CECO (CECO) Q4 2025 Earnings Call Transcript

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DATE

Tuesday, Feb. 24, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Todd Gleason
• Chief Financial Officer — Peter Johansson
• Vice President, Strategy and Corporate Development — Marcio Pinto

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TAKEAWAYS

• Backlog -- Reached $793 million, up 47% year over year and 10% sequentially, marking an all-time high.
• Q4 Orders -- Achieved a record $329 million, up 50% year over year, with a book-to-bill ratio of 1.5.
• Full-Year Bookings -- Reached $1,064 million, increasing 60% with a book-to-bill near 1.4.
• Q4 Revenue -- Posted $215 million, a quarterly record.
• Full-Year Revenue -- Delivered $774 million, up 39%, of which 25% was organic growth; revenue overcame $25 million in headwinds from divesting Global Pump Solutions.
• Q4 Adjusted EBITDA -- Reported at $29.8 million, up 57%, with margin rising 180 basis points to 13.9%.
• Full-Year Adjusted EBITDA -- Exceeded $90 million, up 44%, achieving a historic milestone and expanding margin by 40 basis points.
• Backlog Growth Streak -- Eight straight quarters of backlog growth, accented by five sequential quarters each with over $200 million in bookings.
• Largest Project Awarded -- Secured an approximately $135 million order for a Texas natural gas power generation facility in Q4.
• 2026 Revenue Guidance -- Raised to $925 million–$975 million, up from $850 million–$950 million, not including Thermon contribution.
• 2026 Adjusted EBITDA Outlook -- Increased to $115 million–$135 million, excluding Thermon merger impact.
• Cash Flow -- Delivered full-year positive cash flow of $10 million, up 30%; second-half cash flow reached $30 million; cash conversion in H2 was 52%.
• Leverage and Liquidity -- Ended year with leverage ratio at 2.2x and liquidity of $124 million; realized a 25 basis point interest rate stepdown in Q4 with a further 50 basis point reduction expected, amounting to $1.1 million annualized savings if debt levels are maintained.
• Opportunity Pipeline -- Stated pipeline exceeds $6.5 billion and continues to grow.
• Industrial Water Business -- Management flagged "most active and largest pipeline of opportunities" to date, particularly for international projects in water reuse and recycling.
• QTD Orders (as of Feb. 24, 2026) -- Reported $270 million booked, suggesting a strong start to the year.
• Thermon Transaction Announcement -- Announced definitive agreement to acquire Thermon for approximately $2.2 billion in cash and stock; Thermon shareholders receive $10 in cash and 0.6084 CECO shares per Thermon share.
• Combined Pro Forma Financials -- Expected combined revenue of $1.5 billion and adjusted EBITDA of $295 million including $40 million run-rate synergies, with pro forma net leverage at 2.5x.
• Ownership Structure of Combined Company -- CECO shareholders will own 62.5% and Thermon shareholders 37.5% post-close; close expected in mid-2026.
• Thermon Segment Overview -- For its fiscal year, Thermon posted over $520 million in revenue with 85% from OpEx/short-cycle sales, 45% gross margin, and 23% adjusted EBITDA margin.
• Revenue Mix -- Thermon derives ~50% of revenue from heat tracing, ~35% from heating systems, and ~15% from transport heating, tubing, and digital solutions.
• Synergies -- Management projects $40 million annualized run-rate synergies within three years, primarily from public company consolidation and operational efficiencies.

SUMMARY

A record-breaking quarter and year for CECO Environmental Corp. (NASDAQ:CECO) culminated in the announcement of a definitive merger agreement with Thermon, a move unanimously approved by both boards and positioned as immediately accretive excluding synergies. Over $270 million in orders have already been booked quarter-to-date, including two new large-scale natural gas power generation projects with a combined value over $175 million. The order pipeline for power generation alone is described as exceeding $1 billion and may be approaching $2 billion as negotiations progress. Management stated full-year 2026 guidance does not reflect contributions from the pending Thermon merger and underscores high confidence in organic growth due to the unprecedented backlog and continued booking momentum. The combination with Thermon is cited to offer significant recurring revenue diversification, a balanced mix of short and long-cycle sales, and expanded commercial opportunities across more than 15 countries.

• Management confirmed that 2026 guidance excludes any impact from acquisitions, including Thermon; all outlook is "completely organic."
• Todd Gleason emphasized, "We probably have the tightest backlog that we have had in maybe ever with respect to timing," highlighting minimal scheduling flexibility on large projects.
• Peter Johansson stated the sales pipeline is converting rapidly, supporting the projection for "20% plus top line growth in 2026."
• Thermon's leadership in process heating and temperature management is positioned as highly complementary, with both firms sharing top-two or top-three market status in their respective niches.
• The combined company's potential was framed as, "one plus one will equal more than two," referencing expected meaningful value creation.
• Management identified robust double-digit growth visibility over the medium term, further reinforced by multi-year industrial supercycles in power, natural gas, and semiconductor verticals.
• CECO's previous M&A track record, with more than a dozen successful acquisitions since 2022, is referenced as foundational to the strategic rationale for the Thermon deal.

INDUSTRY GLOSSARY

• Book-to-bill: Ratio comparing orders received (booked) to revenue billed, an indicator of demand and backlog health.
• Backlog: Value of contracted sales orders not yet recognized as revenue, reflecting future revenue visibility.
• Short-cycle sales: Revenue from products or services with a quick order-to-cash conversion, typically OpEx-driven and recurring.
• OpEx: Operational Expenditure; expenditures for day-to-day function of the business, often contrasted with capital expenses (CapEx).
• Synergies: Cost savings or enhanced revenue opportunities realized by combining two businesses, quantified here as $40 million annualized run-rate within three years post-merger.
• 80/20 deployments: Operational efficiency initiative focused on concentrating resources on the highest-impact customers, products, or processes; referenced as a strategy for cost and performance gains.

Full Conference Call Transcript

Todd Gleason: Thanks, Marcio, and welcome, everyone. It is a pleasure to speak about two highlights today. We delivered strong quarter and full year results with many financial records. Importantly, we are also announcing a transformational transaction between CECO Environmental Corp. and Thermon. Please turn to slide number four, and let's discuss each at a high level. On the left side of the slide, we outline the CECO Environmental Corp.–Thermon transaction. This is truly a combination of two proud and winning organizations. Each company is clicking on so many of the right cylinders. Together, we expect the union will create an even stronger global leader with enhanced financial agility and expanded strategic capabilities.

When we close the transaction, we will continue to trade as CECO Environmental Corp. I am excited and very much looking forward to leading the future combined company and working closely with the outstanding leadership and employees at Thermon. More on this transaction in just a minute. Now turning to the right side of the slide, we delivered another strong quarter for CECO Environmental Corp., with full year results for revenue and adjusted EBITDA largely in line with our final expectations. And we are raising our full year 2026 guidance, not inclusive of Thermon, as we have tremendous visibility given our record backlog and growing sales pipeline.

Now please turn to slide number six and let's review the financials in a little more detail. This executive summary slide captures the main points from today's financial earnings release. Q4 delivered numerous new records. Our backlog is at the highest level ever, approaching $800 million and up almost 50% year-over-year. Revenue growth of 35% and adjusted EBITDA growth of 57% speak to our high-performance results. In the quarter, we booked our largest ever project, valued at approximately $135 million for a large-scale natural gas power generation facility based in Texas. For the full year, 2025 orders surpassed $1 billion for the first time, which we signaled we would likely accomplish in our 12/15/2025 press release.

And as we shared in today's press release, we are raising our 2026 full year guidance to reflect our tremendous visibility in backlog and that record sales pipeline I just mentioned. Our increased 2026 guidance reflects strong full year orders growth, as well as full year revenue outlook of between $925 to $975 million, which is up from a previous outlook of $850 to $950 million. Our full year 2026 adjusted EBITDA outlook is now between $115 million to $135 million. So, again, we feel we are clicking on many of the right cylinders. Now before I hand it over to Peter, let's move to slide number seven.

We continue to enjoy a strong market backdrop in the power generation, industrial reshoring, industrial water, and natural gas infrastructure customer segments. In each of the past five quarters, we have booked orders in critical infrastructure projects to support domestic power generation and energy delivery investments, and our pipeline indicates we have the opportunity to maintain that pace in 2026. In fact, we have already secured two large natural gas power generation orders exceeding $175 million in aggregate value at this point in Q1. And we have numerous similarly sized and larger opportunities in our core pipeline.

We remain bullish on the industrial water and wastewater treatment sector, and in particular, the international water infrastructure projects where we now have our most active and largest pipeline of opportunities associated with water reuse and recycling applications. Industrial Air will continue to benefit from industrial reshoring programs, semiconductor investments, and our international expansion activities. As the slide shows, quarter-to-date on to February 24, which is today, we have booked a little over $270 million in orders, so we are well on pace for another record quarter and, obviously, a great start to 2026. I will now hand it over to Peter who will go into more detail on our financial results. Peter?

Peter Johansson: Thank you, Todd. Good day, everyone. Thank you for joining Todd and myself for CECO Environmental Corp.'s fourth quarter 2025 earnings call. Please turn to slide number eight. CECO Environmental Corp. finished 2025 with very strong results for both the fourth quarter and full year on all our key metrics. We finished the fourth quarter with a record backlog of $793 million, up 47% versus prior year and 10% sequentially. Backlog has increased in eight straight quarters and surged upwards in the most recent five, each with well over $200 million in bookings, highlighted by nice wins in power generation, LNG, midstream gas transport and treatment, global semiconductor, and international water end markets.

Fourth quarter orders were $329 million, a company record increase of 50% over the prior year period, with a book-to-bill of approximately 1.5 times. On a full year basis, bookings reached $1,064 million, a 60% increase over full year 2024 levels with a book-to-bill of nearly 1.4 times. The results were largely due to strong demand in our power generation, natural gas infrastructure, semiconductor, and industrial water applications, and we had strength globally in all our major operating regions. Revenue in the fourth quarter and full year was $215 million and $774 million, respectively, with both results being company records. On a full year basis, revenue was up 39%, of which 25% of this growth was organic.

This result was outstanding when you consider that we overcame $25 million of revenue headwinds related to the sale of our Global Pump Solutions business in 2025. Our second half revenue was higher than 2024 by 40%, as the conversion to revenue of our power generation projects booked in late 2024 and 2025 gained speed. Adjusted EBITDA in the quarter was $29.8 million, an increase of 57% versus the prior year period with margins of 13.9%, representing a 180 basis point improvement over the prior year. For the full year, adjusted EBITDA grew 44% to exceed $90 million for the first time in company history, with 40 basis points of margin expansion.

A large part of the improvement was due to lower G&A expense rate, partially offset by $800,000 of costs for strategic reductions in our legal entities to support our accelerating ERP migration program and to conclude certain integration steps from the acquisitions completed in 2024. Let's turn to page nine for now, please. On this chart, I want to remind you that we are presenting CECO Environmental Corp.'s gross profit and our gross margin performance by quarter on a TTM basis to normalize for quarter-to-quarter fluctuations.

We have started this chart at the point in which CECO Environmental Corp.'s operating excellence initiative was launched in 2022, and you can see substantial improvement and steady performance in the 35% upper gross profit margin range. In the quarter, we realized a rebound in margins from the third quarter, back above the 35% target level as strong short-cycle volumes and project execution and closeouts provided margin uplift. This sequential improvement was approximately 240 basis points and is a typical recovery from third quarter seasonal headwinds.

As we look forward to 2026, we will deepen our focus on sourcing and productivity, remain focused on managing price and cost as we navigate an uncertain economic backdrop, and start to realize the benefits from our initial wave of 80/20 deployments, a multiyear journey on which we have embarked that we expect will deliver significant business cost and performance benefits. I will now move a little faster through the next few slides so we have ample time to spend on this morning's announcement and leave time for Q&A. Moving to slide 10.

Regarding cash flow, 2025 was truly a tale of two halves, with the first half of 2025 consuming $20 million of cash and the second half delivering approximately $30 million of cash, for a full year cash flow positive that was positive of approximately $10 million, up 30% year-over-year. Our cash conversion in the second half of the year was very good at 52% and within our target range for cash flow conversion, and we expect to remain there in 2026. Gross debt and net debt both ended the year at levels lower than where we started the year, with our leverage ratio now at a very comfortable 2.2 times and with liquidity well up at $124 million.

With the benefits from the reduction in leverage, and the growth of TTM EBITDA, and improved pricing in our recently concluded and upsized revolver credit facility, we expect to realize a 50 basis point step down in interest rate following a 25 basis point step down realized in the fourth quarter. This will represent an additional annualized interest expense savings of approximately $1.1 million if we maintain the current gross debt balance. I will now move to slides eleven and twelve and move through them quickly to save some time. On slide 11, the book-to-bill in the quarter of approximately 1.5 times on record orders while delivering record revenues was a high.

It is this sustained strong orders performance resulting in record year-end backlog, combined with our $6.5 billion opportunity pipeline, that underpins our 20% plus top line growth in 2026. If we move now to slide 12, we have increased our outlook for all four key metrics, with revenue growth of 23% at the midpoint of our outlook and adjusted EBITDA growth of 38% at the midpoint of our outlook. As Todd stated earlier, we have tremendous visibility given our record backlog and bookings momentum, as well as our sales pipeline, which I have stated now exceeds $6.5 billion and is converting quickly. That concludes the earnings presentation portion of our prepared remarks this morning.

I will now turn the mic back over to Todd who will lead us through the materials describing the exciting strategic combination of CECO Environmental Corp. and Thermon.

Todd Gleason: Thanks, Peter. Now let's transition to review a historic transaction for CECO Environmental Corp. and a major step forward in our industrial leadership journey. Please turn now to slide 14. The addition of Thermon will meaningfully expand CECO Environmental Corp.'s leadership in industrial, environmental, and thermal solutions by adding Thermon's established position in process heating, heat tracing, and temperature management, creating a world-class industrial solutions platform. This combination brings together two highly complementary businesses, creating opportunities to accelerate growth through expanded customer relationships and global reach. And Bruce and I could not feel better about what lies ahead for the combined company and our respective team. I cannot wait to meet many more Thermon leaders and employees.

Moving to slide 15, let's review the key terms of the transaction. Under the agreement, which has been unanimously approved by the boards of both companies, the transaction will be executed through a stock and cash merger with a total consideration of approximately $2.2 billion. Thermon shareholders will receive $10 in cash and 0.6084 of CECO Environmental Corp. common stock per share, delivering a substantial premium while allowing Thermon shareholders to participate in the upside of the combined company. The cash component will be funded through existing credit facilities. This leads us to an implied value of approximately 17 times adjusted EBITDA or 13 times including synergies.

Upon close, which is expected to occur in mid-2026, CECO Environmental Corp. shareholders will own approximately 62.5% of the combined company, and Thermon shareholders will own approximately 37.5%. From a leadership perspective, I will continue as CEO of the combined company, and Thermon will appoint two board members to serve as directors for the combined company. Each company leadership team will remain in place through the pre-closing process and I look forward to meeting Thermon leaders and operating teams as we evaluate the most effective and efficient combined company model.

On the right, you can also note the key pro forma financials for the combined organizations, with revenues of approximately $1.5 billion, adjusted EBITDA of $295 million, assuming approximately $40 million of run-rate synergies, yielding margins close to the low twenties. From a balance sheet standpoint, the company is expected to have a strong balance sheet with pro forma net leverage of 2.5 times, giving us ample opportunity to continue to invest in our people, processes, markets, and best growth opportunities. Now please move to slide number 16 entitled Thermon Group at a Glance. There is certainly more to see here than a mere glance.

Thermon is a leading end-to-end solution provider of process heating, temperature management, and asset protection with a strong aftermarket presence. For the current fiscal year, they are delivering over $520 million in revenue with approximately 85% of their sales considered OpEx or what CECO Environmental Corp. commonly refers to as shorter cycle sales. Thermon's gross profit margin of 45% reflects their leading products, their great operating and price disciplines, and that shorter cycle product mix. Thermon currently has adjusted EBITDA margins of approximately 23%. To be helpful, we provide additional revenue analytics at the bottom of the slide, but I will not go through that here. Moving to page 17 for a quick look at Thermon's expansive solution set.

Thermon is a leading diversified industrial leader. Undeniable. Similar to CECO Environmental Corp., they deliver advanced engineered solutions to solve mission-critical environmental challenges. We could not be more excited to learn more about their innovations and strategic growth programs. Each company protects people, protects the environment, and protects industrial equipment. It is an outstanding match. The current high-level segmentation of Thermon sales spans from heat tracing, which represents approximately half of the company's revenue, heating systems that represent approximately 35% of revenue, and the balance of approximately 15% in transport heating, tubing, and digital solutions.

Thermon has announced several important innovative solutions, including great momentum they are enjoying with their Genesis controls and newly launched liquid load bank offering, to name just a few. Much to be proud of at Thermon, and we aim to support that pride and strategic growth going forward. Now let's transition to slide 18. We are creating a global industrial leader in delivering mission environmental and thermal solutions. We see this combination as a powerful strategic fit that significantly advances our position as a premier engineered solutions provider. This transaction will meaningfully extend CECO Environmental Corp.'s leadership in industrial, environmental, and thermal solutions by adding Thermon's established position in the aforementioned process heating, heat tracing, and temperature management.

Once again, we expect to create a world-class integrated industrial platform. We will have a vast installed base by bringing together our more than seventy-five years of combined installation and product deliveries, which will generate substantial high-margin recurring and replacement revenue. Let me tell you more about why this combination wins, which is outlined on slide number 19. Together, we have an expanded addressable market of over $30 billion across attractive and high-growing industrial end markets. Both companies are well aligned to secular growth tailwinds across electrification, energy transition, data centers, water megatrends. And Thermon operates a recurring short-cycle business model which balances well with CECO Environmental Corp.'s project-based longer cycle work.

From a financial standpoint, this deal is very attractive. Even before synergies, the combination is accretive in year one. With our identified annualized synergies of approximately $40 million by year three, this transaction creates even more shareholder value. We expect to drive strong double-digit growth and margin enhancements through our productivity and 80/20 programs while achieving these synergies. So we believe the next few years will show an even more powerful value creation company. A cornerstone of our transaction discussions has also been our similar values, cultures, and operating styles. Throughout the transaction process, we have gotten to know the Thermon team, and it is clear they have an outstanding group of employees who share many of our same values.

We both have a business and culture grounded in disciplined execution and innovative thinking. And I believe that alignment will serve us well for many years to come and support a smooth integration process. In a nutshell, this is a powerful combination that we believe checks all the boxes. Two winning Texas-headquartered companies, two great operating organizations with shared values and commitment to delivering for our industrial customers. And I believe one plus one will equal more than two when everything is said and done. Moving to slide number 20 for a view of CECO Environmental Corp.'s pro forma financials and a little more color on synergies. The pro forma numbers tell a powerful story.

When we add the $40 million in synergies, the pro forma is even stronger. Combined, $1.5 billion in sales, almost $300 million in adjusted EBITDA with close to 20% EBITDA margins. Scale, margins, and industrial leadership. And while we have months of pre-integration work ahead, the $40 million in identified synergies is a meaningful enhancement to this already accretive transaction. Now, these identified synergies come in two main buckets. First, the cost associated with combining two public companies and reducing the redundancies, as well as SG&A overlap and additional efficiency savings. And the second bucket in the identified synergy comes from operational efficiencies, footprint rationalization, and supply chain leverage. We do show a third bucket.

Our current model does not yet have commercial synergies assumed, but it is an opportunity, and we will be pursuing those as we start working together. Okay. Last couple of slides before Q&A. On page 21, we have an overview of our global presence. The combined company will have operations in more than 15 countries with a combination of engineering and manufacturing sites to better serve our global customers. Our global population will exceed 3,000 employees, many of which are highly skilled engineers, technical resources, and thought leaders in their respective markets. Combined, we have the scale and capabilities to deliver the mission-critical environmental and thermal solutions across the globe and solve our customers' most challenging environmental issues.

Moving to page number 22. I am not going to spend a lot of time on this slide, but you can clearly see the different yet complementary financial profiles of both companies. CECO Environmental Corp., as you may know and I have already mentioned, has about 70% to 80% of our revenues from mid to longer cycle projects, and the balance of our sales driven by shorter cycle product offerings. Thermon, on the other hand, has a relatively small percentage of revenue from longer cycle projects, but a significant percent from shorter cycle sales. As you can see on the right-hand side of this slide, the combination represents a very balanced company from a revenue cycle standpoint.

This is a very attractive mix for any CEO and management team. The right blend of longer cycle jobs and backlog which provide nice visibility to what is already been booked, as well as a steady diet of shorter cycle sales helping to drive productivity, steady margins, and enhanced cash flows. Now let's pivot to slide number 23. I am very proud of the progress we have made at CECO Environmental Corp. over the past five years. I have had the luxury and I will continue to have the luxury to lead one of the great high-performance industrial companies, and our results speak for themselves. Since 2022, our growth and margin expansion has been steady, and it has been impressive.

We have also successfully introduced and maintained a programmatic M&A program to add key businesses and brands to our leading niche industrial portfolio. Since 2022, we have acquired over a dozen companies of various sizes to enhance performance and adjacent market expansion. This proven track record has yielded strong shareholder value creation. We aim to maintain this model of performance and value creation. The combination with Thermon, we believe, will enhance each. Now in conclusion on slide 24, I will wrap up with this before we take your questions. CECO Environmental Corp.'s performance over the past three to five years has been very strong. CECO Environmental Corp.'s performance in 2025 was very strong.

Our outlook for 2026 also points to very strong performance. Separately, Thermon's results and outlook are also very strong. Today's announcement, the opportunity to combine CECO Environmental Corp. with Thermon, will make us both stronger. Stronger and more resilient growth, stronger financial profile, scale with agility. A powerful value creation in year one and beyond. I would now like to open it up for questions, and thank you for your interest.

Operator: Certainly. As a reminder to ask a question, you will need to press star one on your telephone and wait for your name to be announced. In the interest of time, please limit yourself to one question and a follow-up. Please rejoin the queue for additional questions. Please standby while we compile our Q&A roster. Our first question will be coming from the line of Aaron Spychalla of Craig-Hallum Capital Group. Your line is open, Aaron.

Aaron Spychalla: Good morning, Todd and Peter. Thanks for taking the questions. Maybe first for me, you kind of talked about industrial water, just the most active and kind of largest pipeline that you have had there. Can you just kind of maybe frame that for us, you know, what that business is today and just, you know, some of the timelines and sizes and kind of what that opportunity looks like for you in the next couple of years?

Todd Gleason: Yeah. I will start, and then I will hand it over to Peter to add some additional commentary. So we have been intentional about organically as well as inorganic building what we believe is proving to be a very attractive industrial water aspect of CECO Environmental Corp. Over the past few years, we have continued to enter into some new markets both the United States as well as internationally. And what we are seeing in our position and in these investments, is in a large pipeline of activity now for us in 2026 with respect to industrial water treatment and produced water, especially in some international locations associated with energy and heavy industry.

So, you know, as we now look at, you know, both early in this year and throughout the year, opportunities that could be, you know, between $10 to $50 million in size. We expect to, you know, to be announcing throughout the year, maybe even each quarter, some pretty exciting produced water treatment opportunities in, let's say, the Middle East, you know, other parts of the world with respect to water treatment for industrial applications. You know, the acquisitions we have made have been helpful. But I also believe that our engineering capabilities and our relationships with our customers, they have been asking us to help them solve some of these critical areas for a number of years.

Aaron Spychalla: Understood. Thanks for that. And then, you know, on the Thermon acquisition, you know, I appreciate not kind of no commercial synergies outlined kind of yet. But, you know, it seems pretty complementary from a product and end market standpoint. But can you just maybe give a little bit detail on where you kind of see some of the low hanging fruit as you kind of go to market with just a much broader kind of product set, you know, any kind of customer overlap, you know, any other details you can provide there would be helpful. Thanks.

Todd Gleason: Yeah. No. Thanks, Aaron. And we know you know the companies well, since you obviously cover both CECO Environmental Corp. and Thermon. So we are happy to talk more about this as we go forward. Low hanging fruit exists. Not only have we known Thermon for a long time as a leader in what they do, and certainly their reach and their capabilities, but we have a lot of customers in common. Within the customers, the decision makers might be a little different. So if you are looking across energy or industrial organizations, we share a lot of customers, which means we can solve a lot of problems separately or together.

We have a variety of overlap in certain projects where we can see very advanced thermal applications being a part of what could be a combined bid in the future. And, certainly, they have relationships that we do not in certain geographies or end markets, and we have relationships that they do not. We have found that to be a powerful growth component in our previous acquisitions where we can introduce a new product or solution offering across a range of geographies or adjacent markets. So it will be an exciting aspect of this combination.

And then look, I will just say last but not least—there are many more things I could talk about—but I will go right to their Genesis controls platform and solution set because, in our early dialogue, we certainly see that as a complementary opportunity for us to learn more, and to evaluate ways to bring advanced controls and monitoring across more of our portfolio. So that is definitely a low hanging fruit conversation for us to have, and we will evaluate that going forward.

Aaron Spychalla: Yeah. Definitely exciting. Thanks for taking the questions. I will turn it over.

Operator: And our next question will be coming from Rob Brown of Lake Street Capital Markets. Your line is open.

Rob Brown: Hi. Good morning. Congratulations on all the progress. Just following up a little bit more on Thermon. The short cycle business—could you sort of clarify how that business works? What is the size of installed base that you expect, and how recurring is that business?

Todd Gleason: Well, they have seventy-five years of installed base. Right? So this is an organization that has long proven their high quality, long proven their ability to deliver for their customers every day, around the world, in some of the harshest operating environments. They, like CECO Environmental Corp., are very proud of the durability and the long-lasting aspect of their product and solution set. But at the end of the day, their customers rely on them to help them expand as they build out their infrastructure, or as they replace their infrastructure. Their installed base is in the billions. They enjoy thousands of invoices probably a month, as their average sale is much smaller than ours.

So they are constantly providing updated product for their customers and their markets, while they are also working with new customers to solve their complex thermal needs in other areas. And, you know, with their launch of liquid load bank, and some of their other new product categories, I think they are very excited and so are we that they have a very strong not just replacement cycle in front of them, but a penetration in some new markets—categories where their investments are going to yield outstanding results. I would also point you, Rob, to Thermon’s investor materials, including one from late 2025, where they really show how they break down their segmentation of revenue.

We will be showing more combined materials going forward, but their website has very good materials for you.

Rob Brown: Okay. Great. Thank you. And then to the base CECO Environmental Corp. business, the order pipeline—you noted continued very strong into the year here with a couple of power projects. But what is sort of the pipeline activity, specifically in the power vertical? At this point, do you have sort of multiples of these, or could you maybe characterize the pipeline of the power market at this point?

Todd Gleason: Yeah. Peter certainly has a ton of depth on this as we continue to do operating reviews with our businesses. The current power segmentation of our pipeline is well in excess of a billion dollars. We are in regular dialogue with the most important end customers in the power generation space. We have been saying for quite a number of quarters that CECO Environmental Corp. is really well positioned for these large natural gas turbine power jobs that are now coming down the pipeline that really require our advanced solutions. Late last year and already early this year, we are starting to see even more of these larger opportunities. We have a lot of visibility in our pipeline.

It is certainly well in excess of a billion dollars and could even be approaching $2 billion in what we would call a short or medium term pipeline with respect to these power jobs.

Peter Johansson: We have become fond of saying, Rob—you may have picked up on that in past discussions—that it feels like POs are falling from the sky. It is such a dynamic environment that all the behind-the-meter and in-front-of-the-meter providers of power are moving very quickly to put solutions in place. The one thing they all have in common, regardless of the form of generation, is they need emissions treatment. Having an emissions solution—and we are one of three companies in the world that can deliver a comprehensive end-to-end solution for emissions management around gas turbines and large gas engine fleets—gets you permitted faster.

That has become critical to both the utilities that are going to buy the power or the OEMs that are going to deliver it. Todd mentioned a billion to $2 billion is the range of projects we are negotiating, but that is not the total visibility. That is just what we are working on at present.

Rob Brown: Great. Thanks for all the color. I will turn it over.

Operator: And our next question will be coming from Gerard J. Sweeney of Roth Capital. Your line is open.

Gerard J. Sweeney: Hey. Good morning, Todd, Peter, and Marcio. Thanks for taking my call.

Peter Johansson: Thanks, Gerard.

Gerard J. Sweeney: Obviously, first question is going to be on Thermon. I wanted to just see if you could give a little bit more detail. It sounds as though Thermon is a little bit more short cycle, obviously, you are long cycle, and that is one of the points you highlighted in your prepared remarks. But how much of this is there an opportunity for maybe wallet share on some projects that you are going after versus maybe just access to new customers or new customers within existing customers?

Todd Gleason: Yeah. Look. We have a pretty consistent track record, Gerry, in our acquisitions of identifying and combining with companies with great growth profiles. When we look at any transaction, we are more focused on how we invest in those organizations or how they help us rapidly invest in growth pursuits, before we are really looking at synergies. This transaction stands on its own before we even talk about the word synergy. And then when you add the early identified synergies that we talked about in the buckets that we talked about, you start to get an even more powerful financial combination. Back to the root of your question: we enjoy being diversified.

We are very focused on continuing to build what we believe is the premier industrial solutions provider with respect to environmental products, services, and engineered solutions. That is exactly what Thermon is doing as well. If there is an opportunity—and there certainly will be opportunities—for us to look at customers, customer relationships, markets, and growth to go at things together, we will do that. When we are on very large complex projects where heat and thermal management are required and we did not think of those previously, we will certainly be thinking about those going forward. We have a need and an interest in advanced controls applications. We have not made that investment yet, and Thermon has.

So we will look at opportunities to leverage what they have done and where they are located with their knowledge, and how we bring that to them as well. Our customers rely on Thermon for protective services to ensure that their environment is clean and safe and that their employees are benefiting from the efficiencies of their processes—so do we. When both companies are solving problems for customers in unique ways but for similar reasons, there are going to be commercial synergies.

Gerard J. Sweeney: Got that. I was a little bit more curious on—obviously I get the short cycle is right for you, speed of cash conversion. From a holistic standpoint, it sounds as though Thermon does bring you some opportunities to expand some wallet share on projects. And then conversely, their large aftermarket exposure could probably grow with some of your customers that they may not cover as well. Is that a fair sort of generalization?

Todd Gleason: Yeah. That is a fair generalization. I think over the next few months, as we start to really now intentionally roll up our sleeves appropriately with Thermon and evaluate these synergies, there are going to be some very exciting ones. We have mentioned some of their innovations already—more to come on that. And we have incredibly strong relationships with customers on small, medium, and large projects that we know require thermal applications. We should work together to solve those customer needs.

Gerard J. Sweeney: And it would not be a Q&A if I did not ask one more question on the power side. Large turbine makers, manufacturers, starting to look at 2028—maybe even 2028 may be sold out—starting to look at 2029 and 2030. When you discuss your pipeline, how far out on the curve are you looking?

Todd Gleason: When we describe our pipeline of between $1 to $2 billion, those are opportunities that we expect—our dollar level—to book in the next twelve to eighteen months, maybe two years. That does not mean there is not overlap that could extend a little beyond that. So think of it as a two-year pipeline for us.

Peter Johansson: And the pipeline is already expanding beyond that. We need to see orders in the next twelve months to deliver in 2028. We need them in the next twenty-four months to meet 2029–2030. We are aligned with our customers. We do joint planning and joint project assessments. Timelines move as customers solidify their investments and permits, but demand is exceeding supply in all categories of equipment. Ultimately, it comes down to how much capacity we need to have in place to deliver the solutions being demanded across thermal, acoustic, emissions, and inlet air treatment. We are in a very good position to supply all that well into the thirties.

Gerard J. Sweeney: Got it. That is what I was looking for. Thanks. And congratulations on the announcement.

Todd Gleason: Thank you, Gerry.

Operator: And our next question will be coming from James Andrew Ricchiuti of Needham & Company. Your line is open, Jim.

James Andrew Ricchiuti: Hey. Just on the full year revenue guidance for the base CECO Environmental Corp. business, any thoughts on the revenue distribution as you go through the year—first half versus second half—just given the backlog, the timing of some of this?

Todd Gleason: Thanks, Jim. As you know, we do not break down our quarters in terms of guidance, but we have a profile that is typical when we think about our years in terms of the weighting of when projects are at their peak. Q1 is usually one of our smaller quarters, and then Q2 really ramps up from there. I am not suggesting it is 55% or 60% in the second half of the year, but it is certainly going to be more in the second half. Q4 is almost always our largest quarter. Some of these larger jobs that we booked start turning into revenue in the second half, not in the first half.

One thing on these power-related projects is there is not a lot of wiggle room here for calendar moves. These are jobs that are funded and required to meet certain deadlines. We probably have the tightest backlog that we have had in maybe ever with respect to timing. I would say at least 55% in the second half.

James Andrew Ricchiuti: K. Thanks. And just on Thermon, Todd, you characterized them as being a leader in their markets. Any color on the competitive landscape or their market share position as it relates to some of the larger markets that they address?

Todd Gleason: I think we will hold off on specific market share, but they are certainly a leader. We know the space. In the industrial arena, you know who is strong and why you see their names on heavy industrial facilities. They may compete with a variety of smaller private companies in some product or solution categories, and with large privately owned organizations that have been in heat tracing for quite a while. There has been some consolidation here, but Thermon, in their many decades of leadership, has continued to be a top two or three player in their key markets. They are also introducing new products and moving into adjacent spaces where share is emerging.

Similar to CECO Environmental Corp., we believe we are a top two or three player in many of our niche markets; Thermon clearly reflects that.

James Andrew Ricchiuti: Okay. Did you say what the organic growth rate was in Q4? I think you gave it for the year.

Peter Johansson: It is a little over 25% in the quarter. It might be as accurate as 26%, but it is a little over 25% organically.

James Andrew Ricchiuti: Congrats.

Todd Gleason: Thank you, Jim.

Operator: And our next question will be coming from the line of Robert Brooks of Northland Capital Markets. Your line is open, Bobby.

Robert Brooks: Hey. Good morning, guys. Thank you for taking my question. I wanted to ask and hear a little bit more on Thermon's end market splits and how similar that is to you, and also curious, are their end markets as flexible as yours where it can kind of consistently change to where the pocket is going? I am guessing maybe not as much since it is more short-cycle focused. But just wanted to hear more on that and maybe along those lines, what end markets do you feel at this early stage have the best opportunity for cross selling?

Marcio Pinto: I will take the high level. The distribution of their revenue is one of the charts at the end of the deck. You will see there is some complementary, but also some distinct differences. While cross selling might be interesting, it is not the fundamental driver of value creation in this opportunity.

Peter Johansson: The end markets that they serve today—and Todd mentioned it earlier—are very similar to ours with the exception that they have a rather substantial rail and transit opportunity that we do not touch, and they have got some unique capabilities that sit inside of renewables in terms of keeping windmills frost free, keeping solar panels from fogging due to condensation and other things that are quite interesting and will continue to grow. The mix is very complementary in that their technology is adaptive, both in heating as well as heat tracing, to wherever you have a temperature management or thermal control issue. It does not necessarily mean it is cold out.

It can be that the process requires a warm fluid to be passed, or a dry gas to be moved—the application diversity is immense. That gives us great confidence that our mix of project and short cycle will continue to deliver resilient revenue growth. The other dimension to consider, Bobby, is that they are typically specified and installed late in a project, and we are typically specified and procured early in a project. So we will now get to touch clients along a much longer period in the buying window and explore new opportunities.

Todd Gleason: I will add a couple quick things here. I have been aware of Thermon for decades. At a previous organization, we had a business in this space and, at the time, most people viewed it as highly leveraged to cyclical oil and gas, like the oil sands in Canada, and that cyclicality was somewhat limiting. Hats off to Bruce and the Thermon organization because, intentionally and successfully—similar to what we have done at CECO Environmental Corp.—they have diversified into general industrial, into new end markets geographically, introduced new innovations, and offset some of those cyclical markets by growing into new markets. Their diversification is a result of focused and capable expansion.

Today, roughly 30% comes from oil and gas, whereas ten or fifteen years ago that might have been 75% or 80%. They may not have the same near-term ability to be as nimble as we are across industries, but they have proven over time that they have a lot of athleticism to expand into adjacent markets and become much more balanced.

Robert Brooks: That is super helpful color. I really appreciate that, Todd and Peter. And then the water—something I am very focused on. I do not think enough people appreciate the large opportunity there when every barrel of oil in the Permian comes with five to seven barrels of produced water. I was curious—you talk about the opportunity, it seems more internationally focused than domestically. Just kind of curious why that is.

Peter Johansson: Yeah. Bobby, that is an easy one. Our solution set is designed around large fields and fixed process equipment. The Permian and other basins are around mobile equipment. They drill a well, they produce, the well lapses, they move the equipment to the next well pad. It is much more of a gathering process; it is not a fixed installation. At the right time, we can show you the photographs of what we are supplying—you do not want to move it. We are also treating magnitudes of water that are far greater than what comes out of a fracked well. That is generally the reason. You are right that the Permian produces a large water cut, and it is growing.

But there are very good suppliers that cover that already.

Robert Brooks: Got it. Really, really appreciate the call. I will return it to you.

Operator: And our next question will be coming from Amit Dayal of H.C. Wainwright. Your line is open, Amit.

Amit Dayal: Thank you. Good morning, everyone. So Todd, just on CECO Environmental Corp.'s stand-alone outlook for 2026, does that include any potential small acquisitions or is that all organic?

Todd Gleason: This is all organic. Our current outlook only reflects our aforementioned backlog, pipeline, and organic investments.

Amit Dayal: Awesome. And then, you know, the combined company—how should we think about potential growth rates? You are above 20% as a standalone entity right now. Could this accelerate even further as a combined entity on the revenue side?

Todd Gleason: We have very good visibility to a medium and longer term here with our pipeline. We will learn more about Thermon's pipeline as we go forward. Their growth has been at a very attractive rate in this market. From our conversations and analysis, they have a rich opportunity set in front of them—not just with their installed base and exposure to growth markets, but due to great innovations they have been launching, which opens up an ability for higher points of growth than their historic average. We have this incredible super cycle with power, natural gas infrastructure, and on the industrial air side with continuous reshoring and semiconductor investments. Those are with us for a while.

When we win in semiconductor, we are winning fairly large and long-standing applications and relationships. I am bullish—you can tell. Our outlook for 2026, completely organic, is again greater than 20%. We believe our outlook into the next few years represents a similar opportunity to maintain very strong double-digit growth. Thermon solidifies that. If it does not add to the percentage growth rate, it adds to the consistency in the business mix quarter by quarter. And these adjacent markets and the opportunity to work together with innovation will be powerful. This is a growth story.

We are two companies that are really clicking on a lot of cylinders, and we have an opportunity—much like we have done with the vast majority of our previous M&A—to maximize growth together. That is what we plan to do with Bruce and the team.

Amit Dayal: Thank you, guys. That is all I had.

Operator: And I would now like to turn the call back to Todd for closing remarks.

Todd Gleason: Well, thanks everybody for the questions and the interest. To our new friends at Thermon, we cannot wait to meet many of you in the coming period. Thanks again to our global teams that are delivering incredible value to our customers as we continue to protect people, protect the environment, and protect our customers' investment in their industrial equipment. We will be participating at some upcoming conferences in March, both Roth and Citadel's Small & Mid Cap Industrials Conference, so we hope to see you in March at those events or at other opportunities to meet, whether it is in Dallas or on the road. Thanks, everyone. Have a great day, and we will talk to you soon.

Operator: And this concludes today's program. Thank you for participating. You may now disconnect.

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