What is the impact of the Middle East situation on business, and what is the timing for larger water opportunities in the region?

The Middle East situation has caused some project pauses, but the company has accounted for these impacts in its guidance. While some attractive programs are paused until H2, the overall strength in other markets (evidenced by record orders) offsets this. The company remains opportunistic about future rebuilds in the region. “We do have some very attractive programs in our pipeline that have been paused a bit until probably the second half of this year. We're opportunistic in thinking that this conflict can be managed in that period of time. But in our guidance, we have already accounted for any of those impacts.”

Given turbine manufacturers are sold out to 2029, when does CECO get involved in these projects, and how does that affect visibility out to 2030/2031?

CECO works with large gas turbine customers, engineering firms, and OEMs years in advance, receiving orders for 2029 and 2030 deliveries. They are essentially done for 2027 and 2028 installs. Repowering activities happen much faster, typically within months. “We begin work with our large gas turbine customers, the engineering firms and the OEMs years before we receive an order. We're today receiving negotiating, working through technical configuration questions for orders that will deliver in 2029 and 2030.”

How much does pricing contribute to margin expansion, especially with increased demand in power, or is it mainly about keeping pace with inflation?

Price is a lever to increase margins. The company includes inflation estimates in pricing for long-duration projects and has escalators in contracts for excess inflation recovery. Catalyst and specialty steels are the most impacted commodities, which are managed well. “Price for us is a lever to increase margins. We work with our large customers to ensure that we're capturing the most value on the project that we can.”

CECO

CECO Environmental (CECO) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Industrials· Apr 28, 2026

Source: earnings call transcript

Executive summary

CECO Environmental Q1 FY26 — Record Orders and Backlog Drive Raised Full-Year Outlook

CECO Environmental delivered a strong Q1 FY26, marked by record orders and backlog, leading to a second full-year guidance raise. The company is benefiting from investments in diversified end markets like natural gas power generation, semiconductor, and industrial water, with significant order momentum continuing into Q2. The pending Thermon acquisition is on track for a Q2 close, expected to create a leading diversified global industrial company with substantial growth and synergy opportunities.

Highlights

Record orders of $449 million in Q1 FY26, a 97% increase year-over-year.
Backlog reached a record $1.035 billion, up 72% year-over-year.
Adjusted EBITDA grew 46% year-over-year to $20.4 million, with margin expanding by nearly 200 basis points.
Full-year 2026 revenue guidance raised to $940 million - $1 billion, with midpoint implying 25% organic growth.
Full-year 2026 adjusted EBITDA guidance raised to $120 million - $140 million, midpoint implying 44% growth and 170 bps margin expansion.

Concerns

Gross profit margins experienced contraction in Q1 FY26 due to the sale of the higher-margin Global Pump Solutions business and revenue timing of lower-margin jobs.
Q1 FY26 cash flow consumed approximately $16 million, impacted by working capital growth and Thermon transaction expenses, though a $20 million customer payment was delayed to Q2.
Uncertainty related to the Iran war and modestly higher inflation are noted headwinds, though accounted for in guidance.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year 2026 Revenue	$940 million to $1 billion high materiality	FY26	High
Full-year 2026 Organic Sales Growth	approximately 25% high materiality	FY26	High
Full-year 2026 Adjusted EBITDA	$120 million to $140 million high materiality	FY26	High
Full-year 2026 Adjusted EBITDA Growth	approximately 44% medium materiality	FY26	High
Full-year 2026 Adjusted EBITDA Margin Expansion	170 basis points medium materiality	FY26	High
Gross Profit Margin	34% or greater medium materiality	FY26	Medium
Adjusted EBITDA Margin (stand-alone CECO)	mid-teens high materiality	Long-term	High
Adjusted EBITDA	cross the $100 million level medium materiality	Very shortly	High
Cash Flow	revert back to a positive state medium materiality	Q2 FY26	High
ERP Implementation	essentially completed low materiality	End of 2026 · FY26	High

CECO operating KPIs by quarter

CECO operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Dec 2025 Q4 FY25	This call Mar 2026 Q1 FY26	Jun 2026 Q2 FY26	Change vs prior quarter
Backlog	$793M We finished the fourth quarter with a record backlog of $793 million, up 47% versus prior year and 10% sequentially. Source: earnings call transcript	$1.035B We finished the first quarter with a record backlog of $1.035 billion, up 72% versus prior year and 31%, equivalent to $242 million sequentially. Source: earnings call transcript	$1.82B We concluded the quarter with a record backlog of $1.82 billion, up 164% versus prior year and up 76% sequentially from our previous high said at the end of the first quarter, of $1.035 billion. Source: earnings call transcript	+75.8%
Orders	$329M Fourth quarter orders were $329 million, a company record increase of 50% over the prior year period with a book-to-bill of approximately 1.5x. Source: earnings call transcript	$449M In the quarter, we continued our bookings momentum with orders of $449 million, an increase of 97%. Source: earnings call transcript	$799M We delivered record orders of $799 million. Source: earnings call transcript	+78%
Book-to-bill ratio	~1.5 ratio Fourth quarter orders were $329 million, a company record increase of 50% over the prior year period with a book-to-bill of approximately 1.5x. Source: earnings call transcript	~2.2 ratio First quarter orders were $449 million, a company record, representing a 97% increase over the prior year period or a book-to-bill of approximately 2.2. Source: earnings call transcript	~2.8 ratio Our book-to-bill in the quarter was approximately 2.8, an outstanding result. Source: earnings call transcript	—

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Total Backlog $1.035 billion Q1 FY26 end

up 72% YoY; up 31% or $242 million sequentially

Increased for 11 consecutive quarters, surged in most recent 6 quarters with >$200 million in orders.

Orders $449 million Q1 FY26

up 97% YoY (+$221 million vs Q1 FY25)

Company record, driven by power generation, liquefied natural gas, midstream gas transport/treatment, hydrocarbon processing, semiconductor/electronics, and industrial water applications.

Book-to-bill ratio 2.2x Q1 FY26

Resulted in a record for any quarter ending backlog.

Orders $1.286 billion TTM

up 71% over prior TTM period

Book-to-bill ratio 1.6x TTM

New Orders over $400 million April (Q2 FY26 partial)

almost $200 million more than all of Q2 FY25

Includes largest-ever order in the range of $300 million for natural gas power generation emissions and noise abatement solutions.

Orders $228 million Q1 FY25

up 50-60% YoY

Derived from Q1 FY26 orders being $221 million more than Q1 FY25, and Q1 FY25 orders being up 50-60% YoY.

Deals & partnerships

Thermon Acquisition of Thermon to extend leadership in industrial, environmental, and engineered solutions by adding process heating, heat tracing, and temperature management capabilities.

Representatives from both companies are working on integration items. The Thermon operating culture is similar to CECO's. Bruce Thames, Thermon's CEO, and Todd Gleason are aligned on the future of the combined company.

Global Pump Solutions business Sale of the Global Pump Solutions business.

Sale closed at the end of Q1 FY25, creating a headwind for Q1 FY26 revenue comparison.

Capital programs

ERP Implementation Initiative underway

Largely driving capital expenditure in Q1 FY26.

Risks & headwinds

Geopolitical uncertainty (Iran war) H2 FY26

Some attractive programs in the Middle East pipeline paused until H2 FY26.

Mitigation:Accounted for in full-year guidance; overall market strength in other regions offsets impact; opportunistic view on future rebuilds in the region.

Modestly higher inflation

Not quantified, but noted.

Mitigation:Aggressively prebuy or lock in rates; include inflation estimates in pricing; contracts include escalators for excess inflation recovery; strong supply chain management for commodities like catalyst and specialty steels.

Gross margin contraction Q1 FY26

Experienced contraction in Q1 FY26.

Mitigation:Anticipated; expected to improve in Q2 and trend towards 34%+ target throughout the year due to improving volume mix, higher-margin projects, and 80/20 initiatives.

Working capital as cash flow headwind Q1 FY26

Consumed approximately $16 million of cash in Q1 FY26.

Mitigation:Expected to revert to positive cash flow in Q2 FY26, benefiting from Q1 billings and early Q2 cash receipts (e.g., $20 million delayed customer payment already received).

What to watch in Q2 FY26

Thermon Acquisition Close

Q2 FY26

Current On track for Q2 close

Target Closed (early June)

Why it matters

The acquisition is a historic transaction for CECO, creating a larger, diversified industrial company with significant synergy potential.

We remain on track for a Q2 close, and our current expectation is sometime in early June.

Find out whether CECO delivers this. Inve re-checks your case every morning.

Q&A highlights

Can you discuss the drivers of the $7 billion+ sales pipeline, especially in Power Gen, and the delivery timelines/supply chain capacity for these large orders?

The sales pipeline growth is due to intentional expansion into new markets and geographies, benefiting from rising tides in natural gas power and infrastructure, semiconductor, and industrial water. Power Gen has added about $1 billion to the pipeline. Supply chain is a key investment, with redundant capabilities and aggressive pre-buying to protect margins and ensure delivery.

“When I joined CECO in 2020, our sales pipeline was closer to $1 billion, $1.5 billion. So to be at $7 billion, I think, really speaks to this intentional expansion of how we look at our markets geographically, how we look at our markets industrially, and that's going to continue.”

asked by Aaron Spychalla · answered by Todd Gleason

2 min read 5 chapters

Detailed narrative

Strong Order and Backlog Growth

CECO achieved record orders of $449 million in Q1 FY26, a 97% increase year-over-year, and a book-to-bill ratio of 2.2x. This strong performance drove the backlog to an all-time high of $1.035 billion, representing a 72% increase from the prior year and a 31% sequential increase.

The company noted that April alone saw over $400 million in new orders, including its largest-ever order of approximately $300 million for natural gas power generation.

Raised Full-Year Outlook and Margin Expansion

The company raised its full-year 2026 revenue guidance to $940 million - $1 billion and adjusted EBITDA guidance to $120 million - $140 million, marking the second raise this year. The midpoint of the revenue guidance implies 25% organic sales growth, while adjusted EBITDA growth is projected at 44% with 170 basis points of margin expansion.

Management expects gross margins to trend towards 34% or greater as the year progresses, driven by volume mix dynamics, higher-margin projects, and operational efficiencies from the 80/20 initiative.

Strategic Thermon Acquisition Update

The acquisition of Thermon is on track for a Q2 close, expected in early June. The combination is anticipated to create a leading diversified global industrial company with an estimated $1.5 billion in current run rate sales. Management remains highly confident in achieving $40 million in cost synergies and is evaluating additional opportunities, including attractive commercial synergies, to potentially become a 'Rule of 30 or Rule of 40' company.

Diversified Market Strength and Pipeline

CECO's sales pipeline has grown to over $7 billion, reflecting focused investments, expanded global reach, and strong market themes. Key drivers include the power super cycle (natural gas power generation, natural gas infrastructure), semiconductor sector, electronics, industrial water, and U.S. industrial reshoring. The company highlighted its strong positioning in semiconductor and industrial water markets, with the latter approaching $1 billion in pipeline opportunities.

Cash Flow and Liquidity Management

Q1 FY26 cash flow consumed $16 million, primarily due to working capital growth and Thermon transaction expenses, consistent with seasonal trends. However, a nearly $20 million customer payment was delayed to Q2, and cash flow is expected to return to positive in Q2.

The company amended its credit agreement, increasing committed funds to $975 million ($740 million revolver, $235 million delayed draw term loan), providing $723 million in additional capacity for the Thermon acquisition and future growth.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.