CECO Earnings Recap
Beat 4 of last 6 quarters
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CECO's record orders and backlog, driven by natural gas power generation and data center-related demand, underscore the accelerating buildout of AI infrastructure. The company's power generation pipeline, measured in the billions, and its early success attaching Thermon thermal solutions to those projects highlight the indirect but growing exposure to AI-driven electricity demand. The $8.5B pipeline and multi-year visibility suggest sustained demand for emissions and noise abatement equipment on gas turbines powering data centers.
CECO delivered a record quarter with orders of $799M, backlog of $1.82B, revenue of $285M, and adjusted EBITDA of $40.2M. The Thermon acquisition closed on June 1, contributing one month of results and driving the reported revenue increase. The company captured $13M of annualized EBITDA synergies in the first 60 days and identified early commercial wins, including more than $500K of Thermon solutions attached to power generation projects. Cash flow rebounded strongly in Q2 with $53M of adjusted free cash flow, and leverage stood at 2.7x at quarter end, with additional paydowns reducing gross debt to $692M by July 31.
Management raised full-year 2026 guidance, lifting the low end of revenue by $25M to $1.3B–$1.375B and the low end of adjusted EBITDA by $5M to $200M–$225M. They expect mid-teens adjusted EBITDA margins and at least 55% adjusted free cash flow conversion. On a pro forma basis including Thermon for the full year, they estimate revenue of $1.5B–$1.6B and adjusted EBITDA of $255M–$280M. They expect orders to easily exceed $2B for the year, with continued double-digit organic growth and margin expansion driven by backlog mix, 80/20 initiatives, and Thermon synergies. The integration is ahead of plan, with $13M of annualized EBITDA synergies captured in the first 60 days, and they remain confident in the $40M target.
“Simply put, this was a record-setting quarter across the board.”
on Q2 performance
“We have already captured approximately $13 million of annualized EBITDA savings in just the first 60 days and have identified early commercial wins across the combined portfolio.”
on Thermon integration
“I don't anticipate the rate drifting back up.”
on SG&A as % of revenue
On orders, it sounds like things have continued to be strong here to start the third quarter. Can you talk about that and the power gen outlook and competitive dynamics?
Todd said the third quarter has started strong with a steady cadence of opportunities across power, water, and industrial air. He noted that orders are tied to customers' projects that are already underway, with permits in place and binding terms, and that the competitive dynamic is favorable with strong pricing.
On SG&A at 22.4%, about 400 basis point improvement. Could you talk about decomposing structural actions versus volume leverage? And under what conditions would SG&A rate drift back up?
Peter said the majority (about 2/3) of the improvement was from holding expenses flat or down relative to volume, with the rest from structural actions. He said the rate should not drift back up as prior investments in commercial infrastructure are concluded, with the only remaining investment being the ERP migration.
The pipeline increase since the beginning of June, is that mainly power gen related?
Todd said the pipeline increase is largely power gen related, but also semiconductor and includes Thermon's pipeline of $1B–$1.5B. He noted that power gen is the leader, with data centers on the Thermon side also contributing.