CECO (CECO) Q2 2025: Backlog Soars 76% as Power Gen and Industrial Orders Fuel Record Pipeline
CECO’s Q2 delivered a decisive inflection point, with backlog and bookings reaching new highs on the back of broad-based demand in power generation, industrial water, and natural gas infrastructure. Leadership is leveraging a diversified pipeline and global expansion to sustain growth, while proactively investing to address capacity and execution for a potential 2026 step-change. Margin expansion and cost discipline are now balancing against the need to resource for outsized opportunity, keeping the focus on long-term value creation amid inflationary and supply chain pressures.
Summary
- Record Backlog Signals Multi-Year Growth Visibility: Broad-based order strength and a $688 million backlog anchor future revenue streams.
- Pipeline Diversification Unlocks Global and Vertical Expansion: Investments in new markets and regions are accelerating opportunity beyond core North America.
- Margin Strategy Balances Growth and Productivity: Management is prioritizing growth investments, with mid-teens EBITDA margins still in reach as scale builds.
Performance Analysis
CECO’s Q2 performance was defined by a surge in new orders and backlog, reflecting the company’s deliberate portfolio transformation and operational execution. The company reported a record $688 million backlog, up 76% year-over-year, with sequential growth driven by both organic demand and recent acquisitions. Orders in the quarter reached $274 million, a 95% increase over the prior year, fueled by the largest single project in CECO’s history—a selective catalytic reduction (SCR, emissions control) solution for a major U.S. power generation customer. This order, combined with a steady flow of mid-sized projects across natural gas infrastructure and industrial water, pushed the trailing 12-month book-to-bill ratio to 1.35x, underscoring robust demand momentum.
Revenue climbed 35% year-over-year to $185 million, with approximately 20 percentage points of growth attributed to recent acquisitions and the remainder from core operations. Gross margin improved by 50 basis points year-over-year, with adjusted EBITDA up 45% as volume and mix benefits were partially offset by ongoing investments in commercial resources and project execution capabilities. Working capital outflows remained elevated to support growth, and net debt increased modestly as CECO prioritized capacity and pipeline conversion. Integration of acquisitions and the divestiture of the Global Pump Solutions business further streamlined the portfolio, while cost actions in G&A began to yield early benefits.
- Backlog Expansion Drives Revenue Visibility: The $688 million backlog, more than triple 2021 levels, is expected to largely convert to revenue within 24 months.
- Order Mix Diversifies End Markets: Power generation, semiconductor, and industrial water represented the largest contributors, with international markets becoming increasingly material.
- Margin Leverage from Scale and Mix: Short cycle revenue and accretive acquisitions supported gross profit margin gains, even as inflation and resource adds tempered near-term flow-through.
CECO’s operating model is now delivering both top-line acceleration and margin progress, positioning the company to capitalize on a multi-year industrial demand cycle.
Executive Commentary
"We grew backlog to a new record, exiting the quarter at $688 million. Year over year, our backlog is up almost 300 million, or more than 75%. Sequentially, our backlog rose an approximate $80 million. This was made possible by another quarter of record orders."
Todd Gleason, Chief Executive Officer
"Revenue in the quarter of $185 million was an increase of 35% year-over-year, with approximately 20 points generated by the company's most recent three acquisitions and the balance of the growth driven by organic results."
Peter Johansen, Chief Financial Officer
Strategic Positioning
1. Pipeline-Driven Growth Model
CECO’s pipeline now exceeds $5.5 billion, serving as the company’s primary engine for organic growth. Leadership emphasized the direct link between pipeline expansion and revenue, with focused investments in commercial talent, systems, and new market entry. The company’s ability to consistently build and convert this pipeline is enabling a shift from flat historical growth to sustained double-digit expansion.
2. Global and Vertical Diversification
International markets and new verticals are becoming increasingly important contributors. The Middle East, India, and Southeast Asia now account for a growing share of large industrial water and power projects, while CECO’s acquisitions have unlocked new customer access. Management highlighted the strategic importance of local presence and tailored solutions for these high-growth regions.
3. Operating Excellence and Cost Discipline
Margin expansion is being driven by operational excellence, mix optimization, and cost actions. The company’s gross margin has expanded by 500 basis points since Q4 2022, supported by project execution and sourcing initiatives. G&A cost reductions and process simplification are ongoing, with further upside expected as scale builds.
4. Capital Allocation and Balance Sheet Strength
CECO is balancing growth investment with prudent leverage management. Net debt rose to $199 million, primarily to fund working capital and recent acquisitions, but leverage remains manageable at 2.7x bank EBITDA. Management is prioritizing debt reduction in the near term, while retaining capacity for future M&A as opportunities arise.
5. Market Tailwinds and Policy Environment
Secular demand for power generation, industrial reshoring, and environmental solutions is driving a “mega cycle” in CECO’s core markets. Leadership noted that recent U.S. policy shifts and global focus on sustainability are accelerating project approvals and market access, with minimal drag from tariffs or regulatory headwinds at present.
Key Considerations
This quarter marks a strategic acceleration for CECO, as the company’s backlog and order book provide a foundation for multi-year growth. Management is navigating the trade-off between near-term margin optimization and long-term market share capture, with execution risk now shifting toward delivery and integration rather than demand generation.
Key Considerations:
- Backlog-to-Revenue Conversion Pace: Timely execution will be critical to realizing the full revenue and margin potential embedded in the record backlog.
- Inflation and Supply Chain Dynamics: Cost pressures are being modeled into guidance, but the ability to offset inflation through productivity and price remains a watchpoint.
- International Execution Risk: Expansion into new geographies brings complexity in project management, regulatory compliance, and customer engagement.
- Acquisition Integration and Synergy Capture: Realizing the full benefits from recent deals will hinge on successful integration and cross-selling in new markets.
Risks
Execution risk is rising as CECO ramps up to deliver on a record backlog across new verticals and geographies. Inflationary pressures, supply chain volatility, and potential project delays could impact margin realization and cash flow. While management has taken steps to mitigate these risks, a misstep in project execution or integration could disrupt the growth trajectory, particularly as the company adds resources ahead of anticipated 2026 demand.
Forward Outlook
For Q3 2025, CECO guided to:
- Continued strong order bookings, with second half bookings expected to remain above historical averages but not at Q2 peak levels.
- Revenue momentum supported by backlog conversion and minimal project delays.
For full-year 2025, management raised guidance:
- Bookings of $870 million to $930 million (1.2x revenue)
- Revenue of $725 million to $775 million (midpoint up 35% YoY)
- Adjusted EBITDA of $90 million to $100 million (unchanged, ~50% YoY growth)
Management highlighted:
- Visibility into double-digit growth for 2026 based on backlog and pipeline
- Expectations for modest inflation and continued investment in resources to support execution
Takeaways
CECO’s Q2 results confirm that its multi-year transformation is delivering tangible results, with backlog, bookings, and margin all moving in the right direction. The company’s ability to translate pipeline into orders and orders into revenue is now the primary lever for value creation, with global expansion and disciplined capital allocation underpinning the long-term thesis.
- Backlog and Pipeline Strength: Record backlog and a $5.5 billion pipeline anchor growth well into 2026, with power generation and industrial water leading the way.
- Margin and Productivity Focus: Operational excellence and cost discipline are yielding higher gross margins, with the path to mid-teens EBITDA margins supported by scale and mix.
- Execution Watchpoints: Investors should monitor backlog conversion, inflation pass-through, and international project delivery as the next phase of growth unfolds.
Conclusion
CECO’s Q2 marks a decisive step forward, as the company leverages a record backlog and diversified pipeline to drive sustained growth. The focus now shifts to execution and delivery, with margin expansion and disciplined investment setting the stage for a potential multi-year upcycle.
Industry Read-Through
CECO’s results offer a clear read-through to the broader environmental and industrial infrastructure sector. The surge in power generation and industrial water orders reflects secular trends in electrification, reshoring, and sustainability, with demand for emissions control and filtration technologies accelerating globally. Competitors and suppliers should note the rising importance of international markets, the value of local presence, and the need to balance growth investment with operational discipline. As industrial mega-projects proliferate and policy tailwinds persist, execution and supply chain agility will separate leaders from laggards across the sector.