CECO Environmental reported second-quarter orders of $798.5 million, up 191% from a year earlier, as power-generation projects and the acquisition of Thermon pushed its backlog to a record $1.82 billion.
Revenue increased 54% to $285 million in the three months ended June 30, compared with $185.4 million a year earlier. Organic revenue, which excludes businesses owned for less than 12 months, grew 44%.
Chief Executive Todd Gleason said demand remained high across power generation, semiconductor manufacturing, industrial water and natural gas infrastructure. CECO also raised the lower ends of its 2026 revenue and adjusted earnings forecasts.
However, the company recorded a net loss of $34.8 million after absorbing acquisition and integration expenses. Its shares closed 0.8% lower at $70.38 following the results and fell by a further 1.7% in after-hours trading, according to market data reported by Investing.com.
Power generation accounts for half of CECO backlog
Approximately half of CECO’s backlog relates to power-generation projects. Industrial air and water account for about 25%, while the remaining 25% includes natural gas infrastructure, natural gas liquids, hydrocarbon processing, chemicals and other energy work.
Sales in CECO’s Engineered Systems division increased by $45.2 million to $173.7 million. The increase was led by the completion of work on large natural gas power-generation projects.
The company’s quarterly book-to-bill ratio reached approximately 2.8. This means CECO received about $2.80 in new orders for every dollar of revenue recorded during the quarter.
Backlog increased by $784 million from the end of March and by just over $1 billion from the end of 2025. Thermon contributed $262 million, meaning the acquisition accounts for only part of the increase.
CECO said its backlog is backed by purchase orders and project commitments. Management told analysts that many customers have already obtained the necessary permits and that CECO does not count verbal awards as orders.
The company said its historical rate of removing orders from backlog is below 0.5%. However, its quarterly SEC filing states that customers can cancel certain orders.
CECO expects to deliver substantially all of the backlog within 12 to 24 months, with most scheduled for the next 12 months.
Thermon gives CECO direct access to data-centre projects
CECO’s existing exposure to data-centre construction has largely been indirect. New computing campuses require more electricity, which increases demand for power plants, gas infrastructure and emissions-control equipment supplied by CECO.
The acquisition of Thermon gives the company a more direct route into data-centre projects.
Thermon supplies liquid load banks that simulate the heat produced by computer servers. Data-centre developers use the equipment to test whether cooling systems can handle expected computing loads before complete server racks are installed.
The load banks may remain at the site after construction, allowing operators to test cooling equipment during maintenance or changes to the computing system.
Thermon also supplies heat-tracing products. These systems regulate the temperature of pipes, foundations and building joints, reducing the risk of freezing or damage from repeated expansion and contraction.
CECO has not disclosed how much of its second-quarter orders came directly from data-centre customers. The record order figure should therefore not be attributed entirely to artificial intelligence investment.
CECO begins selling Thermon products through existing projects
CECO completed the approximately $2.2 billion acquisition of Thermon on June 1. Thermon contributed $49.6 million in revenue during its first month as part of CECO, while standalone CECO revenue reached a company record of approximately $235 million.
The combined sales teams have identified more than 100 commercial opportunities, according to the company’s second-quarter earnings call.
During the first 60 days, more than $500,000 of Thermon equipment was incorporated into CECO power-generation projects. This included heat-tracing and thermal-management equipment that CECO would previously have purchased from another supplier.
The amount is small compared with CECO’s revenue and backlog, but it provides an early example of how the acquisition may increase the amount of equipment sold through each project.
Thermon savings come with substantial costs
CECO said it had captured approximately $13 million in annualised net adjusted EBITDA savings during the first 60 days following the acquisition. That represents roughly one-third of its eventual $40 million target.
The company expects about $5 million of those savings to be reflected in its 2026 adjusted results. It is targeting annualised savings of between $17 million and $20 million by the first anniversary of the transaction.
CECO has also spent heavily to combine the businesses. Management said approximately $21 million had been incurred during 2026 to obtain the savings, primarily through change-of-control payments and the accelerated vesting of former Thermon executives’ shares.
The company’s second-quarter reconciliation lists total acquisition and integration expenses of $45.5 million.
Reported loss contrasts with adjusted profit
CECO recorded a net loss of $34.8 million, or $0.80 per diluted share, compared with net income of $9.5 million and earnings of $0.26 per diluted share a year earlier.
After excluding selected expenses, the company reported non-GAAP net income of $21.5 million, up 147%, and adjusted earnings of $0.47 per share.
Adjusted earnings before interest, taxes, depreciation and amortisation increased 73% to $40.2 million. The adjusted EBITDA margin rose to 14.1%, compared with 12.6% a year earlier.
Non-GAAP figures are calculated by the company and exclude certain expenses. They should be read alongside CECO’s reported results rather than as a replacement for them.
Gross profit increased 29% to $86.5 million, but the reported gross margin fell to 30.3% from 36.2%. CECO attributed the decline to the mix and timing of power-generation and industrial projects, as well as acquisition-related costs.
On an adjusted basis, the gross margin was 33.7%, up from approximately 31.1% in the first quarter.
Debt rises following Thermon acquisition
CECO reported negative free cash flow of $24.3 million. After excluding cash payments related to the Thermon transaction, adjusted free cash flow was $53.2 million.
Gross debt increased by approximately $523 million from the end of 2025 because CECO borrowed money to fund the acquisition’s cash portion and related expenses. Its leverage ratio reached 2.7 times trailing 12-month bank EBITDA, above the company’s target range of 2.0 to 2.5 times.
CECO repaid another $39.5 million after the quarter ended, reducing gross debt to approximately $692 million by July 31.
CECO raises 2026 forecast
CECO now expects full-year revenue of between $1.3 billion and $1.375 billion. Its previous forecast ranged from $1.275 billion to $1.375 billion.
The lower end of its adjusted EBITDA forecast was increased from $195 million to $200 million, while the upper end remains at $225 million. CECO expects adjusted free cash flow to equal at least 55% of adjusted EBITDA.
On a pro forma basis, assuming Thermon had been included for the whole year, management estimates 2026 revenue of between $1.5 billion and $1.6 billion and adjusted EBITDA of $255 million to $280 million.
The company also expects full-year orders to exceed $2 billion. Its ability to convert those orders into revenue, restore reported margins and reduce acquisition debt will determine whether the record backlog produces a corresponding increase in profit and cash.
