CECO Environmental Corp.

What they do

CECO provides engineered technology and application expertise for industrial air, industrial water and energy transition markets, with an installed base of operating systems and equipment in excess of $10 billion. Its equipment improves air and water quality, manages emissions, and increases energy and process efficiency for highly engineered applications. End markets include power generation, midstream and downstream hydrocarbon processing and transport, chemical processing, EV production, polysilicon and semiconductor fabrication, battery production and recycling, metals, and beverage can manufacturing.

Revenue drivers

• Gas separation, filtration, pressure and acoustical equipment — Supplied across the natural gas value chain, including DeNOx selective catalytic reduction systems for natural-gas-fired power plants; described as a key growth area within the Engineered Systems segment.
• Industrial air pollution control — Emissions control equipment for industrial facilities, supported by regulatory drivers including the 2021 US Infrastructure Investment and Jobs Act and similar spending in other countries.
• Industrial water and wastewater treatment — Solutions for industrial and produced water and wastewater treatment, including water treatment offerings tied to natural gas and power applications.
• Aftermarket and installed-base services — The company is targeting a higher share of recurring revenue from aftermarket products and value-added services on its installed base to improve retention and business resiliency; no revenue figure was disclosed in the excerpts.

Recent performance

Second quarter 2026 revenue was $285.0 million, up 54 percent, the first quarter including Thermon. Orders were $798.5 million, up 191 percent, and backlog was $1,819.1 million, up 164 percent. Gross profit was $86.5 million at a 30.3 percent margin, while GAAP net loss was $(34.8) million, or $(0.80) per diluted share, versus net income of $9.5 million a year earlier. Non-GAAP net income was $21.5 million, up 147 percent, and Adjusted EBITDA was $40.2 million, up 73 percent. Free cash flow was $(24.3) million, but adjusted free cash flow was $53.2 million after excluding cash payments related to the Thermon transaction.

Strategy

The enterprise strategy combines an operational strategy and a capital allocation strategy. Operationally, CECO emphasizes commercial and operational excellence, margin expansion, recurring revenue growth, cash flow generation, product management, and project management execution. The company closed the Thermon acquisition on June 1, 2026, a cash and stock transaction that significantly affects comparability of results, and says early synergy capture is ahead of plan. Capital deployment is focused on building out the industrial air solutions portfolio and advancing industrial water. Management cites a record sales pipeline of over $8.5 billion.

Risks

• Acquisition integration and transaction costs — The Thermon merger closed June 1, 2026, and CECO expects significant legal, accounting, financial advisory and integration costs, with GAAP results in the second quarter swinging to a $(34.8) million net loss.
• Fixed-price contract exposure — The majority of projects are performed on a fixed-price basis, so cost overruns on those projects can adversely affect operating results.
• Macroeconomic and credit downturn — A national or global downturn could cause customers to delay procurement, suppliers to fail, and customers to become insolvent or unable to obtain credit.
• Tariffs, trade conflict and supply inflation — Management flags Middle East conflict and geopolitical tariff considerations, and says the business could be adversely affected by further policy developments, raw material shortages and inflationary pressure on materials and labor.

Outlook

Management raised its full year 2026 consolidated outlook to revenue of $1.300 billion to $1.375 billion, up from $1.275 billion to $1.375 billion. Adjusted EBITDA guidance is $200 million to $225 million, up from $195 million to $225 million, and free cash flow conversion is expected to be at least 55 percent of Adjusted EBITDA. The company says its third quarter has started well, with no slowdown in booked projects, and reiterates confidence in a long-term double-digit growth outlook.