CECO ENVIRONMENTAL CORP

CECO Environmental Corp. serves a growing multi-billion dollar global industrial market that is highly fragmented and comprised of many industrial sectors and niche applications, including industrial wastewater treatment, industrial ventilation systems and contamination controls and filtration, semiconductor fabrication, electronics manufacturing, baseload and backup power generation, hydrocarbon processing, chemical processing, natural gas processing and transport, automobile production, polysilicon production, battery recycling, metals processing and production, produced water treatment, electric vehicle and battery production, desalination water transport, ultra-high purity water treatment for electrolysis and electronics production, naval/marine vessel oily water treatment, aluminum beverage can production, lightweight, high-strength metals production, and datacenter acoustics management. The Company believes demand for its products and services will continue to be driven by a global focus on the environment, an increasingly stringent regulatory environment, a favorable investment climate for net-zero technologies, emerging market industrialization, developed market industrial re-shoring, expansion and renewal of infrastructure, water scarcity, increased demand for electrical power generation, expanding natural gas infrastructure, and hydrocarbon processing.

The Company believes it is a leading provider of critical solutions in industrial air quality, industrial water treatment, and energy transition solutions, and that no single competitor has the resources to offer a similar portfolio of product and service capabilities. The markets the Company serves are highly fragmented with numerous small and regional participants, and the Company believes no single company competes with it across the full range of its solutions and products. The Company's value differentiators include product and solutions performance quality, reliability, durability, on-time delivery, and safety, underpinned by core capabilities in advanced design and systems engineering, commercial excellence, and operational excellence. The Company has an installed base of operating systems and equipment in excess of $10 billion ¹ and targets growing a higher share of recurring revenue from aftermarket products and installed base value-added services.

The Company generates revenue by providing engineered and configured products and solutions including dampers and diverters, expansion joints, selective catalytic reduction systems, severe-service and industrial cyclones, dust collectors, thermal oxidizers, filtration systems, wet and dry scrubbers, separators and coalescers, water treatment packages, metallic and non-metallic pumps, industrial silencers, and fluid handling equipment, and plant engineering services and engineered design build fabrication. A significant portion of revenue is derived from fixed-price contracts, with revenue recognized over time using the cost-to-cost method for performance obligations with continuous transfer of control to the customer. The Company's business model focuses on effective management of subcontractors and flow of raw and finished materials, which allows optimization of working capital levels through reduction in certain assets and reduction of capital expenditures. The Company is not dependent upon any single customer, and no customer contributed 10% or more of consolidated revenues for the years ended December 31, 2025, 2024, or 2023 ².

The Company operates through two reportable segments. The Engineered Systems segment serves the power generation, hydrocarbon transport and processing, water/wastewater treatment, oily water separation and treatment, marine and naval, and natural gas and natural gas liquids infrastructure, treatment and transport sectors, addressing global demand for contaminant removal and environmental protection solutions with highly engineered platforms including emissions management, fluid bed cyclones, thermal acoustics, separation and filtration, and dampers and expansion joints. The Industrial Process Solutions segment serves the broad industrial sector with solutions for contamination control, exhaust air treatment, VOC abatement, process filtration and fluid handling in applications such as aluminum beverage can production, vehicle production, food and beverage processing, semiconductor fabrication, electronics production, steel and aluminum processing, engineered wood products manufacturing, chemical processing, general manufacturing and machining, coating and surface treatment, battery production and recycling, and wind and solar power components manufacturing end markets, through platforms including duct fabrication and installation, industrial air, and fluid handling.

For the year ended December 31, 2025, the Engineered Systems segment reported net sales of $544,298 thousand ³ and segment profit of $111,834 thousand ⁴. The Industrial Process Solutions segment reported net sales of $230,083 thousand ⁵ and segment profit of $101,140 thousand ⁶ for the same period. The Company's products and solutions primarily compete on the basis of performance, track record, speed of delivery, quality, price, and customer service.

On February 23, 2026, the Company entered into an Agreement and Plan of Merger with Longhorn Merger Sub, Inc. and Longhorn Merger Sub LLC, each a direct wholly owned subsidiary of the Company, and Thermon Group Holdings, Inc., pursuant to which CECO will acquire Thermon in a cash and stock transaction. On January 30, 2026, the Company entered into the Fourth Amended and Restated Credit Agreement, which provides for a senior secured revolving credit facility in an initial aggregate principal amount of up to $700.0 million ⁷. On January 3, 2025, the Company acquired Profire Energy, Inc. ⁸. In the first quarter of 2025, the Company divested its Global Pump Solutions business, recognizing a gain on sale of $63,701 thousand ⁹. The Company also completed the acquisitions of EnviroCare International LLC on July 29, 2024 ¹⁰, WK Group on October 2, 2024 ¹¹, and Verantis Environmental Solutions Group on December 17, 2024 ¹². On May 10, 2022, the Board of Directors authorized a $20.0 million ¹³ share repurchase program, which expired on April 30, 2025.

Consolidated net sales for the year ended December 31, 2025 were $774,381 thousand ¹⁴ compared to $557,933 thousand ¹⁵ in 2024, an increase of $216.5 million or 38.8% ¹⁶. Gross profit increased by $73.1 million, or 37.3% ¹⁷, to $269,226 thousand ¹⁸ in 2025 compared to $196,147 thousand ¹⁹ in 2024. Net income attributable to CECO Environmental Corp. was $50,051 thousand ²⁰ for 2025 compared to $12,957 thousand ²¹ for 2024. Diluted earnings per share were $1.37 ²² in 2025 versus $0.36 ²³ in 2024. Non-GAAP operating income was $68.4 million ²⁴ in 2025, an increase of $19.1 million from $49.4 million ²⁵ in 2024. Non-GAAP net income was $32.6 million ²⁶ in 2025 compared to $26.7 million ²⁷ in 2024.

The Company's growth strategy is supported by an operating environment of performance excellence and focuses on leveraging its technologies and application expertise for customers around the world, constantly looking for opportunities to apply its technology and expertise to new customers and in new geographies in existing end markets, and to enter new end markets with existing products and solutions. Acquisitions are a key part of the Company's growth model, and it is continuously seeking value-added, accretive additions to the CECO portfolio aligned with its strategic focus in industrial air, industrial water, and the energy transition. The Company intends to continue to expand its customer base and end markets and has continued to pursue potential attractive growth opportunities both domestically and internationally. The Company believes growth for its products and services is driven by the increase in demand for air quality and water treatment solutions, the energy transition, a shift towards cleaner sources of fuel such as natural gas, hydrogen, nuclear, and renewable sources, and increased awareness of customers about corporate social responsibility. The Company expects that more rigorous regulations being introduced to protect the workforce, environment, and operating equipment will favorably impact demand for its products and solutions.

The Company's capital allocation strategy supports the growth and value creation generated by its operational strategy, focusing capital deployment on building out its leading industrial air solutions portfolio, advancing its emerging industrial water treatment position, and supporting customers as they make the transition to cleaner more sustainable forms of energy, while also shifting its portfolio mix towards businesses with more recurring revenue and more predictable cash flows, strong secular growth trends and less cyclicality. The Company's enterprise strategy consists of a combined operational strategy and capital allocation strategy, with core elements of the operational strategy being commercial and operational excellence, margin expansion, recurring revenue growth, cash flow generation, product management, and project management execution.

The Company's focus is on increasing its operating margins as well as its gross margin percentage, which translates into stronger operating results. An advantage of the Company's operating model is that as revenue grows, it has significant operating leverage on its fixed selling and administrative cost structure. The Company is continuously seeking the most cost-effective means and structure to serve its customers, protect its stockholders and respond to changes in its markets, and from time to time may engage in restructuring activities in an effort to improve cost competitiveness and profitability.

The Company's current capacity, with limited capital additions, is expected to be sufficient to meet production requirements for the near future. The Company has 51 principal operating facilities across 13 states and 10 countries. The Company's business model focuses on effective management of subcontractors and flow of raw and finished materials, which allows it to optimize working capital levels through reduction in certain assets and reduce capital expenditures. The Company has approximately 1,540 ²⁸ employees across 10 countries, including approximately 520 ²⁹ engineers, designers, solution experts, and project managers. The Company expects to continue expanding its sales and support capabilities and its network of outside sales representatives in key regions domestically and internationally.

The Company's primary focuses of its capital allocation strategy are organic growth and portfolio management, and the Company closely monitors its leverage and debt repayment strategies. The Company expects to fund any cash portion of the Merger Consideration and related transaction costs with available cash and borrowings under its existing and/or committed credit facilities. The Company expects to incur significant costs in connection with the Thermon transaction, including legal, accounting, financial advisory and other expenses, and additional costs may be incurred in connection with integration planning and execution. The Company has not paid a cash dividend on its common stock in recent years and currently intends to retain future earnings, if any, to finance the operations, growth and development of its business into the foreseeable future, or for other uses such as the continuation of its share repurchase program.

The Company faces headwinds from the volatility of oil and natural gas prices, which can impact customers' activity levels and spending for its products and services. The Company could experience shortages of raw materials and additional inflationary pressures for certain materials and labor, and while it has secured raw materials from existing and alternate suppliers and taken other mitigating actions, it cannot guarantee that it can continue to do so in the future. The Company is subject to the impact of fluctuations in foreign currency exchange rates, with approximately 34% ³⁰ of its 2025 revenues derived from outside the United States. The Company's business could be adversely impacted by changes in environmental legislation and enforcement, and changes in laws or regulations or the manner of their interpretation or enforcement could increase its cost of doing business and restrict its ability to operate its business or execute its strategies.

The Company's business may be adversely affected by global economic conditions, and a national or global economic downturn or credit crisis may have a significant negative impact on its financial condition, future results of operations and cash flows. The Company's dependence upon fixed-price contracts could adversely affect its operating results, as if estimates of costs to complete a project are below actual costs incurred, margins will decrease or a loss may be incurred. The Company's ability to meet customer delivery schedules for its backlog, which was $793.1 million ³¹ at December 31, 2025, is dependent on a number of factors including access to raw materials, an adequately trained workforce, project engineering expertise, sufficient internal manufacturing plant capacity, available subcontractors, and appropriate planning and scheduling of manufacturing resources.

The Company's business is subject to risks from its dependence on fixed-price contracts, where if estimates of costs to complete a project are below actual costs incurred, margins will decrease or a loss may be incurred, and the majority of projects are currently performed on a fixed-price basis. The Company has $214.2 million ³² of indebtedness as of December 31, 2025, and a substantial portion of borrowings is at variable rates of interest indexed to SOFR, which if interest rates increase could result in higher interest expense; the estimated annual impact of a hypothetical 10% change in the estimated weighted average borrowing rate at December 31, 2025 is $1.4 million ³³. The Company has identified material weaknesses in its internal control over financial reporting related to control deficiencies at the Verantis Environmental Solutions Group business acquired in December 2024 and the assessment of completeness and accuracy of information used in the execution of controls relating to balance sheet reconciliations. As of December 31, 2025, goodwill and indefinite lived intangibles were $297.9 million ³⁴, or 33.3% ³⁵, of total assets, and if these become impaired, the Company may be required to recognize charges that would adversely impact results of operations. The Company's subsidiary Met-Pro Technologies LLC has been named in asbestos-related lawsuits, and while the Company divested the fluid handling business in the first quarter of 2025, it retained historical asbestos liabilities and related legacy insurance policies.

Management's message emphasizes that CECO is a leading environmentally focused, diversified industrial company serving the broad landscape of industrial air, industrial water and energy transition markets globally by providing innovative technology and application expertise. The Company's mission is to help companies grow their business with safe, clean, and more efficient solutions that help protect their people, the environment, and their industrial equipment and facilities. The strategy to become a global leader in niche applications in industrial air treatment and management, industrial water treatment, and the energy transition is supported by an operating environment of performance excellence across the Company. Management believes the Company's value differentiators include product and solutions performance quality, reliability, durability, on-time delivery, and safety, underpinned by core capabilities in advanced design and systems engineering, commercial excellence, and operational excellence. The Company's enterprise strategy consists of a combined operational strategy and capital allocation strategy, with the operational strategy implemented through technology and application-based platforms aligned around target customers and end markets, and the capital allocation strategy supporting growth and value creation by focusing on building out the leading industrial air solutions portfolio, advancing the emerging industrial water treatment position, and supporting customers as they make the transition to cleaner more sustainable forms of energy. Management believes that with an installed base of operating systems and equipment in excess of $10 billion ³⁶, the Company is targeting to grow a higher share of recurring revenue from aftermarket products and installed base value-added services, which it believes will provide greater customer retention and loyalty, and increased business resiliency.