Detailed narrative
Record Orders and Backlog Growth
CECO reported record orders of $799 million in Q2 FY26, a 191% increase year-over-year, bringing the first half 2026 orders to $1.25 billion, up 150% from the prior year. This performance drove the quarter-ending backlog to over $1.8 billion, a 164% increase year-over-year and 76% sequentially, with a trailing 12-month book-to-bill ratio exceeding 2.0.
The company emphasizes that this backlog is firm, supported by legally binding purchase orders and project commitments, providing substantial visibility for continued revenue growth.
Thermon Integration Progress
The Thermon acquisition, closed on June 1, is progressing ahead of synergy expectations. In the first 60 days, CECO captured approximately $13 million of annualized net adjusted EBITDA savings, representing one-third of the $40 million target. These savings are primarily from public company cost reductions and incremental actions across the organization, with $5 million expected to be realized in 2026 adjusted EBITDA.
The company expects $17 million to $20 million of annualized savings by year one, with high confidence in achieving the full $40 million target.
Commercial Synergies and Cross-Selling
The combination with Thermon is expected to drive 1 to 2 percentage points of additional organic growth, leveraging increased scale, broader portfolio, and expanded international footprint. Teams have identified over 100 commercial opportunities, with early wins including more than $500,000 worth of Thermon solutions incorporated into CECO power generation projects.
This "partner selling" approach integrates Thermon's heat trace and thermal management products into CECO's large-scale projects, particularly in power generation and data centers, where CECO has direct visibility to project needs.
Industrial Water Market Dynamics
While the industrial water business is growing year-over-year, larger orders previously anticipated have been delayed due to conflicts in the Middle East. These projects, which offer higher gross margins (well over 30%) and above-company-average EBITDA margins, are not factored into the current 2026 outlook but are expected to contribute significantly in future years.
Management remains bullish on the long-term potential for this business to reach $200 million to $300 million in revenue organically.
Data Center Opportunity
Thermon brings direct exposure to the data center market with two distinct product offerings: liquid load banks for cooling system testing and traditional heat trace products for maintaining building stability. These solutions are procured directly by data center developers, offering significant opportunities for Thermon, with orders being "full margin and quick to turn." CECO's existing data center exposure is indirect, through power generation.
Capacity and Execution
CECO has strategically invested in project engineering, application engineering, and global supply chain capabilities since 2022, anticipating a "power super cycle." This investment, coupled with a global outsourcing model, enables the company to handle large volumes of orders at favorable margins.
Management selectively pursues projects to ensure capacity and quality execution, with large projects often involving a "design once, build many times" approach, simplifying execution and supply chain management.