CECO Environmental Q2 2025 slides: record performance drives raised revenue outlook

Introduction & Executive Summary

CECO Environmental (NASDAQ:CECE) presented its Q2 2025 earnings results on July 29, 2025, showcasing record-breaking performance across multiple key metrics. The environmental solutions provider reported significant year-over-year growth in backlog, orders, and revenue, while raising its full-year revenue outlook despite cautioning about potential inflation impacts in the second half of the year.

The company highlighted its successful transformation from a stagnant performer during 2015-2020 to a high-growth organization in the 2021-2025 period, with substantial expansion in its sales pipeline and order book. Strong demand in power generation, gas infrastructure, and semiconductor markets has fueled this growth trajectory.

Quarterly Performance Highlights

CECO Environmental delivered exceptional Q2 2025 results, with revenue reaching $185 million, representing a 35% increase year-over-year and a 5% sequential improvement. The company’s backlog hit a record $688 million, up 76% compared to Q2 2024, while orders surged to $274 million, a 95% year-over-year increase with a book-to-bill ratio of approximately 1.5x.

As shown in the following chart of quarterly financial performance:

Adjusted EBITDA rose to $23.3 million, up 45% year-over-year, with margins improving by approximately 87 basis points to 12.6%. Adjusted earnings per share reached $0.24, compared to $0.20 in the same quarter last year. The company attributed this performance to strong bookings, improved backlog conversion, and better price/productivity ratios.

Gross profit margins improved to approximately 36%, reflecting a 100 basis point sequential increase and a 50 basis point year-over-year improvement. This trend of sustained gross profit improvement is illustrated in the following chart:

Growth Transformation & Strategic Initiatives

CECO Environmental has undergone a remarkable transformation from a company with little to no growth between 2015-2020 to a high-growth enterprise in the 2021-2025 period. This shift is clearly demonstrated in the company’s sales pipeline, which has expanded from approximately $1.1 billion in 2020 to over $5.5 billion in 2025, representing a 38% compound annual growth rate since 2021.

The following chart illustrates this dramatic transformation:

The company’s order book has shown consistent growth over the past several years, with the backlog trend continuing its upward trajectory through Q2 2025:

Management highlighted that recent M&A integrations are on track, delivering expected revenue and cost synergies. The company is also actively reloading its M&A pipeline, suggesting further acquisitions may be on the horizon to support continued growth.

Updated Financial Outlook

Based on strong first-half performance, CECO Environmental has raised its full-year 2025 revenue outlook to $725-775 million, up from the previous guidance of $700-750 million provided in April 2025. This represents approximately 35% year-over-year growth, with organic growth accounting for about 20%.

The company also increased its book-to-bill ratio outlook to greater than 1.2x, up from the previous guidance of 1.0-1.1x, while maintaining its adjusted EBITDA forecast at $90-100 million. This outlook implies adjusted EBITDA margins of 12.5-13.0%, representing a year-over-year improvement of approximately 150 basis points.

The updated outlook is based on several key assumptions, including continued strong order intake following the record $0.5 billion in bookings during the first half of 2025, improved revenue conversion in the second half, and ongoing investments to support growth. Management also noted some uncertainty regarding inflation impacts in the second half of 2025.

Cash Flow and Debt Position Challenges

Despite the strong operational performance, CECO Environmental reported challenges with its cash flow generation. Year-to-date adjusted free cash flow was negative at -$18.0 million, compared to a positive $0.7 million in the same period last year. Operating cash flow also declined to -$13.6 million from $7.9 million year-over-year.

The following chart details the company’s cash flow and indebtedness position:

The company’s gross debt position increased to $236.2 million as of June 30, 2025, up from $216.9 million at the end of 2024. The leverage ratio slightly increased to 2.7x from 2.6x during the same period. However, available capacity under the company’s debt facilities expanded to $104 million from $69 million, providing additional financial flexibility.

Management indicated that the free cash flow profile is expected to improve in the second half of 2025 compared to the first half, with a target of converting more than 60% of adjusted EBITDA to free cash flow for the full year.

Forward-Looking Statements

Looking ahead, CECO Environmental remains optimistic about its growth prospects, citing a robust demand environment with limited impact from trade and geopolitical tensions. The company’s sales pipeline exceeds $5.5 billion, up approximately $1 billion year-over-year, with strong customer engagement across key markets.

Management highlighted that power generation, gas infrastructure, and semiconductor markets remain "incredibly robust," with steady regional demand in the US, Middle East, Asia, and India. The company also noted that despite "headline uncertainty" from U.S. policies, there has been limited impact on market momentum.

For the remainder of 2025, CECO Environmental expects to maintain its growth trajectory while continuing to focus on execution and sourcing to mitigate potential inflation impacts. The company is also shifting its focus toward EBITDA margin expansion and expense management while maintaining the strong gross margins achieved in recent quarters.

In summary, CECO Environmental’s Q2 2025 presentation portrays a company that has successfully transformed into a high-growth enterprise with record performance across key metrics, though challenges remain in converting this operational success into positive free cash flow.

Full presentation:

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