0001193125-26-197428
SEC filingQ1 2026 revenue grew 16.5% to $205.9M, driven by backlog execution; GAAP operating margin fell to 0.9% due to transaction costs, while non-GAAP margin improved to 8.7%.
For the three months ended March 31, 2026, net sales increased 16.5% to $205.9 million from $176.7 million in the prior year period. The growth was driven by execution and delivery on the company's record backlog, particularly in exhaust and selective catalytic reduction systems. Gross profit rose 2.7% to $63.9 million, but gross margin contracted to 31.0% from 35.2%, primarily due to the divestiture of the higher-margin Global Pump Solutions business, improved backlog conversion in international markets, and project mix. Selling and administrative expenses declined to $46.0 million from $53.6 million, reflecting the divestiture and lower general administrative costs, resulting in SG&A as a percentage of sales dropping to 22.3% from 30.3%. GAAP operating income fell to $1.9 million from $61.9 million, as the prior year included a $64.5 million gain on the sale of Global Pump Solutions. Excluding that gain and other adjustments, non-GAAP operating income improved to $17.9 million from $8.6 million, and non-GAAP operating margin expanded to 8.7% from 4.9%. Interest expense decreased to $4.2 million from $6.2 million due to lower average debt and rates. Net loss attributable to CECO was $0.4 million versus net income of $36.0 million in the prior year, driven by the transaction-related costs and the absence of the gain. Orders booked surged 98% to $449.5 million, led by demand for emissions and exhaust systems for large-scale natural gas power generation projects.
The Engineered Systems segment reported net sales of $150.5 million, up 25.0% from $120.4 million, driven by backlog execution on large power projects. Segment profit rose to $29.8 million from $22.8 million, with margin improving to 19.8%. Orders booked in this segment increased 135% to $383.0 million, reflecting strong demand for emissions and exhaust systems. The Industrial Process Solutions segment saw net sales decline 1.6% to $55.4 million from $56.3 million, primarily due to the divestiture of the Global Pump Solutions business, nearly offset by backlog execution on industrial and ducting applications. Segment profit decreased to $6.4 million from $71.4 million, as the prior year included the $64.5 million gain. Excluding the gain, segment profit was roughly in line with sales volume. Orders booked in this segment increased 2% to $66.5 million, driven by scrubber technology demand in international markets.
Management's discussion highlights the pending acquisition of Thermon Group Holdings, expected to close in 2026 subject to approvals. The company anticipates funding the cash portion with available cash and credit facility borrowings. In the near term, CECO faces headwinds from geopolitical tensions and tariff considerations but is actively mitigating impacts through pricing, sourcing, and logistics adjustments. Backlog of $1,035.1 million, up from $793.1 million at year-end 2025, provides strong visibility, with substantially all expected to convert within 12-24 months. The company remains focused on leveraging its niche market positions in air, water, and energy transition solutions. No specific quantitative guidance was provided for upcoming quarters.