sameer Joshi: It's not a Q2 item, it's a second half of the year and as we head into 2026.
Sameer Joshi: And then this next question is about slide <unk>.
Sameer Joshi: What are you seeing that is that the green line, which is order.
Sameer Joshi: Moving away from the revenue line and I understand it because I'm shocked.
Sameer Joshi: B.
Sameer Joshi: Being negotiated but in terms of.
Sameer Joshi: Going forward margin impact.
Sameer Joshi: The margins of short term project with this long term project, how should we look at.
Sameer Joshi: When you can buy later half from 10 to 26.
Sameer Joshi: Gross margin impact.
Sameer Joshi: So nominal I think Peter said that we're really pleased with the.
Sameer Joshi: Both.
Speaker Change: Well, how we've been sequentially growing our gross margins in fact, that's highlighted obviously on the next slide 13.
Sameer Joshi: We're really pleased I believe it is at least.
Sameer Joshi: We're really pleased with.
Sameer Joshi: The productivity quality the efforts in our global supply chain group.
Sameer Joshi: So.
Sameer Joshi: There is opportunity to continue to increase gross margins, but keeping it stable in the mid thirty's.
Sameer Joshi: A range of between 34 to 36, I think Peter said is sort of how we're modeling the year.
Sameer Joshi: If it my point is if it goes down to the mid 34 34 five.
Sameer Joshi: There's nothing to see here is just the profile of the of the business of the profile of the projects in fact, some of our larger.
Sameer Joshi: Future bookings and projects associated with power have lower gross margins, but actually higher EBITDA margin just the nature of those business and those projects and those profiles. So I would probably keep gross margins relatively steady in that range of where we're currently at for the year and the goal is to step up sequentially.
Sameer Joshi: <unk> EBITDA margin throughout the year.
Sameer Joshi: Understood.
Sameer Joshi: And just one last one the topline guidance has been kept steady, but there's also discussion about.
Sameer Joshi: Price action to mitigate any margin impact.
Sameer Joshi: Does that mean that.
Sameer Joshi: Your outlook includes likely lower volume.
Sameer Joshi: In terms of like with the higher price.
Brian: Yes, Hi, Brian.
Sameer Joshi: Yes.
Sameer Joshi: We we probably just decided not to touch anything with respect to guidance because it's early in the year price actions are not super material.
Sameer Joshi: For us.
Sameer Joshi: I know some companies that's a different dialogue for us it's more again, we're more passing through prices on our projects and those might be in our backlog as we go through the year not necessarily something that we recognize revenue on in the year. So the dynamic of price might be well, we are raising price on a project that we won but were not.
Sameer Joshi: Going to recognize the revenue on that price until maybe even Q1 of next year. So we have to get that model through the fact is we gave a range on our guidance to start our guidance.
Sameer Joshi: Projections for 2025, we are just going to keep that range.
Sameer Joshi: There is certainly a great start to the year and not only in terms of revenue in Q1, which demonstrates our good growth company, but the bookings that we generated in the last three quarters gives us confidence that our revenue range is.
Sameer Joshi: It's very much.
Sameer Joshi: No.
Sameer Joshi: In good shape.
Sameer Joshi: And I think we just felt it was too early in the year to make any changes to our outlook.
Speaker Change: Understood. Thanks for taking my questions and good luck. Thank you Sameer I think we might be a little overtime is there any other questions in the queue otherwise, we'll wrap up no further questions at this time okay.
Sameer Joshi: Thank you.
Sameer Joshi: For that well look great questions. We appreciate your interest in our information today.
Sameer Joshi: Once again, thanks to team CECO, our global resources.
Sameer Joshi: Incredibly hard to deliver value for our customers around the world and we are pleased that we continue to protect people protect the environment and protect our customers' investments in their global industrial equipment.
Sameer Joshi: To continue to be active in the second quarter with.
Sameer Joshi: Getting out and meeting with investors for example, we're going to be at certain well attended investor conferences, we hope to see you.
Sameer Joshi: In may at the Craig Hallum Conference in Minneapolis, followed by the East Coast ideas Conference and the Northland Conference in June.
Sameer Joshi: Lastly, we look forward to speaking with you likely in late July when we release, our second quarter earnings results. So thank you appreciate your interest have a great day.
Sameer Joshi: This concludes today's conference call. Thank you for participating you may now disconnect.
Sameer Joshi: Okay.
Sameer Joshi: [music].
Sameer Joshi: Yes.