CECO ENVIRONMENTAL CORP — Call Transcript 2026

Speaker 1: Good day, and thank you for standing by. Welcome to the CECO Environmental Post-Closing Update on Thermone Transaction. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Marcio Pindo, Vice President of Integration and Investor Relations. Please go ahead.

Speaker 2: Thank you, Liz, and thank you for joining us on the CECO Environmental post-closing call on the Thermont transaction. On the call with me today, I have Todd Gleeson, Chairman and Chief Executive Officer and Peter Johansson, Chief Financial Officer. So in today's call, we will provide updates on the post-acquisition integration and our initial full-year outlook as a combined company. We look forward to providing additional financial information when we hold our second-quarter earnings call later this summer. As a reminder, these calls, webcast, and presentation are available on our website, and today's discussion includes forward-looking statements that are subject to risks and uncertainties, including the ones described in our SEC filings, as we have also noted in our presentation legal disclosures. As always, we will leave time at the end of the call for analyst questions. And with that, I'll turn the call over to Todd.

Speaker 3: Thanks, Marcio, and good day, everyone. We appreciate the opportunity to provide an update now that we have officially closed the acquisition of Thurmont. Let me start by thanking our great employees as we maintain focus on delivering for our customers and driving meaningful results, all while balancing a major set of integration activities. We announced the transaction at the end of February, and our teams wasted no time preparing for a productive and timely integration. Activities are well underway, and my excitement continues to grow as we work closely with the Thurmont business leaders. Just a ton of opportunities. Let's please move to slide number three. Welcome to the new CECO. The combination advances our portfolio of leading industrial solutions. One that has an $8 billion sales pipeline, which is very well positioned for some of the most important secular tailwinds, power generation and electrification, data centers and AI, semiconductor and general industrial reshoring, as well as industrial water and infrastructure. The new CECO has greater scale, our more balanced portfolio, higher margins, and our balance sheet is well positioned to fund a range of investments. As a quick update on bookings and market trends, CECO Standalone has already booked a record quarter with well over $550 million in new orders before June, and we still have a month to go in the quarter. The legacy Thurmont business continues to build strong momentum with new products such as liquid load banks and medium-voltage heaters. The combination will drive even more growth. Simply put, it is an exciting new CECO and builds upon our track record of growth. Please go to slide number four. Let's discuss our integration status. Having personally been part of major integrations at previous companies, I can't say enough about how important a successful day one is to our employees and our customers. And by almost every measure, we had an excellent day one and week one. Integration teams are working on multiple work streams to bring the two companies together functionally and operationally. We're off to a great start capturing cost and growth synergies and moving with speed on key decisions. I want to thank Bruce Thames, Thurmond's outgoing CEO, for his leadership and partnership to ensure we have had so many positive engagements. Our Integration Management Office has detailed plans in place and are already driving programs to meet or exceed the announced $40 million of synergies. Over the next few quarters, we look forward to providing updates on our progress. Our preliminary assessment is we are ahead of schedule and we expect to maintain this great momentum. This year, we expect $15 million of run rate synergies of which at least $5 million will hit the bottom line prior to the end of 2026. With respect to growth synergies, we are in position to accelerate new product sales as well as coordinate commercial teams to maximize large project pursuits where solutions from each company are relevant. We are also rapidly exploring geographic opportunities and how we can expand Thurmont's offerings globally. Additionally, the detail in CECO's $8 billion sales pipeline provides tremendous insights into exciting opportunities across the enterprise. While we are just getting started on actualizing commercial synergies, we do expect to generate one to two points of additional organic growth for the legacy Thurmont business. These commercial synergies are all upside from the original deal economics. And from a talent and culture perspective, we have expanded our Board to include two very experienced directors from Thurmont, as both Victor Ritchie and Marcus George join to help us advance our strategic transformation. These additions, along with the blended corporate and business unit leadership team, adds depth and talent. Candice Harris-Peterson, who joins my senior team as our new Chief Human Resources Officer, will be instrumental in partnering with me and others to advance our focus on talent development and a high-performance culture. Moving to slide five, let me quickly highlight a few key points. On the right side of the slide, we highlight the tremendous shareholder value CECO has generated over the past five to six years. This has been the result of a proven business model, and the acquisition of Thurmont advances and strengthens our business model. When the stock market closed yesterday, our market capitalization was approximately $4.7 billion. We've come a long way from CECO's market cap of less than $250 million when I joined as CEO in July of 2020. While we have benefited at times from good market dynamics and a healthy global economy, the implementation of a more dynamic growth and transformation business model has really driven a ton of the value creation. We have intentionally focused on two main pillars, as shown on the left side of the slide. We drive business transformation via organizational design and through performance culture and processes. By eliminating unnecessary structure and aligning people, incentives, and our win-right values, our high-performance design has yielded top quartile growth and performance. And going forward, we are adding operational excellence and 80-20 to our business transformation playbook. Along with the business transformation, we also have programs in place to drive what we call portfolio transformation. Portfolio transformation is both organic, where we have invested heavily in global expansion, new talent, new market penetration programs, and new solutions. And portfolio transformation is also inorganic, aided by our programmatic M&A programs. We have a proven model of making accretive strategic acquisitions and executing on those new business additions to drive even more growth. Having more scale and more business balance, thanks to this transformational acquisition, will accelerate our overall capabilities and open up new opportunities for additional value creation. Now let's wrap up with slide number six. We are pleased to provide updated guidance for the full year 2026. I acknowledge this is a bit of a busy slide, but we felt it was important to provide these details. The section on the left side of the slide provides a reference to recent historic actual results for legacy CECO and legacy Thurmont. It also shows what was our most recent full year 26 outlook for standalone CECO. As a reminder, Thurmon was on a different financial calendar than CECO, so they recently reported their full-year 2026 results, which ended on March 31, 2026. Additionally, because of the pending transaction with CECO, Thurmon had not provided guidance for the coming year. The middle section is our updated guidance for full year 2026 on a combined basis. This incorporates Thurmon as a wholly owned business group within CECO starting June 1st. The seven months of combination are captured in this updated outlook. The details of this guidance are as follows. We currently expect full year orders to be over $2 billion as both CECO and Thurmont are experiencing strong momentum. We are guiding for full-year revenue of between $1.275 billion to $1.375 billion, which is up approximately 20% at the midpoint on a similar year-over-year basis. And we expect full-year adjusted EBITDA of between $195 million and $225 million, up approximately 25% on a year-over-year basis, including the approximate $5 million of cost synergies that we expect to realize to the bottom line in the next seven months. As a reminder, this guidance does incorporate only those seven months of Thurmont, so not the full year impact. And the $5 million of cost synergies is the actual amount we anticipate recognizing this year from the $15 million of run rate savings. The balance of those run rate savings will be recognized in 2027, along with additional synergies created and captured in that period. So synergies are meaningful this year, but even more impactful in 2027. The right side of the slide shows our combined full year financials on a pro forma basis. For 2026, this pro forma financial profile would show the combined company at $1.5 billion to $1.6 billion of sales with adjusted EBITDA of between $250 million to $280 million, which includes around $10 million of synergies on a 12-month basis. No matter how we view the combination, CECO generates strong double-digit sales growth and robust EBITDA and EBITDA margins. Analytically, we expect CECO to be a Rule of 30 or Rule of 40 company with between 15% to 25% top-line growth and high-teens to low-20s EBITDA margins for years to come. We hope this detail has been helpful. We would now like to open up the line for questions. operator.

Speaker 1: As a reminder if you'd like to ask a question at this time please press star one one on your telephone and wait for your name to be announced to withdraw your question please press star one one again our first question comes from aaron's bichala with craig-hallum your line is now open.

Speaker 4: Yeah good morning thanks for taking the questions Hi, Aaron. Hi. First for me, just on the guidance, I just want to confirm no real change on kind of legacy CECO. It's just all incorporating Thurmon. And then on commercial synergies, you kind of highlighted one to two basis points of growth. Can you just kind of unpack that a little bit and where some of those come from with some of the CECO projects?

Speaker 3: Yeah. So you're right, Aaron. Fundamentally, we're incorporating some synergies, of course, now in our combined initial outlook for the full year. We expect to have more visibility and potentially a different outlook as we go forward and report our second quarter earnings and also going forward from there. So we've essentially taken what had been the CECO outlook coupled with the forecast and the visibility we have on the Thurmont growth and performance for the balance of the year, and we're introducing this today as a great place for us to start. As far as synergies go, we've already hit the ground running on incorporating Thermon product lines into various large-scale projects where we would see, and our customers importantly, would see the need for some of their solutions, where maybe Thermon didn't have a relationship in a power Gen. market or industrial market, but we see that there's going to be a heat trace need or an immersion heater need or something similar. So we've already been working to bring those products into the customer's program and help to drive some sales. And it's early days, but we're already seeing what we believe will be millions of dollars of growth this year. We're also starting to coordinate internationally ways that we can, you know, bring our commercial teams together to go and we believe, take advantage of some of the best market trends that are happening around the world. So, those items coupled with... Our operational and supply chain chains are just going to get started now on helping to evaluate additional ways to leverage different supply chain models so that we can accelerate some of the new product introductions over the next 6 to 12 months. If you look at Thurmont's approximate, you know, $550 million worth of sales for the full year, you know, most recently completed for them, you know, we believe that that these areas that I just mentioned, as well as some others, could easily add $5 to $10 million worth of growth going forward. And it's exciting. You think about, Aaron, that we had a $7 to $8 billion sales pipeline, and Thurmont had a very nice sales pipeline, but nothing near that size just because of their shorter cycle business model. They just didn't have the same visibility to big projects coming. But the details in that sales pipeline is tremendous. Literally almost a line item detail across these industrial projects where we can now identify solutions that Thermon is basic in, and we can introduce the parties together to really open up some new sales opportunities for the Thermon businesses because of our robust sales pipeline. Those are just some of the answers. There's many more, and we'll be providing more commercial updates on wins and opportunities that we're working together as we go forward.

Speaker 4: Great. Thanks for all the detail and for taking the questions. I'll turn it over.

Speaker 3: Thanks.

Speaker 1: Our next question comes from Bobby Brooks with Northland Capital Markets.

Speaker 5: Hey, good morning, guys. Thank you for taking my question. I was curious just how you're thinking about on the personnel front. It was specifically kind of with like the go-to-market teams, commercialization teams. How are you thinking of balancing the new Thurmont teams added with your own internal teams? Are there going to be some teams that get collapsed and just go under the CECO team? Just wanted to get some thoughts on that.

Speaker 3: Yeah, thanks, Bobby, and thanks for the question. As is our normal and will continue to be our operating model, the businesses we acquire are leaders, and they know their markets. And the people that are running those businesses are the experts. The CECO brings certain capabilities internationally and opportunities to work together across these very niche industrial spaces. But the Thurmont business knows what they're doing and the teams know what they're doing. And there's just going to be a lot of coordinated activity we expect, especially in markets where one might have a leading position and the other might be interested in navigating that leading position. But there will be in the business units, no collapsing of thermon businesses inside of CECO. We make acquisitions, we invest in those businesses so that they grow. Certainly, we can add talent and we can move some people between businesses because they're ready for market career opportunities and to help drive market development opportunities. But we're super thrilled with the talent that's at Thurmont. And they're going to continue to lead their businesses and their business functions within those operations. We're going to look at ways as we've done historically at CECO to create a more streamlined organization where appropriate. And like I said, our, you know, global teams are going to, you know, evaluate better opportunities for us to introduce each other to new geographic markets or vertical markets. But the Thurmont business is going to continue to lead as a niche leader across its businesses, and we're just going to invest in their success.

Speaker 5: Yep, super helpful. Appreciate that. And that you guys have definitely have a long track record of doing that with your previous acquisitions. And maybe kind of to flip the question a little bit is you mentioned there, there's opportunities for each side of the business to make those kind of warm handshakes introductions where you might not already have a strong foothold. I was curious to hear from the CECO perspective, what end markets might Thurmont have really good inroads to that CECO might not necessarily have made that's kind of top of mind.

Speaker 3: Look, each of us brings incredible relationships with a variety of end markets. Thurmont has footholds in various geographies. You know, we just don't have the same type of depth of relationship. Thurmont has very strong relationships with also, you know, areas of channel, whether it's distributors and others, where, you know, while that's not necessarily our model, we would love to evaluate ways that we can partner with distribution organizations, and we just don't have those same types of relationships. No doubt, as Thurmont introduces new products and data centers, as they We're both in gas, oil and gas and infrastructure. So where we win, they win differently. There's ways for us to continue to compare notes. Just like the legacy CECO businesses, we often find ourselves at the same trade shows. We often find ourselves at the same industry conferences. And we learn from each other. I was joking with some of the Thurmont team members last week that I heard from both Thurmont legacy employees as well as legacy CECO employees that went to the industrial boiler show that they ended up hanging out together along with customers, most of that show, because we solve challenges in the boiler industry differently, but we have a lot of the same opportunities. So, there's just going to be a lot of cross-selling and cross-sharing. And, I can tell you too, our cultures already get along. And that's important. I've been part of combinations where cultural combinations were the biggest challenge. It wasn't the economics, it was the culture. And certainly we have some personality differences at various levels of how corporates are run and strategies are delivered, but at the operational level. Our engineering solutions focus, as well as Thurmont's engineering solutions focus, our focus on quality, our focus on productivity, that's what our customers care about. And where they're strong with the customers, they're going to welcome the CECO opportunities. And where we're strong with our customers, they're going to welcome the Thurmont opportunities because we all focus on the same quality.

Speaker 5: That's great to hear about the culture fit. I think folks really underappreciate how important that is. And just my last question is, any specific end markets that the team has circled as most compelling like kind of cross-synergy selling or just introducing to new customers, whether it's a Seco, a legacy-Seco relationship to Thurmont or a legacy-Thermont relationship to Seco, any specific end market you might call out?

Speaker 3: Well, look, I would call, the answer is yes and no, Bobby. The answer is no in the sense that we have a lot of opportunity, especially internationally, but it's early days. Obviously, commercial teams can't really start working together until you've combined. So we've now been combined for a week. That doesn't mean that we can't have integration discussions. It doesn't mean that if we're at an industrial conference that we can't talk and identify ways that we could work together. But one week in now, we can actually start working together and having phone calls and starting to partner. So those conversations are more in front of us than they are behind us. But it goes without saying, the biggest market at the moment is power generation. And when CECO books $100 million to $300 million projects, I can assure you that that's a big circle around that industry, because there's going to be process heating needs, and Thermont is a leader there. And so we can now bring those solutions into our very large, complex projects with the GE Vernovas and the Siemens and others with respect to what they have as best-in-class power generation solutions. The other thing I'd say is I remain Very excited about our growing international and industrial water capabilities, and you can imagine that heat trace when it comes to water solutions and water skids is a... very critical component to a lot of that infrastructure. Our ability to work together to create advanced solutions that provide even more efficiency, uptime, reliability, and safety for our customers in industrial water over the coming years, I think is going to be a big circle around that market opportunity as well. Those are some of the answers that we've identified today.

Speaker 5: That's great to hear. Appreciate you guys taking my question. I'll return to the queue.

Speaker 3: Thanks, Bobby.

Speaker 1: Our next question comes from Rob Brown with Lake Street Capital Markets.

Speaker 4: Good morning. I just wanted to follow up on I think you mentioned the liquid load bank product at Thurmont. What's sort of the opportunity there and how does that how might that fit into the legacy CECO?

Speaker 3: Well, I know Bruce And Tom Czarofsky and David Bunton and so many people at Thurmont put a lot of focus and effort into launching not just the Liquid Load Bank, but the medium voltage and their other new suite of products over the last couple of years, but specifically over the last nine to 12 months. Liquid Load Bank is one that they highlighted a lot in our discussions and with investors over the last six, nine months. Rob, I think you know that. You know, as data centers and artificial intelligence goes much stronger towards liquid cooled solutions, having a liquid load bank is an important solution for that configuration to ensure that as you transition and as you start up and as you manage the liquid cooled solutions within those data centers, then you have the most effective and meaningful configuration. I would just say it's preliminary, but so far the liquid load bank interest from customers, major customers in data center infrastructure are very encouraging that, you know, the, you know, the orders, which they mentioned on some of their calls of well over 100 liquid load banks and growing to several multiples of that in the near future, we think, provide an exciting opportunity. This is a product line singularly that adds points of growth to Thurmont in the coming years. And so a business that we feel was already starting to be at mid to high single-digit growth as a Thermon company now is starting to approach high single-digit, low double-digit growth before we even start to introduce some of these synergies. And I would say leading the charge is probably liquid load back.

Speaker 4: Okay, great. Thank you. And then on the orders, I think you talked about an uptick even in before the June activity, but what sort of the order pipeline look like at this point? Is it very similar kind of momentum and how do you see the order activity sort of cadence for the rest of the year?

Speaker 3: Well, it's similar momentum. It's an interesting time, Rob. We've gone record after record the last few quarters now for quite a while. Obviously, we booked at standalone CECO 400, and I think it was 49 million of orders in Q1, and we booked essentially that in April. We had a very nice May. and where we have a great pipeline for June. And we see that the third quarter and fourth quarter pipeline also looks extremely strong. Now, you know, booking $300 million orders is somewhat unique, but not something that we don't see in front of us again. So our pipeline across the board looks very attractive. I think some of the businesses where we're just building even more momentum now In terms of semiconductor, in terms of water, that momentum continues to build. We think that that's going to have a stronger second-half of the year than we had in the first half, but PowerGen remains. incredibly strong, whether it's support, the rebuilding of just power infrastructure in the grid, or certainly all of the headlines associated with data centers and AI. There's no shortage of demand for electrification, digitization, power generation. I think we're just seeing ongoing momentum. And Thurmont is as well across their businesses. It'll be interesting, depending on what happens with the Iran war, if that moderates, will there be a Middle East rebuild as well? We're starting to see some opportunities there. But no telling when that conflict ends, and we're not predicting anything. And our guidance is already cautious of that not necessarily ending anytime soon. But, you know, we remain interested in the outcome of that because it probably speaks to some additional opportunities as well.

Speaker 4: Okay, thank you. Congrats on all the progress. I'll turn it over.

Speaker 3: Thanks, Rob. Thank you.

Speaker 1: That concludes today's question and answer session. I'd like to turn the call back to Todd Gleason for closing remarks.

Speaker 3: Well, thank you. Thanks for the questions and the interest in our update today. We look forward to seeing many of you at upcoming investor events. And as always, if you have any questions, we would be happy to help in any way. And with that, we'll go ahead and end the call. I want to once again thank Team CECO, which now includes the great new addition of the Thurmont leaders and employees around the world. Welcome to what we know is an exciting new start to our future together. And we look forward to continuing to perform at a very high level. Thanks, everybody.

Speaker 1: This concludes today's conference call. Thank you for participating. You may now disconnect.