CECO (CECO) Q3 2025: Backlog Jumps 64% as $5.8B Pipeline Drives Multi-Year Visibility

October 28, 2025 | By EarningsIQ Research

CECO’s record $720 million backlog and 44% bookings surge underscore a multi-year demand cycle, with momentum in power, water, and reshoring end-markets. Margin dynamics reflect project mix and seasonality, but operational leverage and cost discipline are set to drive EBITDA expansion into 2026. Management’s guidance signals confidence in sustained double-digit growth, with the $5.8 billion pipeline anchoring forward visibility and upside optionality.

Summary

• Backlog Expansion: Record backlog and robust order intake signal durable end-market demand.
• Margin Leverage: Operational excellence and cost initiatives support EBITDA margin gains despite project mix headwinds.
• Pipeline Visibility: $5.8 billion sales pipeline anchors multi-year growth and potential for further upside.

Performance Analysis

CECO delivered a record-setting quarter, with revenue climbing sharply and backlog reaching $720 million, up 64% year over year. The company’s fourth straight quarter of orders exceeding $200 million reflects sustained demand across power generation, energy transition, industrial water, and reshoring sectors. Notably, bookings of $233 million in Q3 rose 44% YoY, driving a book-to-bill ratio of 1.2 and underpinning future revenue conversion. Approximately 30% of revenue growth stemmed from recent acquisitions, while the remainder was organic, highlighting the effectiveness of both growth strategies.

Gross margin dynamics were shaped by project mix and seasonality, with Q3 gross margin at 32.7%, down 70 basis points YoY and 350 basis points sequentially. Management attributed this to a combination of an adverse project closeout and typical summer slowdowns, but emphasized that these effects are transitory. EBITDA rose 62% YoY, with margin expansion of 120 basis points, aided by ongoing G&A cost reductions and execution of a multi-year operating excellence agenda. Free cash flow rebounded to $19 million in the quarter, reflecting improved working capital management and operational cash generation. Net debt was reduced to $186 million, with leverage improving to 2.3 times trailing EBITDA.

• Order Intake Momentum: Four consecutive quarters of $200 million-plus bookings, supporting backlog growth and revenue visibility.
• Margin Variability: Q3 margin contraction driven by mix and seasonality, but offset by structural cost discipline and sourcing savings.
• Cash Flow Recovery: Free cash flow rebounded $22 million sequentially, strengthening balance sheet and investment capacity.

CECO’s performance reflects a balanced approach, with both organic and inorganic growth levers, disciplined cost management, and a business model that is increasingly resilient to macro fluctuations due to its industrial, infrastructure, and energy customer base.

Executive Commentary

Strategic Positioning

1. Backlog and Pipeline as Growth Anchors

CECO’s $720 million backlog, up 64% YoY, provides strong revenue visibility into 2026 and beyond. The sales pipeline, now exceeding $5.8 billion, encompasses large opportunities across power, water, and industrial reshoring, including major projects in the Middle East and Asia. This multi-year pipeline de-risks growth targets and positions CECO as a key beneficiary of global energy transition and infrastructure cycles.

2. Margin Expansion via Operational Excellence

Margin management is a central pillar, with the company deploying its “80-20” efficiency program and cost-saving initiatives to offset project mix headwinds. While gross margin saw a seasonal dip, management expects a Q4 rebound and targets further EBITDA margin expansion (110–150 basis points in 2026) through G&A leverage and process simplification. The focus on sourcing savings, project execution, and portfolio optimization supports this trajectory.

3. Balanced Capital Allocation and M&A

CECO is prioritizing balance sheet strength, ERP migration, and organic growth, but maintains a robust M&A pipeline. Recent acquisitions contributed 30% of revenue growth, and management signals readiness to close tuck-in deals that enhance portfolio leadership, particularly in industrial water and power adjacencies. Disciplined capital deployment is expected to sustain double-digit growth while preserving investment capacity.

4. End-Market Diversification and Resilience

With 100% industrial exposure, CECO’s customer base is insulated from consumer cyclicality and benefits from secular trends such as reshoring, electrification, and data center power demand. The company’s growing presence in short-cycle businesses (now above 30% of sales) and aftermarket/recurring revenue streams further enhance resilience and margin stability.

5. Multi-Year Visibility and Upside Optionality

Guidance for 2026 is underpinned by backlog and pipeline, with further upside possible if CECO captures additional large projects not yet baked into the outlook. Management’s disciplined approach to forecasting and pipeline management provides both credibility and optionality for investors seeking exposure to infrastructure supercycles.

Key Considerations

CECO’s Q3 results highlight a business model built for durable growth, with operational execution and strategic discipline supporting both near-term delivery and long-term scalability. Investors should weigh the following:

• Backlog Conversion Pace: Timely execution and conversion of record backlog into revenue will be key to sustaining growth rates and meeting guidance.
• Project Mix Impact: Large power and water jobs can dilute gross margin, but drive EBITDA leverage due to low incremental G&A requirements.
• Operating Excellence: Continued deployment of 80-20 and cost initiatives are expected to drive margin gains and offset inflation or mix pressures.
• M&A Pipeline Execution: Successful integration and cross-selling from recent deals (such as Profire) and future tuck-ins will be important for portfolio expansion and margin accretion.
• Macro Insulation: Industrial and infrastructure focus insulates CECO from consumer sentiment swings, but large project timing and regulatory dynamics remain watchpoints.

Risks

Project timing slippage, especially for mega jobs in power or water, could delay revenue recognition and impact margin mix. Tariff and inflation volatility remain monitored, though current supply chain management and pricing strategies mitigate near-term risk. Execution risk on large projects and integration of acquisitions are ongoing challenges, while regulatory or geopolitical shifts could impact global infrastructure investment flows.

Forward Outlook

For Q4 2025, CECO guided to:

• Bookings above $250 million, with potential to exceed $300 million if mega projects close
• Continued revenue and EBITDA growth, with free cash flow conversion at 60% of adjusted EBITDA

For full-year 2026, management introduced guidance:

• Revenue of $850–$950 million (up 15–25% YoY)
• Adjusted EBITDA of $110–$130 million (up 20–40% YoY)
• Adjusted EBITDA margin expansion of 110–150 basis points

Management highlighted:

• Strong multi-year pipeline and backlog visibility underpinning double-digit growth
• Potential for upside if additional large projects are won in Q4 or early 2026

Takeaways

CECO’s Q3 demonstrates a business in the midst of a structural upcycle, with record backlog and bookings translating into multi-year visibility. Margin expansion is being driven by operational discipline and cost optimization, even as project mix introduces some variability quarter to quarter. Guidance for 2026 is credible and underpinned by backlog, with further upside if pipeline conversion outpaces expectations.

• Record Backlog and Pipeline: $720 million backlog and $5.8 billion pipeline set the stage for sustained growth and revenue visibility.
• Margin Upside from Execution: Operating excellence and G&A leverage are expected to drive EBITDA margin gains, offsetting mix-related gross margin headwinds.
• Watch Large Project Timing: Near-term bookings and project conversion will determine the pace and magnitude of 2026 outperformance.

Conclusion

CECO’s operating model is proving resilient and scalable, with record backlog, robust pipeline, and disciplined execution supporting sustained double-digit growth. Margin expansion and capital allocation discipline will be key levers as the company navigates a multi-year infrastructure and energy transition upcycle.

Industry Read-Through

CECO’s results highlight the ongoing strength of industrial infrastructure, energy transition, and water investment cycles. The record backlog and robust pipeline suggest that capital flows into power generation, industrial water, and reshoring are not abating despite macro volatility. Peer companies in engineered systems, industrial services, and infrastructure solutions should see similar tailwinds, though project timing and margin mix will remain key differentiators. Secular themes in electrification, data center power demand, and global water reuse are translating into durable multi-year demand, with supply chain and execution capabilities emerging as critical competitive advantages.

CECO Industrials Environmental Services Infrastructure Backlog Energy Transition Water M&A