CECO (CECO) Q1 2025: Bookings Surge 57% as $5B Pipeline Expands, Margin Leverage in Focus
CECO set new records in Q1 with bookings up sharply and backlog exceeding $600 million, driven by broad-based demand across industrial air, water, and energy transition markets. Despite tariff uncertainty and inflationary pressures, management maintained guidance and highlighted a $5 billion sales pipeline, signaling sustained demand visibility and a robust order environment. Margin expansion and operational leverage remain top priorities as integration and cost actions are set against a backdrop of accelerating global infrastructure investment.
Summary
- Sales Pipeline Expansion: CECO’s opportunity set grew to $5 billion, with a dozen $50M-plus deals in view.
- Margin Management Under Tariff Pressure: Cost actions and contract structures aim to offset $3–10 million in potential tariff exposure.
- Global Diversification Accelerates: Non-US business is nearing 50% of mix, with India and Middle East demand outpacing expectations.
Performance Analysis
CECO delivered a record quarter, with orders up 57% year over year and backlog reaching $602 million, a 55% increase from the prior year. The quarter’s $228 million in bookings was achieved without any large power or water contracts, underscoring the breadth of demand across platforms. Revenue rose 40% versus last year, with approximately two-thirds of growth contributed by recent acquisitions such as Profire Energy, Verantis Environmental, and the WK Group. Organic growth, driven by project execution and shorter-cycle aftermarket sales, also played a material role.
Adjusted EBITDA of $14 million was slightly above expectations, though margin was impacted by higher SG&A and resource investments to support the expanding backlog and bid activity. Gross margins remained steady in the mid-30s, reflecting operational discipline and mix improvements. Notably, the company’s book-to-bill ratio remained above 1.2x on a trailing 12-month basis, supporting future revenue visibility and signaling continued strength in underlying demand.
- Backlog Leverage: $602 million in backlog is expected to convert to revenue over 30 months, with most delivered in the next 18 months.
- Shorter-Cycle Revenue Mix: 30% of sales now come from faster-turn aftermarket and standard products, with a goal to reach 50% in coming years.
- Acquisition Integration: Profire and other recent deals contributed nearly $50 million in Q1 bookings, with integration synergies already materializing.
Capital deployment focused on debt reduction post-divestiture of Global Pump Solutions, with net debt at $190 million and a stated intent to further deleverage in Q2. Cash flow was pressured by integration and M&A costs, but working capital management and collections provided partial offset.
Executive Commentary
"We delivered multiple financial records in the first quarter. Perhaps the most impressive of our Q1 achievements was our record bookings of approximately $228 million, up 57% year over year. We generated these tremendous bookings without a large order in either the power generation or produced water treatment markets, and these records reflect the continued strength of our entire portfolio."
Todd Gleason, Chief Executive Officer
"For the second consecutive quarter, Seco delivered orders in excess of $200 million, with our first quarter orders results of 228 million. A figure of 57% versus prior year, and a 4% sequential increase from the fourth quarter of 2024, delivering a book-to-bill of approximately 1.3 times. On a trailing 12-month basis, orders totaled $750 million, up 29%."
Peter Johansson, Chief Financial and Strategy Officer
Strategic Positioning
1. Balanced Revenue Streams and Mix Shift
CECO’s business model is evolving toward a higher mix of short- and mid-cycle revenue, with 30% of sales now derived from aftermarket and standard products. The company targets a 50% shorter-cycle mix, which should provide more predictable cash flow and margin stability. This shift is supported by investments in IT infrastructure, particularly the rollout of a single ERP platform (Microsoft D365) to harmonize operations globally.
2. Global and Sector Diversification
Non-US revenue is approaching half of total sales, with significant growth in India, Southeast Asia, and the Middle East. These regions are experiencing secular infrastructure and industrial investment, with India described as being at an inflection point akin to China’s early-2000s growth. The company’s portfolio is increasingly insulated from single-market or sector risk, with power, water, and industrial air all contributing to the pipeline.
3. Tariff and Cost Mitigation Playbook
Management estimates $3–10 million in gross tariff exposure for 2025, but has implemented contract pass-through provisions, cost actions, and price increases to offset risk. The supply chain is regionally aligned, limiting direct import exposure. Most contracts allow for tariff-driven cost pass-throughs, though this can modestly compress margin as price increases are not fully margin-accretive.
4. M&A Integration and Capital Allocation Discipline
Recent acquisitions (Profire, Verantis, WK Group) are contributing to both bookings and revenue, with integration progressing ahead of plan. The company is pausing on new M&A in the near term to focus on integration, deleveraging, and pipeline development for future strategic deals. Capital expenditures remain light, with IT and targeted automation the main investment areas.
5. Margin Expansion and Operational Leverage
Gross margin expansion of 500 basis points since late 2022 has been driven by operational excellence and improved mix, now stabilizing in the 34–36% range. The company is targeting mid-teens EBITDA margin, but acknowledges that advance investment in SG&A and project management is necessary to support future revenue conversion from backlog. Management expects sequential margin improvement through 2025 as volume ramps and cost actions take hold.
Key Considerations
CECO’s Q1 results highlight a business scaling rapidly across geographies and end markets, but also facing a complex set of operational, macro, and integration challenges. Investors should weigh the following:
Key Considerations:
- Backlog Visibility: Record backlog and pipeline provide multi-quarter revenue visibility, but timing of large power projects could shift revenue recognition into 2026–27.
- Tariff Pass-Through Limitations: While most contracts allow cost recovery, not all inflation can be offset, especially in distributed component purchases, risking mild margin compression.
- Integration Execution: Profire and other acquisitions are on track, but realization of full synergy potential is still underway and critical for margin expansion.
- Global Demand Drivers: Industrial reshoring, power infrastructure, and water investment are secular tailwinds, but regional volatility and policy shifts could impact project timing.
- SG&A and Resource Alignment: Elevated SG&A reflects investment ahead of revenue; operational leverage is expected as backlog converts, but short-term margin volatility remains possible.
Risks
Tariff uncertainty and inflation could outpace pass-through capabilities, especially if supply chain costs escalate faster than contract adjustments allow. Integration missteps or delayed synergy capture from recent acquisitions could pressure margins, while project delays in large power and water contracts may defer revenue and profit recognition. Global macro volatility and shifting regulatory environments, particularly outside the US, add an additional layer of execution risk as the company expands internationally.
Forward Outlook
For Q2 2025, CECO guided to:
- Sequential revenue and EBITDA margin improvement as backlog converts and cost actions materialize.
- Continued strong bookings, with potential for large power and water contracts to land in coming quarters.
For full-year 2025, management maintained guidance:
- Revenue of $700–750 million (30% YoY growth, roughly half organic, half acquired).
- Adjusted EBITDA of $90–100 million (up 50% at midpoint).
- Free cash flow conversion of 60–70% of adjusted EBITDA.
Management highlighted:
- Book-to-bill expected to remain above 1.0 for the year, extending a multi-year streak.
- Margin expansion and cost discipline as SG&A normalizes and operational leverage builds.
Takeaways
CECO’s Q1 2025 results reinforce the company’s positioning at the intersection of global infrastructure, energy transition, and industrial reshoring.
- Pipeline Strength: The $5 billion sales pipeline and record backlog anchor revenue visibility and support the case for sustained above-market growth, even as project timing remains a swing factor.
- Margin and Integration Watch: Operational leverage and synergy capture from recent acquisitions are key to realizing mid-teens EBITDA margin targets, but cost discipline and SG&A control will be critical as the business scales.
- Tariff and Inflation Navigability: Pass-through mechanisms, regionalized supply chain, and proactive pricing actions provide some insulation, but investors should monitor for inflationary lag and margin compression risk as macro conditions evolve.
Conclusion
CECO’s record Q1 bookings and expanding global pipeline underscore strong secular demand across its diversified portfolio, even as tariff and cost headwinds persist. Execution on backlog conversion, margin expansion, and integration will determine the pace at which the company can translate its opportunity set into durable earnings growth.
Industry Read-Through
CECO’s order momentum and robust pipeline signal ongoing strength in industrial infrastructure, energy transition, and water markets, with global reshoring and electrification themes driving demand. Tariff uncertainty and inflation risk are sector-wide issues, but CECO’s regionalized supply chain and contract structures offer a playbook for peers. M&A integration discipline, margin management, and operational leverage are emerging as key differentiators for companies seeking to capitalize on secular infrastructure investment while navigating macro volatility. Investors in industrials and environmental solutions should watch for similar margin and backlog dynamics across the sector.