Executive Summary

CECO delivered record Q3 revenue of $197.6M (+46% YoY) and record orders of $232.9M, driving backlog to $719.6M (+64% YoY). Adjusted EBITDA was $23.2M (+62% YoY). Free cash flow improved to $19.0M .
The company reaffirmed FY25 guidance (revenue $725–$775M; adjusted EBITDA $90–$100M; FCF ≈>60% of adjusted EBITDA) and introduced FY26 outlook (revenue $850–$950M; adjusted EBITDA $110–$130M; FCF 50–60% of adjusted EBITDA) .
Street estimates: Q3 revenue beat ($197.6M vs $190.4M*), non-GAAP EPS beat ($0.26 vs $0.25*), while adjusted EBITDA of $23.2M was roughly in line with a $23.6M* consensus (slight miss by ~1–2%). Values retrieved from S&P Global.
Management highlighted potential for a record Q4 bookings quarter (> $250M and possibly > $300M) driven by large power and industrial water projects; pipeline exceeds $5.8B and supports sustained growth into 2026 .

What Went Well and What Went Wrong

What Went Well

Record revenue and orders, with backlog up 64% YoY to $719.6M, reflecting robust demand across power generation, natural gas infrastructure, semiconductor, and industrial water end-markets .
Management reaffirmed FY25 and provided strong FY26 outlook (revenue $850–$950M; adjusted EBITDA $110–$130M) citing record backlog and a $5.8B+ pipeline: “We are pleased to introduce our full year 2026 outlook that projects continued strong growth…” .
Free cash flow rebounded to $19.0M in Q3; net debt declined sequentially as the company reduced revolver borrowings and expects lower interest costs from a leverage step-down .

What Went Wrong

Gross margin contracted to 32.7% (down ~70 bps YoY and ~350 bps sequentially) due to adverse mix and an accelerated closeout of a dilutive industrial air project; management expects margins to bounce back in Q4 .
GAAP EPS fell to $0.04 (vs $0.06 prior-year) affected by higher interest expense and mix; adjusted EPS was $0.26 .
Management noted moderate inflation in select commodities/components and seasonal dynamics pressured gross margin; they’re mitigating via pricing, sourcing, and operating excellence programs .

Financial Results

Headline P&L vs prior year, prior quarter, and consensus

Metric	Q3 2024	Q2 2025	Q3 2025 Actual	Q3 2025 Consensus
Revenue ($M)	135.5	185.4	197.6	190.4*
Gross Profit Margin (%)	33.4 (calc. from $45.3M/$135.5M)	36.2	32.7	—
Adjusted EBITDA ($M)	14.3	23.3	23.2	23.6*
Adjusted EBITDA Margin (%)	—	12.6	11.7	—
GAAP Diluted EPS ($)	0.06	0.26	0.04	—
Non-GAAP Diluted EPS ($)	0.14	0.24	0.26	0.25*

Revenue: beat consensus by ~$7.2M; Non-GAAP EPS: beat by $0.01; Adjusted EBITDA: ~in line/slight miss vs $23.6M* (CECO reported $23.2M adjusted) . Values retrieved from S&P Global.

KPIs and Operating Metrics

KPI	Q1 2025	Q2 2025	Q3 2025
Orders ($M)	227.9	274.1	232.9
Backlog ($M)	602.0	688.1	719.6
Book-to-Bill (x)	~1.3	~1.5	~1.2
Free Cash Flow ($M)	(15.1)	(3.0)	19.0

Segment revenue breakdown was not disclosed in the Q3 release; management commentary emphasized end-market strength in power generation, natural gas infrastructure, industrial water, and semiconductor .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($M)	FY 2025	$725–$775 (raised in Q2)	$725–$775	Maintained
Adjusted EBITDA ($M)	FY 2025	$90–$100	$90–$100	Maintained
FCF Conversion (% of Adj. EBITDA)	FY 2025	>60%	>60%	Maintained
Revenue ($M)	FY 2026	—	$850–$950	New
Adjusted EBITDA ($M)	FY 2026	—	$110–$130	New
FCF Conversion (% of Adj. EBITDA)	FY 2026	—	50–60%	New

Management also stated Q4 bookings could exceed $250M and potentially surpass $300M, depending on timing of large awards .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2 2025)	Current Period (Q3 2025)	Trend
Power gen / AI data center demand	Pipeline >$1B; largest-ever SCR order in Q2; early-to-mid cycle positioning; capacity not a constraint	Pipeline still >$1B; multiple large opportunities; Q4 could include “mega jobs”	Accelerating pipeline; sustained demand
Industrial water (intl.)	Expanding globally; pipeline with multiple $50M+ prospects in ME/Asia	Larger projects mostly in Middle East/Asia; timing key	Building toward awards
Tariffs / inflation	Estimated $3–$10M exposure; pass-throughs and pricing actions	Moderate inflation in select components; modeling into H2; manageable	Manageable headwind
Margins	Mid-30s gross margin seen sustainable; EBITDA margin expansion plan	Q3 GM dip (mix/seasonal; 30–50 bps from one closeout); expect bounce in Q4; targeting +110–150 bps EBITDA margin expansion in 2026	Temporary dip; medium-term EBITDA expansion
Short-cycle / aftermarket mix	~30% with target to 50% over time	~30%+; steady growth; long-cycle mix may mask growth	Increasing over multi-year
M&A / portfolio	Profire acquired; GPS divested	M&A pipeline active; potential tuck-ins; focus on balance sheet, ERP, organic growth	Ongoing programmatic M&A
ERP / IT	D365 program ongoing	Continued ERP migration; infrastructure improvements	Ongoing
Macro / regulatory	Resilient to tariffs via in-region supply chains	Monitoring tariffs, inflation, and potential U.S. gov’t shutdown; base case assumes stability	Stable base case

Management Commentary

“We delivered another quarter with outstanding growth and multiple financial records… Over the past four quarters, we booked over $950 million in new orders… our sales pipeline now exceeds $5.8 billion” — Todd Gleason, CEO .
“We are reaffirming our full year 2025 outlook… and introduce our full year 2026 outlook which points to another year with very strong growth in both sales and adjusted EBITDA” — CEO .
“Gross profit margins… down 70 bps year over year… we chose to accelerate the closeout of an industrial air project with dilutive margins into the third quarter… 30 to 50 basis points of the reduction” — CFO .
“Q4 bookings will be above $250 million, and depending on the timing… we might actually deliver our first $300 million plus quarter” — CEO .

Q&A Highlights

Pipeline/awards timing: Multiple industrial water projects (produced water/reuse) in Middle East/Asia and large power gen projects are near award; timing drives potential record Q4 bookings .
Power gen cycle: Robust and multi-year globally; CECO’s content typically comes in later project phases; capacity sufficient; data center-driven demand is part of a broader, elongated power investment cycle .
Margins: Q3 gross margin pressured by mix and a project closeout (30–50 bps); management expects gross margin to rebound in Q4 and sees 2026 EBITDA margin +110–150 bps despite lower gross margin mix from large projects .
Short-cycle mix: Short-cycle revenues continue to grow and account for 30%+; medium-term goal remains 50% via organic and inorganic initiatives .
M&A: Pipeline active; near-term capital deployment prioritizes deleveraging, ERP migrations, and funding double-digit organic growth; tuck-ins possible .

Estimates Context

Q3 2025 S&P Global consensus vs. reported:
- Revenue: $190.4M* vs. $197.6M actual — beat .
- Primary (non-GAAP) EPS: $0.25* vs. $0.26 actual — beat .
- EBITDA: $23.6M* vs. $23.2M adjusted (company-reported) — roughly in line/slight miss .
- Number of estimates: EPS (6*), Revenue (6*). Values retrieved from S&P Global.

Metric	Q3 2025 Consensus	Q3 2025 Actual
Revenue ($M)	190.4*	197.6
Primary EPS ($)	0.25*	0.26
EBITDA ($M)	23.6*	23.2 (Adjusted EBITDA)
Primary EPS - # of Estimates	6*	—
Revenue - # of Estimates	6*	—

Values retrieved from S&P Global.

Key Takeaways for Investors

Backlog quality and pipeline size support revenue visibility into 2026; management now guides FY26 revenue $850–$950M and adjusted EBITDA $110–$130M, reflecting durable power and industrial water demand .
Near-term catalyst: potential record Q4 bookings (> $250M and possibly > $300M) from large power/water awards; booking timing could influence sentiment and 2026 visibility .
Q3 revenue and adjusted EPS beat consensus; gross margin dip was mix/seasonality and a one-off project closeout; management expects Q4 margin rebound .
Medium-term margin story intact: mix may pressure gross margin as mega-projects ramp, but SG&A leverage and operating excellence (incl. 80/20) underpin +110–150 bps EBITDA margin expansion in 2026 .
Deleveraging (sequential net debt reduction) and expected rate step-down lower interest expense; liquidity remains sufficient for tuck-in M&A alongside organic growth investments .
Watch inflation/tariffs and Europe softness; CECO’s in-region sourcing, pass-through mechanisms, and pricing/productivity actions mitigate headwinds .
Trading implication: stock may respond to confirmation of large Q4 bookings and evidence of Q4 margin rebound; mid-term re-rating case supported by FY26 growth and EBITDA margin progression .

Notes:

All company results and quotes are sourced from CECO’s Q3 2025 press release, 8-K, and earnings call transcript .
Consensus figures marked with an asterisk (*) are Values retrieved from S&P Global.

CECO ENVIRONMENTAL CORP (CECO)·Q3 2025 Earnings Summary