What CECO Environmental (CECO) Said on Its Q3 Earnings Call

Key Points

• Record results and backlog: Q3 revenue rose 105% to more than $404 million and adjusted EBITDA increased 201% to $70.1 million, with Thermon contributing to growth. Orders surged 234%, lifting backlog to a record $2.193 billion.
• Ambitious growth outlook: CECO forecast 2027 revenue of $2.1 billion–$2.3 billion and adjusted EBITDA of $475 million–$525 million, citing backlog conversion, higher margins and integration gains. Management also expects double-digit revenue and EBITDA growth in 2028.
• Integration progress and risks: CECO has captured about $22 million in annualized Thermon savings, while Q3 adjusted free cash flow reached approximately $154 million. Management said data center projects were on schedule, but some large Middle East industrial water opportunities have been delayed by regional conflicts.

CECO Environmental TXSE: CECO reported record third-quarter revenue and adjusted earnings as its first full quarter with Thermon contributed to growth, while a rising backlog supported an initial 2027 outlook for substantially higher sales and profitability.

The industrial and environmental solutions company posted revenue of more than $404 million, up 105% from a year earlier, and adjusted EBITDA of $70.1 million, up 201%. Adjusted earnings per share rose to $0.60 from $0.26, Chief Financial Officer Peter Johansson said on the earnings call.

Legacy CECO revenue grew 30% and adjusted EBITDA increased 64%. Results included a full three months of Thermon, which CECO acquired on June 1. Johansson said faster conversion of the legacy company’s backlog supported revenue and that no material project delays affected the quarter.

Orders climbed 234% to $778 million, bringing quarter-end backlog to a record $2.193 billion, up 205% from a year earlier. Chairman and CEO Todd Gleason said the sales opportunity pipeline exceeded $9 billion.

Backlog supports 2027 outlook

CECO forecast 2027 revenue of $2.1 billion to $2.3 billion and adjusted EBITDA of $475 million to $525 million. At the midpoints, the outlook implies revenue of $2.2 billion and an adjusted EBITDA margin of approximately 22.7%.

Gleason attributed the projected improvement to a full year of Thermon, conversion of a larger backlog, higher backlog margins, integration savings and productivity gains. The company expects orders to grow at least 20% in 2027 and adjusted free cash flow to equal 50% to 60% of adjusted EBITDA.

CECO expects at least 70% of its year-end 2026 backlog to convert to revenue in 2027, Gleason said. The remainder of its revenue outlook includes aftermarket, services and shorter-cycle sales. He said the gross margin in backlog was higher than the margins CECO had reported for the third quarter and year to date.

For 2028, management offered a preliminary view of double-digit revenue and adjusted EBITDA growth, with an adjusted EBITDA margin of approximately 23.5%. Gleason said the outlook was based on customer discussions and analysis of the opportunity pipeline, which the company expects to exceed $10 billion in the next few quarters.

Gleason said the 2027 margin outlook reflected a gradual build through the year as higher volumes contribute to profitability. He also expects the first quarter to remain among the company’s smallest quarters by volume, consistent with its typical seasonality.

Thermon integration and cash generation

CECO has captured approximately $22 million of annualized net adjusted EBITDA savings from the Thermon combination, or about 55% of its three-year target, Gleason said. The company now expects to capture at least 70% of the target by the acquisition’s first anniversary.

Its teams have also actioned approximately $2.5 million of revenue synergies, including opportunities for thermal solutions in power generation and gas filtration projects. Johansson said CECO was not creating a single sales force across all technologies; instead, teams were sharing leads and responding to customers seeking a broader package of solutions.

Adjusted free cash flow reached approximately $154 million in the third quarter and $192 million for the first nine months of 2026. Johansson attributed the performance in part to collections on earlier project billings, customer down payments and improved working capital management.

CECO ended the quarter with approximately $530 million of net debt and a net leverage ratio of 2.0 times trailing 12-month bank EBITDA, at the low end of its target range. Johansson said the company expects further collections and debt repayments to bring year-end leverage below that range.

2026 guidance and demand risks

CECO raised its full-year orders outlook to at least $2.5 billion and its adjusted free cash flow expectation to approximately 100% of adjusted EBITDA, from at least 55%. It maintained its August guidance for revenue of $1.3 billion to $1.375 billion and adjusted EBITDA of $200 million to $225 million.

Approximately 20% of quarter-end backlog related to data center applications, Gleason said, with the remainder largely tied to multi-industrial and energy applications. He said the projects in backlog were funded and progressing, and that data center projects were on schedule. Johansson said power generation projects across utility, industrial and data center applications represented approximately 60% of total backlog.

Gleason said CECO considered inflation, policy changes, geopolitical developments and sentiment around artificial intelligence and data center investment in its outlook. He also said some large industrial water opportunities in the Middle East had been delayed by regional conflicts; those projects remain in the pipeline but were not materially included in the outlook.

About CECO Environmental (TXSE:CECO)

CECO Environmental Corp. NASDAQ: CECO is an industrial technology company that designs and supplies environmental and engineered equipment for industrial processes. Its solutions help customers control air pollution, manage industrial emissions, improve process efficiency and handle fluids in demanding operating environments.

The company’s product and service offerings include air pollution control systems, industrial ventilation and filtration equipment, scrubbers, fans, dust collection systems, thermal and heat-transfer equipment, pumps and other fluid-handling technologies.

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