CECO Revenue Jumps 35 Percent in Q2

CECO Environmental (CECO 16.25%), a global provider of air and water environmental solutions and industrial process improvements, released its second-quarter results on July 29, 2025, for the period ending June 30. The company posted significant top-line growth, reporting GAAP revenue of $185.4 million against an expected $178.66 million for Q2 2025, beating analyst estimates by $6.74 million, or 3.8%. Non-GAAP earnings per share came in at $0.24 for Q2 2025, topping expectations by $0.06, or 33.9%. Results reflected both record orders and a sharply higher backlog, largely fueled by acquisition activity and ongoing strong demand in key sectors like power and water infrastructure. Despite these gains, free cash flow (non-GAAP) showed a negative result. Overall, the quarter demonstrated record-setting performance in bookings, revenue, and profitability, while flagging areas such as cash generation and investment scale for closer observation in coming quarters.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Overview and Success Factors

CECO Environmental’s core business focuses on designing and delivering environmental solutions that enable industrial customers to improve air and water quality, manage emissions, and increase efficiency. Its portfolio serves a range of sectors, including power generation, natural gas processing, water treatment, and semiconductor manufacturing. Solutions include highly engineered emissions-control systems, process filtration equipment, and water treatment technologies.

In recent years, the business has emphasized several key growth areas: strengthening its portfolio through targeted acquisitions, expanding its recurring revenue from aftermarket services, and increasing its global presence. Success for CECO depends on three main levers: capitalizing on stricter environmental regulations worldwide, managing a more diversified and resilient customer base, and maintaining disciplined expense management while integrating acquired businesses. Its exposure to growth markets, along with an increasing backlog and robust sales pipeline, positions it strongly in the drive toward stricter sustainability and net-zero targets.

Quarter Highlights: Record Growth and Acquisition Impact

The period marked a substantial leap in both orders and backlog for CECO. Quarterly orders surged 95% from the prior-year quarter to $274.1 million, setting an all-time record. This resulted in backlog rising to $688.1 million, up 76%, giving the company extended revenue visibility looking out roughly two years based on historical run rates. About half the order growth came from recently acquired businesses, most notably Profire Energy, a combustion and emissions-control solutions provider. Profire saw record bookings in its first full quarter under CECO.

Revenue (GAAP) climbed 35% from the comparable period a year ago. Gross profit margin (GAAP) was 36.2%. Adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) reached $23.3 million, up 45%. Management highlighted the strength of its diversified bookings, with notable wins in power generation, natural gas, water infrastructure, and international markets. The business booked its largest-ever order for an emissions management solution tied to a large power project, reflecting both market opportunity and the deepening relevance of environmental compliance solutions.

This decision aimed to consolidate CECO’s operational focus on air, water, and energy transition projects. The gain from this divestiture ($64.5 million) affected results year to date (Q2 2025 YTD), but not for this period specifically. Meanwhile, selling, general, and administrative expenses (GAAP) jumped to $48.8 million from $36.5 million versus Q2 2024, in part due to integration costs and increased commercial and technical resources required to manage the higher order flow and delivery commitments.

Despite progress in sales and profitability, there were areas of concern. Free cash flow (non-GAAP) declined to $(3.0) million from a positive $2.6 million in Q2 2024. Management attributed the drop in non-GAAP operating income to timing of investments and costs tied to recent acquisitions. Debt (excluding current portion) also moved higher to $236.9 million as of June 30, reflecting acquisition spending and working capital expansion to meet the growing backlog.

CECO’s solutions portfolio includes a mix of short-cycle products (such as replacement filters and recurring service contracts), mid-cycle engineered equipment, and long-cycle, large-scale emissions and water treatment projects. The long-cycle project wins, particularly in power and industrial settings, help build backlog and support visibility beyond the next several quarters. Meanwhile, management continues to highlight efforts to increase recurring revenue from CECO’s $10 billion installed base of equipment, reinforcing stability in a variable project environment.

The company’s focus on environmental sustainability trends, investment in net-zero technologies, and global regulatory drivers continues to drive new order activity. Management reported a sales pipeline of $5.5 billion, supporting ongoing visibility and multi-year growth prospects. The customer base is increasingly international, with expectations that non-U.S. business will soon represent about half of activity. The board and executive team pointed out that growing exposure to end markets such as nuclear and semiconductor manufacturing, alongside traditional energy transition themes, broadens future opportunity and resilience.

Looking Ahead: Guidance, Watchpoints, and Capital Allocation

Management raised its full-year 2025 revenue outlook to a range of $725 million to $775 million, up from the prior $700 million to $750 million, representing about 35% growth at the midpoint for the year. Adjusted EBITDA guidance, however, remained steady at $90 million to $100 million, translating to anticipated year-over-year growth from 2024 to 2025 of roughly 50%. The company continues to target adjusted free cash flow conversion greater than 60% of adjusted EBITDA. No quarterly guidance on earnings or cash flow was provided, and the leadership team did not announce or change any dividend policy. CECO does not currently pay a dividend.

As the backlog builds and acquisition impacts continue to play out, key items for investors to monitor include the pace and profitability of backlog conversion, ongoing integration of acquired companies, and expense discipline. Management addressed inflationary and supply chain risks by noting that many contracts include provisions to pass along cost increases; however, some projects, especially larger and long-cycle orders, carry margin risks if indirect cost pressures accelerate. The company noted its multi-cycle revenue model and global supply chain design help mitigate exposure, but operational execution and synergy realization from acquisitions will remain focus areas for the remainder of the year.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.