# CECO ENVIRONMENTAL CORP (CECO)

Informational only - not investment advice.

CIK: 0000003197
SIC: 3564 Industrial & Commercial Fans & Blowers & Air Purifing Equip
SIC breadcrumb: [Manufacturing](/division/D/) > [Industrial And Commercial Machinery And Computer Equipment](/major-group/35/) > [SIC 3564 Industrial & Commercial Fans & Blowers & Air Purifing Equip](/industry/3564/)
Latest 10-K filed: 2026-03-02
SEC page: https://www.sec.gov/edgar/browse/?CIK=3197
Filing source: https://www.sec.gov/Archives/edgar/data/3197/000119312526085815/ceco-20251231.htm

## Selected Fundamentals
| Metric | Value | Unit | FY | Filed |
| --- | ---: | --- | ---: | --- |
| Revenue | 774381000 | USD | 2025 | 2026-03-02 |
| Net income | 50051000 | USD | 2025 | 2026-03-02 |
| Assets | 893769000 | USD | 2025 | 2026-03-02 |

## Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-03-02. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000003197.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.

| Metric | 2012 | 2013 | 2014 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue |  |  |  | 417,011,000 | 345,051,000 | 337,339,000 | 341,869,000 | 316,011,000 | 324,140,000 | 422,627,000 | 544,845,000 | 557,933,000 | 774,381,000 |
| Net income |  |  |  | -38,218,000 | -3,029,000 | -7,121,000 | 17,707,000 | 8,211,000 | 1,426,000 | 17,417,000 | 12,911,000 | 12,957,000 | 50,051,000 |
| Operating income |  |  |  | -25,562,000 | 8,024,000 | 10,002,000 | 17,990,000 | 13,346,000 | 9,857,000 | 22,161,000 | 34,569,000 | 35,403,000 | 105,859,000 |
| Gross profit |  |  |  | 134,859,000 | 113,194,000 | 111,537,000 | 114,099,000 | 105,128,000 | 100,922,000 | 128,225,000 | 171,016,000 | 196,147,000 | 269,226,000 |
| Diluted EPS |  |  |  | -1.12 | -0.09 | -0.21 | -0.50 | 0.23 | 0.04 | 0.50 | 0.37 | 0.36 | 1.37 |
| Operating cash flow |  |  |  | 69,599,000 | 6,570,000 | 21,952,000 | 10,227,000 | 4,421,000 | 13,298,000 | 29,649,000 | 44,647,000 | 24,828,000 | 5,861,000 |
| Capital expenditures |  |  |  | 1,076,000 | 1,028,000 | 3,090,000 | 5,655,000 | 3,945,000 | 2,616,000 | 3,376,000 | 8,384,000 | 17,368,000 | 11,343,000 |
| Share buybacks | 456,000 | 2,365,000 | 973,000 | 188,000 |  |  |  | 0.00 | 5,014,000 | 7,020,000 | 0.00 | 5,000,000 | 0.00 |
| Assets |  |  |  | 498,634,000 | 438,549,000 | 392,582,000 | 408,637,000 | 419,314,000 | 416,197,000 | 504,721,000 | 600,291,000 | 759,699,000 | 893,769,000 |
| Liabilities |  |  |  | 308,552,000 | 251,980,000 | 214,022,000 | 215,620,000 | 215,703,000 | 210,240,000 | 286,573,000 | 362,800,000 | 507,806,000 | 570,587,000 |
| Stockholders' equity |  |  |  | 190,082,000 | 186,569,000 | 178,560,000 | 193,017,000 | 202,658,000 | 204,554,000 | 213,224,000 | 232,643,000 | 247,689,000 | 317,528,000 |
| Cash and cash equivalents |  |  |  | 45,824,000 | 29,902,000 | 43,676,000 | 35,602,000 | 35,992,000 | 29,902,000 | 45,522,000 | 54,779,000 | 37,832,000 | 33,144,000 |
| Free cash flow |  |  |  | 68,523,000 | 5,542,000 | 18,862,000 | 4,572,000 | 476,000 | 10,682,000 | 26,273,000 | 36,263,000 | 7,460,000 | -5,482,000 |

### Ratios

ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported.

| Metric | 2012 | 2013 | 2014 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net margin |  |  |  | -9.16% | -0.88% | -2.11% | 5.18% | 2.60% | 0.44% | 4.12% | 2.37% | 2.32% | 6.46% |
| Operating margin |  |  |  | -6.13% | 2.33% | 2.96% | 5.26% | 4.22% | 3.04% | 5.24% | 6.34% | 6.35% | 13.67% |
| Return on equity |  |  |  | -20.11% | -1.62% | -3.99% | 9.17% | 4.05% | 0.70% | 8.17% | 5.55% | 5.23% | 15.76% |
| Return on assets |  |  |  | -7.66% | -0.69% | -1.81% | 4.33% | 1.96% | 0.34% | 3.45% | 2.15% | 1.71% | 5.60% |
| Liabilities / equity |  |  |  | 1.62 | 1.35 | 1.20 | 1.12 | 1.06 | 1.03 | 1.34 | 1.56 | 2.05 | 1.80 |
| Current ratio |  |  |  | 1.46 | 1.61 | 1.55 | 1.56 | 1.68 | 1.62 | 1.64 | 1.39 | 1.35 | 1.34 |

## Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-04-30. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000003197.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

| Quarter | End date | Revenue | Net income | Diluted EPS | Method |
| --- | --- | ---: | ---: | ---: | --- |
| 2022-Q1 | 2022-03-31 |  |  | 0.08 | reported discrete quarter |
| 2022-Q2 | 2022-06-30 |  |  | 0.13 | reported discrete quarter |
| 2022-Q3 | 2022-09-30 |  |  | 0.06 | reported discrete quarter |
| 2023-Q1 | 2023-03-31 | 112,563,000 | 1,978,000 | 0.06 | reported discrete quarter |
| 2023-Q2 | 2023-06-30 | 129,181,000 | 3,724,000 | 0.11 | reported discrete quarter |
| 2023-Q3 | 2023-09-30 | 149,390,000 | 3,330,000 | 0.09 | reported discrete quarter |
| 2023-Q4 | 2023-12-31 | 153,711,000 | 3,879,000 |  | derived Q4 = FY annual - nine-month YTD |
| 2024-Q1 | 2024-03-31 | 126,332,000 | 1,508,000 | 0.04 | reported discrete quarter |
| 2024-Q2 | 2024-06-30 | 137,522,000 | 4,485,000 | 0.12 | reported discrete quarter |
| 2024-Q3 | 2024-09-30 | 135,513,000 | 2,086,000 | 0.06 | reported discrete quarter |
| 2024-Q4 | 2024-12-31 | 158,566,000 | 4,878,000 |  | derived Q4 = FY annual - nine-month YTD |
| 2025-Q2 | 2025-06-30 | 185,391,000 | 9,510,000 | 0.26 | reported discrete quarter |
| 2025-Q3 | 2025-09-30 | 197,599,000 | 1,499,000 | 0.04 | reported discrete quarter |
| 2025-Q4 | 2025-12-31 | 214,694,000 | 3,058,000 |  | derived Q4 = FY annual - nine-month YTD |
| 2025-Q1 | 2026-03-31 | 205,919,000 | -398,000 | -0.01 | reported discrete quarter |

## Macro Cross-References
- [CPIAUCSL](/indicator/CPIAUCSL/): Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
- [UNRATE](/indicator/UNRATE/): Unemployment Rate
- [FEDFUNDS](/indicator/FEDFUNDS/): Federal Funds Effective Rate
- [CES0500000003](/indicator/CES0500000003/): Average Hourly Earnings of All Employees, Total Private
- [DFEDTARU](/indicator/DFEDTARU/): Federal Funds Target Range - Upper Limit
- [DFEDTARL](/indicator/DFEDTARL/): Federal Funds Target Range - Lower Limit
- [DGS3MO](/indicator/DGS3MO/): Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
- [DGS2](/indicator/DGS2/): Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
- [DGS10](/indicator/DGS10/): Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
- [DGS30](/indicator/DGS30/): Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
- [T10Y2Y](/indicator/T10Y2Y/): 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
- [CPILFESL](/indicator/CPILFESL/): Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
- [CPIUFDSL](/indicator/CPIUFDSL/): Consumer Price Index for All Urban Consumers: Food
- [CPIENGSL](/indicator/CPIENGSL/): Consumer Price Index for All Urban Consumers: Energy
- [CUSR0000SAH1](/indicator/CUSR0000SAH1/): Consumer Price Index for All Urban Consumers: Shelter
- [PCEPI](/indicator/PCEPI/): Personal Consumption Expenditures: Chain-type Price Index
- [PCEPILFE](/indicator/PCEPILFE/): Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
- [PPIACO](/indicator/PPIACO/): Producer Price Index by Commodity: All Commodities
- [T10YIE](/indicator/T10YIE/): 10-Year Breakeven Inflation Rate
- [U6RATE](/indicator/U6RATE/): Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
- [PAYEMS](/indicator/PAYEMS/): All Employees, Total Nonfarm
- [CIVPART](/indicator/CIVPART/): Labor Force Participation Rate
- [EMRATIO](/indicator/EMRATIO/): Employment-Population Ratio
- [UNEMPLOY](/indicator/UNEMPLOY/): Unemployed
- [CE16OV](/indicator/CE16OV/): Employment Level
- [ICSA](/indicator/ICSA/): Initial Claims
- [JTSJOL](/indicator/JTSJOL/): Job Openings: Total Nonfarm
- [JTSQUR](/indicator/JTSQUR/): Quits: Total Nonfarm
- [GDPC1](/indicator/GDPC1/): Real Gross Domestic Product
- [A191RL1Q225SBEA](/indicator/A191RL1Q225SBEA/): Real Gross Domestic Product: Percent Change from Preceding Period
- [INDPRO](/indicator/INDPRO/): Industrial Production: Total Index
- [TCU](/indicator/TCU/): Capacity Utilization: Total Index
- [HOUST](/indicator/HOUST/): New Privately-Owned Housing Units Started: Total Units
- [PERMIT](/indicator/PERMIT/): New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
- [RSAFS](/indicator/RSAFS/): Advance Retail Sales: Retail Trade
- [PCE](/indicator/PCE/): Personal Consumption Expenditures
- [DSPIC96](/indicator/DSPIC96/): Real Disposable Personal Income
- [PSAVERT](/indicator/PSAVERT/): Personal Saving Rate
- [M2SL](/indicator/M2SL/): M2
- [BOPGSTB](/indicator/BOPGSTB/): U.S. International Trade in Goods and Services: Balance
- [MSPUS](/indicator/MSPUS/): Median Sales Price of Houses Sold for the United States
- [HSN1F](/indicator/HSN1F/): New One Family Houses Sold: United States
- [RHORUSQ156N](/indicator/RHORUSQ156N/): Homeownership Rate in the United States
- [TTLCONS](/indicator/TTLCONS/): Total Construction Spending: Total Construction in the United States
- [RRVRUSQ156N](/indicator/RRVRUSQ156N/): Rental Vacancy Rate in the United States
- [TOTALSL](/indicator/TOTALSL/): Total Consumer Credit Owned and Securitized
- [REVOLSL](/indicator/REVOLSL/): Revolving Consumer Credit Owned and Securitized
- [DRCCLACBS](/indicator/DRCCLACBS/): Delinquency Rate on Credit Card Loans, All Commercial Banks
- [GDP](/indicator/GDP/): Gross Domestic Product
- [GPDI](/indicator/GPDI/): Gross Private Domestic Investment
- [GCE](/indicator/GCE/): Government Consumption Expenditures and Gross Investment
- [PCEC](/indicator/PCEC/): Personal Consumption Expenditures
- [NETEXP](/indicator/NETEXP/): Net Exports of Goods and Services
- [GFDEBTN](/indicator/GFDEBTN/): Federal Debt: Total Public Debt
- [GFDEGDQ188S](/indicator/GFDEGDQ188S/): Federal Debt: Total Public Debt as Percent of Gross Domestic Product
- [FYFSD](/indicator/FYFSD/): Federal Surplus or Deficit
- [FGRECPT](/indicator/FGRECPT/): Federal Government Current Receipts
- [FGEXPND](/indicator/FGEXPND/): Federal Government: Current Expenditures
- [MANEMP](/indicator/MANEMP/): All Employees, Manufacturing
- [USCONS](/indicator/USCONS/): All Employees, Construction
- [USTRADE](/indicator/USTRADE/): All Employees, Retail Trade
- [USFIRE](/indicator/USFIRE/): All Employees, Financial Activities
- [USGOVT](/indicator/USGOVT/): All Employees, Government
- [AWHAETP](/indicator/AWHAETP/): Average Weekly Hours of All Employees, Total Private
- [DGORDER](/indicator/DGORDER/): Manufacturers' New Orders: Durable Goods
- [NEWORDER](/indicator/NEWORDER/): Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
- [BUSINV](/indicator/BUSINV/): Total Business Inventories
- [EXPGS](/indicator/EXPGS/): Exports of Goods and Services
- [IMPGS](/indicator/IMPGS/): Imports of Goods and Services
- [IR](/indicator/IR/): Import Price Index (End Use): All Commodities
- [PPIFIS](/indicator/PPIFIS/): Producer Price Index by Commodity: Final Demand

## Latest quarter (10-Q)

Latest 10-Q source: https://www.sec.gov/Archives/edgar/data/3197/000119312526197428/ceco-20260331.htm

Extracted structurally from real Item 2 body heading to real Item 3/4 boundary.
Confidence: high
Filing date: 2026-04-30
Report date: 2026-03-31

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The Company’s Condensed Consolidated Statements of Operations for the three months ended March 31, 2026 and 2025 reflect the consolidated operations of the Company and its subsidiaries.

CECO Environmental Corp. (“CECO,” “we,” “us,” "our," or the “Company”) is a leading environmentally focused, diversified industrial company, serving the broad landscape of industrial air, industrial water and energy transition markets globally providing innovative technology and application expertise through a collection of focused operating companies with niche leadership positions and well-established brands in fragmented markets with flexible business models and established supply chains. CECO helps companies grow their business with safe, clean, and more efficient solutions that help protect people, the environment and industrial equipment. CECO's solutions improve air and water quality, optimize emissions management, and increase the energy and process efficiency for highly engineered applications in power generation, midstream and downstream hydrocarbon processing and transport, chemical processing, electric vehicle production, polysilicon fabrication, semiconductor and electronics production, battery production and recycling, specialty metals, aluminum and steel production, beverage can manufacturing, and industrial and produced water and wastewater treatment, and a wide range of other industrial end markets.

On February 23, 2026, the Company entered into an Agreement and Plan of Merger with Thermon Group Holdings, Inc. ("Thermon"), pursuant to which CECO will acquire Thermon in a cash and stock transaction. The consummation of the Merger is subject to the satisfaction or waiver of customary closing conditions, including stockholder approvals and regulatory approvals. We expect to fund the cash portion of the merger consideration and related transaction costs with available cash and borrowings under our existing credit facilities. For additional details, see Note 15 to the unaudited condensed consolidated financial statements within Item 1 of this Quarterly Report on Form 10-Q.

Market Pressures

The senior management team monitors and manages the Company's ability to operate effectively as the result of market pressures. Against the current backdrop of a rapidly evolving global commercial environment, we believe we are comparatively well-positioned as we execute and manufacture a majority of our business in the same regions in which we sell, with our cost and revenue bases largely aligned as a result. Recently, international trade has been impacted by conflict in the Middle East and geopolitical tariff considerations. To mitigate potential impacts from further escalation of conflict in the Middle East, we have implemented contingency planning measures and continue to assess potential effects on our operations, supply chain, and financial results. To mitigate potential tariff-related impacts, we have worked strategically with customers and suppliers to optimize terms and pricing, sourcing locations, and logistics routes and schedules. While we will continue to take a proactive approach on our efforts to mitigate the impacts of these matters, our business and results could be adversely affected by further policy developments. Additionally, we could experience shortages of raw materials and additional inflationary pressures for certain materials and labor. We have secured raw materials from existing and alternate suppliers and have taken other mitigating actions to mitigate supply disruptions; however, we cannot guarantee that we will be able to continue to do so in the future. If we are unable to continue to mitigate the effects of these supply disruptions and/or inflationary pressures, our business, results and financial condition could be adversely affected.

Note Regarding Use of Non-GAAP Financial Measures

The Company's unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These GAAP financial statements include certain charges the Company believes are not indicative of its core ongoing operational performance.

As a result, the Company provides financial information in this Management’s Discussion and Analysis that was not prepared in accordance with GAAP and should not be considered as an alternative to the information prepared in accordance with GAAP. The Company provides this non-GAAP financial information because the Company’s management utilizes it to evaluate its ongoing financial performance and the Company believes it provides greater transparency to investors as supplemental information to its GAAP results.

The Company has provided the non-GAAP financial measures of non-GAAP operating income and non-GAAP operating margin as a result of items that the Company believes are not indicative of its ongoing operations. These include transactions associated with the

21

Company’s acquisitions, divestiture, and the items described below in “Consolidated Results.” The Company believes that these items are not necessarily indicative of the Company’s ongoing operations and their exclusion provides individuals with additional information to better compare the Company's results over multiple periods. The Company utilizes this information to evaluate its ongoing financial performance. The Company has incurred substantial expense and income associated with acquisitions. While the Company cannot predict the exact timing or amounts of such charges, it does expect to treat the financial impact of these transactions as special items in its future presentation of non-GAAP results.

22

Results of Operations

Consolidated Results

Our Condensed Consolidated Statements of Operations for the three and three months ended March 31, 2026 and 2025 are as follows:

Three months ended March 31,

(in millions, except ratios)

2026

2025

Net sales

$

205.9

$

176.7

Cost of sales

142.0

114.5

Gross profit

$

63.9

$

62.2

Percent of sales

31.0

%

35.2

%

Selling and administrative expense

46.0

53.6

Percent of sales

22.3

%

30.3

%

Amortization expense

4.0

3.1

Acquisition and integration expense

10.3

8.1

Gain on sale of Global Pump Solutions business

—

(64.5

)

Other operating expense

1.7

—

Operating income

$

1.9

$

61.9

Operating margin

0.9

%

35.0

%

Other expense

$

1.4

$

0.6

Interest expense

4.2

6.2

(Loss) income before income taxes

$

(3.7

)

$

55.1

Income tax (benefit) expense

(3.5

)

18.6

Net (loss) income

$

(0.2

)

$

36.5

Noncontrolling interest

0.2

0.5

Net (loss) income attributable to CECO Environmental Corp.

$

(0.4

)

$

36.0

To compare operating performance between the three months ended March 31, 2026 and 2025, the Company has adjusted GAAP operating (loss) income to exclude (1) amortization of intangible assets, (2) acquisition and integration expenses, which include legal, accounting, and other expenses, inclusive of those incurred in connection with the proposed Thermon transaction (3) gain on the sale of the Global Pump Solutions business as discussed in Note 16, and (4) other non-recurring expenses, restructuring expenses primarily relating to severance, facility exits, and associated legal expenses, asbestos litigation expenses relating to future settlement payments, executive transition expenses, and third party professional consulting fees associated with Enterprise Resource Planning system implementations.

The following table presents the reconciliation of GAAP operating income and GAAP operating margin to non-GAAP operating income and non-GAAP operating margin:

Three months ended March 31,

(in millions, except ratios)

2026

2025

Operating income as reported in accordance with GAAP

$

1.9

$

61.9

Operating margin in accordance with GAAP

0.9

%

35.0

%

Amortization expense

4.0

3.1

Acquisition and integration expense

10.3

8.1

Gain on sale of Global Pump Solutions business

—

(64.5

)

Other operating expense

1.7

—

Non-GAAP operating income

$

17.9

$

8.6

Non-GAAP operating margin

8.7

%

4.9

%

Net sales for the three months ended March 31, 2026 increased $29.2 million, or 16.5%, to $205.9 million compared with $176.7 million for the three months ended March 31, 2025. The increase in net sales is driven by execution and delivery on the Company's record backlog, with growth primarily coming from exhaust and selective catalytic reduction systems.

Gross profit increased $1.7 million, or 2.7%, to $63.9 million in the three months ended March 31, 2026 compared with $62.2 million in the three months ended March 31, 2025. The increase in gross profit was primarily attributable to higher sales volume. Gross profit as a percentage of sales decreased to 31.0% in the three months ended March 31, 2026 compared with 35.2% in the three months

23

ended March 31, 2025. The decrease was primarily attributable to the divestiture of the higher-margin Global Pump Solutions business in 2025, improved backlog conversion in international markets, and project mix.

Selling and administrative expenses were $46.0 million for the three months ended March 31, 2026 compared with $53.6 million for the three months ended March 31, 2025. The decrease was attributable to the divestiture of the Global Pump Solutions business and lower general administrative expense throughout the Company. As a percentage of sales, selling and administrative expenses decreased to 22.3% in the three months ended March 31, 2026 compared with 30.3% in the three months ended March 31, 2025.

Amortization expense was $4.0 million for the three months ended March 31, 2026 compared with $3.1 million for the three months ended March 31, 2025. The increase in expense is attributable to increased intangible assets attributable to the prior year acquisition.

Acquisition and integration expenses were $10.3 million for the three months ended March 31, 2026 compared with $8.1 million for the three months ended March 31, 2025. The increase is driven by costs incurred in connection with the proposed Thermon transaction during the first quarter of 2026, partially offset by the non-recurrence of costs related to the Profire acquisition that were incurred in the first quarter of 2025.

Operating income decreased $60.0 million to $1.9 million for the three months ended March 31, 2026 compared with operating income of $61.9 million for the three months ended March 31, 2025. The prior year period included a $64.5 million gain on the sale of the Global Pump Solutions business. Excluding this gain, the decrease in operating income is primarily attributable to costs associated with the proposed Thermon transaction, partially offset by higher gross profit and lower selling and administrative costs.

Non-GAAP operating income was $17.9 million for the three months ended March 31, 2026 compared with $8.6 million for the three months ended March 31, 2025. Non-GAAP operating income as a percentage of sales increased to 8.7% for the three months ended March 31, 2026 from 4.9% for the three months ended March 31, 2025.

Interest expense decreased to $4.2 million in the three months ended March 31, 2026 compared with interest expense of $6.2 million for the three months ended March 31, 2025. The decrease in interest expense is primarily due to a decrease in the average outstanding debt balance and lower interest rates.

Income tax benefit was $3.5 million for the three months ended March 31, 2026 compared with income tax expense of $18.6 million for the three months ended March 31, 2025. The effective income tax rate for the three months ended March 31, 2026 was (93.4% ) compared with 33.8% for the three months ended March 31, 2025. Our effective tax rate is affected by certain other permanent differences, including transaction costs, state income taxes, non-deduc

[Excerpt truncated for page length; source filing is linked above.]

## Latest 10-K MD&A

Extracted from Item 7 to the first post-MD&A boundary after HTML sanitization.
Confidence: high

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis (“MD&A”) should be read in conjunction with the consolidated financial statements and accompanying notes included in Item 8 of this Annual Report on Form 10-K, which include additional information about our accounting policies, practices and the transactions underlying our financial results. The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts in our consolidated financial statements and the accompanying notes including various claims and contingencies related to lawsuits, taxes, environmental and other matters arising during the normal course of business. We apply our best judgment, our knowledge of existing facts and circumstances and actions that we may undertake in the future in determining the estimates that affect our consolidated financial statements. We evaluate our estimates on an ongoing basis using our historical experience, as well as other factors we believe appropriate under the circumstances, such as current economic conditions, and adjust or revise our estimates as circumstances change. As future events and their effects cannot be determined with precision, actual results may differ from these estimates.

Overview

Business Overview

CECO is an 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. We help companies grow their business with safe, clean, and more efficient solutions that help protect people, the environment and industrial equipment. Our solutions improve air and water quality, optimize emissions management, and increase the energy and process efficiency for highly engineered applications in power generation, midstream and downstream hydrocarbon processing and transport, chemical processing, electric vehicle production, polysilicon fabrication, semiconductor and electronics production, battery production and recycling, specialty metals, aluminum and steel production, beverage can manufacturing, and industrial and produced water and wastewater treatment, and a wide range of other industrial end markets.

Industry Trends and Corporate Strategy

We are a global corporation with worldwide operations. As a global business, our operations are affected by worldwide, regional and industry-specific economic factors, wherever we operate or do business. Our geographic and industry diversity, and the breadth of our product and services portfolio, have helped mitigate the impact of any one industry or the economy of any single country on our consolidated operating results.

We believe growth for our 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 our customers about corporate social responsibility and interest to procure equipment and solutions that protects employees, the environment and their industrial equipment.

With a shift to cleaner, more environmentally responsible power generation, power providers and industrial power consumers are building new facilities that use cleaner fuels. In developed markets, natural gas is the largest source of electricity generation. We supply product offerings throughout the entire natural gas value chain and believe expansion will drive growth within our Engineered Systems segment for our gas separation & filtration, pressure products, acoustical equipment , water treatment solutions and DeNOx selective catalytic reduction ("SCR") systems for natural-gas-fired power plants. Increases in global natural gas, installed miles of new pipeline, including future CO2 and hydrogen pipelines, and liquified natural gas demand and supply all stand to drive the need for our products.

We also believe there is a growing demand to control and reduce air and water emissions from industrial facilities for which our pollution control equipment will serve. In 2021, the US Congress passed the Infrastructure Investment and Jobs Act with $550 billion of new federal spending aimed at rebuilding roads and bridges, climate resilience, and other environmental initiatives. Similar investments are being made in many other countries in which we do business. As industrial capital expenditures grow, corporations are seeking to do so with a smaller environmental impact. These regulatory and economic tailwinds coupled with shareholder pressure on companies to improve their sustainability and reduce their global carbon footprint serve as catalysts for a growing set of opportunities for our portfolio of equipment and solutions.

We continue to focus on increasing revenues and profitability in developing markets, where environmental awareness and associated regulatory standards are increasing, while continuing to strengthen and expand our product offerings and channels in our domestic market of the United States. Our enterprise strategy consists of a combined operational strategy and capital allocation strategy.

28

Our operational strategy is implemented through our technology and application-based platforms aligned around target customers and end markets where our solutions are particularly valuable. Core elements of our operational strategy are commercial and operational excellence, margin expansion, recurring revenue growth, cash flow generation, product management, and project management execution.

Our capital allocation strategy supports the growth and value creation generated by our operational strategy. We will focus our capital deployment on building out our leading industrial air solutions portfolio, advancing our emerging industrial water treatment position, and supporting our customers as they make the transition to cleaner more sustainable forms of energy, while also shifting our portfolio mix towards businesses with more recurring revenue and more predictable cash flows, strong secular growth trends and less cyclicality. While the primary focuses of our capital allocation strategy is organic growth and portfolio management, the Company closely monitors its leverage and debt repayment strategies.

Market Pressures

The senior management team monitors and manages the Company's ability to operate effectively as the result of market pressures. Against the current backdrop of a rapidly evolving global commercial environment, we believe we are comparatively well-positioned as we execute and manufacture a majority of our business in the same regions in which we sell, with our cost and revenue bases largely aligned as a result. Recently, international trade has been impacted by geopolitical tariff considerations. To mitigate potential tariff-related impacts, we have worked strategically with customers and suppliers to optimize terms and pricing, sourcing locations, and logistics routes and schedules. While we will continue to take a proactive approach on our efforts to mitigate the impacts of tariffs, our business and results could be adversely affected by further policy developments. We could experience shortages of raw materials and additional inflationary pressures for certain materials and labor. We have secured raw materials from existing and alternate suppliers and have taken other mitigating actions to mitigate supply disruptions; however, we cannot guarantee that we will be able to continue to do so in the future. If we are unable to continue to mitigate the effects of these supply disruptions and/or inflationary pressures, our business, results and financial condition could be affected.

Recent Developments

Proposed Transaction with Thermon Group Holdings, Inc.

On February 23, 2026, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Longhorn Merger Sub, Inc. and Longhorn Merger Sub LLC, each a direct wholly owned subsidiary of the Company (together, the “Merger Subs”), and Thermon Group Holdings, Inc. (“Thermon”), pursuant to which CECO will acquire Thermon in a cash and stock transaction. The acquisition will be effected pursuant to a two-step merger transaction as contemplated by the Merger Agreement (the “Merger”). The consummation of the Merger is subject to the satisfaction or waiver of customary closing conditions, including, among others, approval by the Company’s stockholders and Thermon’s stockholders, the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the effectiveness of a registration statement on Form S-4 to be filed by the Company, and other customary regulatory approvals and conditions.

We expect to fund any cash portion of the Merger Consideration and related transaction costs with available cash and borrowings under our existing and/or committed credit facilities. We expect to incur significant costs in connection with the transaction, including legal, accounting, financial advisory and other expenses, and additional costs may be incurred in connection with integration planning and execution. For a description of risks related to the proposed transaction, see "Part I—Item 1A. Risk Factors—Risks Related to the Proposed Transaction with Thermon Group Holdings, Inc." and for additional details regarding the proposed transaction, see Note 17 to the Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K.

Operations Overview

Our segments consist of like end-market and end-market adjacent platforms. Our platforms are structured to win in their target markets with a core focus on understanding customer needs and providing best-in-class solutions. Our business model provides scalable efficiencies enabling us to serve our customers with a variety of products that we typically classify into three categories: make-to-order, configure-to-order, and engineer-to-order. For our project-based platforms, we leverage third-party subcontract fabrication partners in a global network to execute for our customers world-wide. Our platforms are focused on sales, application engineering, product management, project management, and supply chain execution for our customers.

Our operations management team has distinct industry expertise coupled with strong leadership skills resulting in a customer-first mindset across the business. Our operations management team works closely with our Chief Executive Officer on global fulfillment strategies, operational excellence, resource allocation, and employee development.

29

Within our segments, we have monthly business reviews to ensure we are serving customers, achieving our operating plan, and executing on strategic growth initiatives. These reviews include, but are not limited to pipeline reviews, quotation reviews, project management reviews, financial performance, manufacturing scorecards, safety, and customer feedback. In these reviews we focus on metrics such as quality, customer satisfaction, on-time-delivery, lead-times, price, inflation, project margins, backlog, and above all, safety.

In support of the segments, centralized teams provide back-office functions for scale, efficiency, and compliance. These key functions include: accounting, treasury, tax, payroll, human resources and total rewards management, legal, information technology, marketing, and internal control over financial reporting. We have excellent collaboration between our segments and our centralized service teams ensuring optimal efficiency and alignment on growth and improvement initiatives.

Our reportable segments are:

•
Engineered Systems segment: Our 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. We seek to address the global demand for contaminant removal and environmental protection solutions with its highly engineered platforms including emissions management, fluid bed cyclones, thermal acoustics, separation and filtration, and dampers and expansion joints.

•
Industrial Process Solutions segment: Our 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. We assist our customers in maintaining clean and safe operations for employees, reducing energy consumption, minimizing waste for customers, and meeting regulatory standards for toxic emissions, fumes, volatile organic compounds, and odor elimination through its platforms including duct fabrication and installation, industrial air, and fluid handling.

Our contracts are obtained either through customer upselling based on our leading brands and significant install base, competitive bidding or as a result of negotiations with our customers. Contract terms offered by us are generally dependent on the complexity and risk of the project as well as the resources that will be required to complete the project. Our focus is on increasing our operating margins as well as our gross margin percentage, which translates into stronger operating results.

Our cost of sales is principally driven by a number of factors, including material and subcontract prices and labor cost and availability. Changes in these factors may have a material impact on our overall gross profit margins.

We break down costs of sales into five categories, as follows:

•
Subcontracts: Electrical work, concrete work, subcomponents and other subcontracts necessary to produce our products;

•
Labor: Our direct labor both in the shop and in the field;

•
Material: Raw materials that we buy to build our products, fans, motors, control panels and other equipment necessary for turnkey systems; and

•
Factory overhead: Costs of facilities and supervision wages necessary to produce our products.

In general, subcontracts are the highest percentage of costs and also the most flexible followed by labor, material, and equipment. Due to the project nature and global orientation of several of our platforms, leveraging subcontract fabrication partners close to our customers increases our ability to meet customer delivery expectations at market competitive pricing. In periods where orders are infrequent, we do not have to maintain the fixed cost of a manufacturing plant. Across our various product lines, the relative relationships of these cost categories change and cause variations in gross margin percentage. Material and labor costs can increase quickly, which also reduces gross margin percentage. As material cost inflation occurs, we seek to pass this cost onto our customers as price increases.

Selling and administrative expense principally includes sales and engineering payroll and related fringes, advertising and marketing expenditures as well as all corporate and administrative functions and other costs that support our operations. Variable compensation based on the Company’s performance is included in selling and administrative expense. An advantage of our operating model is that as revenue grows, we have significant operating leverage on our fixed selling and administrative cost structure.

30

Note Regarding Use of Non-GAAP Financial Measures

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These GAAP financial statements include certain charges the Company believes are not indicative of its core ongoing operational performance.

As a result, the Company provides financial information in this MD&A that was not prepared in accordance with GAAP and should not be considered as an alternative to the information prepared in accordance with GAAP. We believe these non-GAAP measures are useful to investors and management in evaluating the Company's ongoing financial performance, and the Company believes they provide greater transparency to investors as supplemental information to its GAAP results.

The Company has provided the non-GAAP financial measures including non-GAAP operating income, non-GAAP operating margin, and non-GAAP net income as a result of adjustments for items that the Company believes are not indicative of its ongoing operations. These items include charges associated with the Company’s acquisitions, divestiture, and the items described below in “Consolidated Results.” The Company believes that these items are not necessarily indicative of the Company’s ongoing operations and their exclusion provides individuals with additional information to better compare the Company's results over multiple periods. The Company utilizes this information to evaluate its ongoing financial performance. The Company has incurred substantial expense and income associated with acquisitions. While the Company cannot predict the exact timing or amounts of such charges, it does expect to treat the financial impact of these transactions as special items in its future presentation of non-GAAP results.

Results of Operations

Consolidated Results

Our consolidated statements of income for the years ended December 31, 2025, 2024 and 2023 are as follows:

Year ended December 31,

(in millions)

2025

2024

2023

Net sales

$

774.4

$

557.9

$

544.8

Cost of goods sold

505.2

361.8

373.8

Gross profit

$

269.2

$

196.1

$

171.0

Percent of sales

34.8

%

35.1

%

31.4

%

Selling and administrative expenses

$

200.8

$

146.7

$

122.9

Percent of sales

25.9

%

26.3

%

22.6

%

Amortization expenses

$

16.1

$

8.7

$

7.4

Acquisition and integration expenses

9.5

4.2

2.5

Gain on sale of Global Pump Solutions business

(63.7

)

—

—

Other operating expense

0.6

1.0

3.6

Operating income

$

105.9

$

35.5

$

34.6

Percent of sales

13.7

%

6.3

%

6.4

%

Other expense (income)

$

2.1

$

4.7

$

(0.4

)

Interest expense

20.9

13.0

13.4

Income before income taxes

$

82.9

$

17.7

$

21.5

Income tax expense

29.7

3.3

7.0

Net income

$

53.2

$

14.4

$

14.5

Noncontrolling interest

3.1

1.5

1.6

Net income attributable to CECO Environmental Corp.

$

50.1

$

13.0

$

12.9

31

Non-GAAP Measures

To compare operating performance between the years ended December 31, 2025, 2024 and 2023 the Company has adjusted GAAP operating income to exclude (1) amortization of intangible assets, (2) acquisition and integration expenses, which include legal, accounting, and other expenses, (3) gain on the sale of the Global Pump Solutions business, and (4) other non-recurring expenses, including fair value adjustment of earn-out liabilities from the acquisitions of WK Group, restructuring expenses primarily relating to severance, facility exits, and associated legal expenses, asbestos litigation expenses relating to future settlement payments, and third party professional consulting fees associated with Enterprise Resource Planning system implementations. See “Note Regarding Use of Non-GAAP Financial Measures” above. The following tables present the reconciliation of GAAP operating income and GAAP operating margin to non-GAAP operating income and non-GAAP operating margin, and GAAP net income to non-GAAP net income.

Year ended December 31,

(in millions)

2025

2024

2023

Operating income as reported in accordance with GAAP

$

105.9

$

35.5

$

34.6

Operating margin in accordance with GAAP

13.7

%

6.3

%

6.4

%

Amortization expenses

16.1

8.7

7.4

Acquisition and integration expenses

9.5

4.2

2.5

Gain on sale of Global Pump Solutions business

(63.7

)

—

—

Other operating expense

0.6

1.0

3.6

Non-GAAP operating income

$

68.4

$

49.4

$

48.1

Non-GAAP operating margin

8.8

%

8.9

%

8.8

%

Year ended December 31,

(in millions)

2025

2024

2023

Net income as reported in accordance with GAAP

$

50.1

$

13.0

$

12.9

Net income as a percentage of sales

6.5

%

2.3

%

2.4

%

Amortization expenses

$

16.1

$

8.7

$

7.4

Acquisition and integration expenses

9.5

4.2

2.5

Gain on sale of Global Pump Solutions business

(63.7

)

—

—

Other operating expense

0.6

1.0

3.6

Foreign currency remeasurement

2.3

4.3

(1.0

)

Tax expense (benefit) of adjustments

17.7

(4.6

)

1.2

Non-GAAP net income

$

32.6

$

26.7

$

26.6

Non-GAAP net income as a percentage of sales

4.2

%

4.8

%

4.9

%

32

Comparison of the years ended December 31, 2025 and 2024

Consolidated net sales in 2025 were $774.4 million compared with $557.9 million in 2024, an increase of $216.5 million or 38.8%. The increase was primarily driven by the Company’s Engineered Systems segment. Within Engineered Systems, net sales increased across all product families with notable growth in filter separators, coalescers, and combustion and SCR systems. Approximately $129.4 million of net sales is attributable to acquisitions that occurred during the preceding twelve-month period.

Gross profit increased by $73.1 million, or 37.3%, to $269.2 million in 2025 compared with $196.1 million in 2024. The increase in gross profit was attributable to the volume growth described above. Gross profit as a percentage of sales decreased to 34.8% in 2025 compared with 35.1% in 2024. The decrease in gross profit as a percentage of sales was driven by subcontractor and materials cost, partially offset by the Company's ability to leverage volume expansion to reduce internal labor and overhead costs in relation to sales.

Selling and administrative expenses were $200.7 million in 2025 compared with $146.7 million in 2024, an increase of $54.0 million, or 36.8%. The increase is primarily attributed to higher headcount to support the Company’s growth and strategic initiatives. The increase in cost was primarily realized through salaries and wages, benefits, stock compensation, incentive payments, and commissions. Approximately 49% of the increase relates to incremental selling and administrative expense incurred at the businesses acquired in 2024 and 2025.

Amortization expenses were $16.1 million in 2025 and $8.7 million in 2024, an increase of $7.4 million, or 85.1%. The increase in expense is attributable to an increase in definite lived asset amortization due to recent acquisitions.

Acquisitions and integration expenses related to various merger and acquisition diligence activities, which include legal, accounting and banking expenses, were $9.5 million in 2025, as compared with $4.2 million in 2024, an increase of $5.3 million, or 126.2%. The increase is due to the timing and volume of acquisition activity. See Note 14 to the Consolidated Financial Statements for further discussion on recent acquisitions.

Other operating expense for the year ended December 31, 2025 was $0.6 million in 2025, a decrease of $0.4 million, or 40%, compared with $1.0 million in 2024. The change was driven by $2.1 million related to the transfer of the pension plan as part of the sale of the Global Pump Solutions business, an increase in executive transition expenses of $1.3 million and an increase in asbestos-related litigation expenses of $1.1 million, related to expected future settlement payments, offset by $(6.6) million related to the fair value adjustment to the WK Group earnout in 2025. Executive transition expenses in 2025 related to severance, executive search fees, and other costs associated with executive officer transitions.

Operating income for 2025 was $105.9 million, an increase of $70.4 million from $35.5 million in 2024. Operating income as a percentage of sales for 2025 was 13.7% compared with 6.3% for 2024. The increase was primarily attributable to higher gross profit, partially offset by higher selling and administrative expenses and acquisition and integration expenses, as well as the gain on the sale of the Company’s GPS business.

Non-GAAP operating income was $68.4 million in 2025, an increase of $19.1 million from $49.4 million in 2024. The increase in non-GAAP operating income is primarily attributable to the increase in gross profit, partially offset by higher selling and administrative costs. Non-GAAP operating income as a percentage of sales was 8.8% for 2025 compared with 8.8% for 2024.

Other income for 2025 was $2.1 million compared to other expense of $4.7 million in 2024, a decrease of $2.6 million. The decrease in other income (expense) was primarily attributable to net foreign currency transaction losses in the current year based on changes in exchange rates at our foreign subsidiaries.

Interest expense was $20.9 million in 2025 compared to $13.0 million in 2024, an increase of $7.9 million, or 60.8%. The increase in interest expense is primarily due to a higher average outstanding debt balance throughout 2025.

Income tax expense was $29.7 million in 2025 compared to $3.3 million in 2024, an increase of $26.4 million, or 800.0%. The effective tax rate for 2025 was 35.9% compared with 18.5% in 2024. Income tax expense and the effective tax rate for 2025 were affected by the sale of the Global Pump Solutions business, changes in valuation allowances, and the net impact of global intangible low-taxed income and foreign-derived intangible income, as well as certain permanent differences including state income taxes, non-deductible incentive stock-based compensation, and differences in tax rates among the jurisdictions in which we operate.

33

Orders booked were $1,064.3 million in 2025 compared with $667.3 million in 2024, an increase of $397.0 million, or 59.5%. Of this $397.0 million increase, $267.2 million represents organic growth, as defined as the change in orders excluding the impact of orders recorded in the twelve month period subsequent to acquisition dates and orders from the GPS business, while $129.8 million of orders were attributable to acquisitions that occurred during the preceding twelve-month period. The Engineered Systems segment drove the majority of the year-over-year growth as nearly all product families realized higher bookings than in the prior period. Higher bookings in emissions management and thermal acoustics were driven by market demand to support the ongoing energy super-cycle in the United States. The company’s largest booking occurred in the fourth quarter of 2025, which exceeded $135 million; this order is for a comprehensive emissions management solution to support a large-scale Texas-based natural gas power generation facility. Additionally, filtration and water treatment packages bookings were higher year-over-year, notably in international markets.

Comparison of the years ended December 31, 2024 and 2023

See the Management Discussion and Analysis section of our Annual Report on Form 10-K for the year ended December 31, 2024 for a discussion of our consolidated results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023, which information is incorporated by reference herein.

Business Segments

The Company’s operations are organized and reviewed by management along its product lines and end markets that the segment serves and are presented in two reportable segments. The results of the segments are reviewed through segment profit, which represents income from operations as adjusted for certain items.

Net sales by segment for the years ended December 31 were as follows:

(in thousands)

2025

2024

2023

Engineered Systems Segment

$

544,298

$

384,025

$

380,108

Industrial Process Solutions Segment

230,083

173,908

164,737

Total net sales

$

774,381

$

557,933

$

544,845

Segment profit by segment for the years ended December 31 were as follows:

(in thousands)

2025

2024

2023

Engineered Systems segment

$

111,834

$

79,137

$

65,625

Industrial Process Solutions segment

101,140

32,323

25,306

Segment profit

$

212,974

$

111,460

$

90,931

Comparison of the years ended December 31, 2025 and 2024

Engineered Systems segment

Our Engineered Systems segment net sales increased $160.3 million to $544.3 million in 2025 compared with $384.0 million in 2024, an increase of 41.7%. The increase in net sales year-over-year was seen in all product families with notable growth in filter separators, coalescers, and combustion and SCR systems. Approximately $62.7 million of net sales in 2025 is attributable to acquisitions that occurred during the preceding twelve-month period.

Segment profit for the Engineered Systems segment increased $32.7 million to $111.8 million in 2025 compared with $79.1 million in 2024, an increase of 41.3%. The increase in operating income is primarily attributable to higher gross profit margin, driven by sales volume as described above.

Our Engineered Systems segment orders booked increased $315.2 million, or 62.9%, to $816.1 million in 2025 compared with $500.9 million in 2024. Higher orders in emissions management and thermal acoustics were driven by market demand to support the ongoing energy super-cycle in the United States. The company’s largest order occurred in the fourth quarter of 2025, which exceeded $135 million; this order is for a comprehensive emissions management solution to support a large-scale Texas-based natural gas power generation facility. Additionally, filtration and water treatment packages orders were higher year-over-year, notably in international

34

markets. Orders for the company’s products in oil markets experienced year-over-year contraction. Approximately $61.6 million of orders in 2025 are attributable to acquisitions that occurred during the preceding twelve-month period. These orders are attributable to the company’s combustion management product line.

Industrial Process Solutions segment

Our Industrial Process Solutions segment net sales increased $56.2 million to $230.1 million in 2025 compared with $173.9 million in 2024, an increase of 32.3%. The increase is primarily attributable to the Company’s acquisitions of Verantis and WK and the divestiture of its Fluid Handling business. Approximately $66.6 million of net sales in 2025 is attributable to acquisitions that have occurred during the preceding twelve-month period.

Segment profit for the Industrial Process segment increased $68.8 million to $101.1 million in 2025 compared with $32.3 million in 2024. The increase in operating income was primarily attributable to higher sales volume. Gross profit margins decreased year over year, driven by the divestiture of the higher-margin Fluid Handling business and project mix, primarily within the Company’s ducting business. Margin performance reflects these portfolio changes and project mix impacts.

Our Industrial Process Solutions segment orders booked increased $81.9 million, or 49.2%, to $248.2 million in 2025 compared with $166.3 million in 2024. The increase was primarily attributable to the Company’s acquisitions of Verantis and WK, which occurred in late 2024, partially offset by the divestiture of the Fluid Handling business. In addition, the Industrial Process Solutions segment experienced higher bookings related to regenerative thermal oxidizers and scrubber technologies. Approximately $42.9 million of orders in 2025 are attributable to acquisitions that occurred during the preceding twelve month period, offset by the impact of the divestiture of its Fluid Handling business.

Comparison of the years ended December 31, 2024 and 2023

See the Management Discussion and Analysis section of our Annual Report on Form 10-K for the year ended December 31, 2024 for a discussion of business segment results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023, which information is incorporated by reference herein.

Liquidity and Capital Resources

When we undertake large jobs, our working capital objective is to make these projects self-funding. We work to achieve this by obtaining initial down payments, progress billing contracts, when possible, utilizing extended payment terms from material suppliers, and paying sub-contractors after payment from our customers, which is an industry practice. Our investment in net working capital is funded by cash flow from operations and by our revolving line of credit.

At December 31, 2025, the Company had working capital of $104.4 million, compared with $86.3 million at December 31, 2024. The ratio of current assets to current liabilities was 1.34 to 1.00 at December 31, 2025 as compared with a ratio of 1.35 to 1.00 at December 31, 2024.

At December 31, 2025 and 2024, cash and cash equivalents totaled $33.1 million and $37.8 million, respectively. As of December 31, 2025 and 2024, $26.4 million and $29.7 million, respectively, of our cash and cash equivalents were held by foreign subsidiaries, as well as being denominated in foreign currencies.

Debt consisted of the following:

December 31,

(in thousands)

2025

2024

Outstanding borrowings under Credit Facility

Revolving Credit Facility

$

208,600

$

214,200

Total outstanding borrowings under the Credit Facility

208,600

214,200

Outstanding borrowings under the joint venture term debt

5,647

7,297

Unamortized debt discount

(1,809

)

(2,617

)

Total outstanding borrowings

212,438

218,880

   Less: current portion

(1,879

)

(1,650

)

Total debt, less current portion

$

210,559

$

217,230

In 2025, the Company made repayments of $1.7 million on the joint venture term debt, with net borrowings of $5.6 million on the revolving credit line.

35

Credit Facility

The Company's outstanding borrowings in the United States consist of a senior secured term loan and a senior secured revolver loan with sub-facilities for letters of credit, swing-line loans and multi-currency loans (collectively, the "Credit Facility").

On October 30, 2023, the Company entered into Amendment No. 4 to the Second Amended and Restated Credit Agreement. Pursuant to this amendment, the lenders provided an additional term loan in the aggregate principal amount of $75.0 million.

On October 7, 2024, the Company entered into the Third Amended and Restated Credit Agreement. This agreement provides for a senior secured revolving credit facility in an initial aggregate principal amount of up to $400.0 million.

On January 30, 2026, the Company entered into the Fourth Amended and Restated Credit Agreement. This agreement provides for a senior secured revolving credit facility in an initial aggregate principal amount of up to $700.0 million.

Under the terms of the Credit Facility, the Company is required to maintain certain financial covenants. At December 31, 2025, this included the maintenance of a Consolidated Net Leverage Ratio not greater than 4.00 to 1.00, a Consolidated Secured Net Leverage Ratio not greater than 3.00 to 1.00, and a Consolidated Fixed Charge Coverage Ratio not less than 1.25 to 1.00. With the Fourth Amended and Restated Credit Agreement, this includes the maintenance of a Consolidated Net Leverage Ratio not greater than 4.00 to 1.00, a Consolidated Secured Net Leverage Ratio not greater than 3.00 to 1.00, and a Consolidated Fixed Charge Coverage Ratio of not less than 1.25 to 1.00.

As of December 31, 2025 and 2024, the Company was in compliance with all related financial and other restrictive covenants under the Credit Facility.

Joint Venture Debt

On March 7, 2022, the Company's Pinnacle Processes Inc. (formerly known as Effox-Flextor-Mader, Inc.) joint venture ("PPI JV") entered into a loan agreement secured by the assets of the PPI JV in the aggregate principal amount of $11.0 million for the acquisition of General Rubber, LLC.

Foreign Debt

In addition, the Company has a number of bank guarantee facilities and bilateral lines of credit in various foreign countries currently supported by cash, letters of credit or pledged assets and collateral under the Credit Facility. The Credit Facility allows letters of credit and bank guarantee issuances of up to $65.0 million from the bilateral lines of credit secured by pledged assets and collateral under the Credit Facility.

See Note 8 to the Consolidated Financial Statements for further information on the Company’s debt facilities.

Total unused credit availability under our Credit Facility and other non-U.S. credit facilities and agreements, exclusive of any potential asset base limitations, was as follows:

December 31,

2025

2024

(in millions)

Credit Facility, revolving loans

$

400.0

$

400.0

Draw down

(208.6

)

(214.2

)

Letters of credit open

(23.8

)

(18.9

)

Total unused credit availability

$

167.6

$

166.9

Amount available based on borrowing limitations

$

123.6

$

1.0

36

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. See Note 8 to the Consolidated Financial Statements for further information.

Overview of Cash Flows and Liquidity

Year ended December 31,

(in thousands)

2025

2024

2023

Total operating cash flow provided by operating activities

$

5,861

$

24,828

$

44,647

Net cash used in investing activities

(1,076

)

(105,312

)

(56,486

)

Net cash (used in) provided by financing activities

(11,558

)

65,910

21,144

Effect of exchange rate changes on cash and cash equivalents

1,798

(2,673

)

(442

)

Net (decrease) increase in cash, cash equivalents and restricted cash

$

(4,974

)

$

(17,247

)

$

8,863

Operating Activities

In 2025, $5.9 million of cash was provided by operating activities compared with $24.8 million provided by operating activities in 2024, a decrease of $18.9 million. The decrease in 2025 was primarily driven by unfavorable changes in net working capital, particularly increased costs on uncompleted contracts and higher prepaid expenses, partially offset by increased customer billings and improved collections on accounts receivable.

In 2024, $24.8 million of cash was provided by operating activities compared with $44.6 million provided by operating activities in 2023, a decrease of $19.8 million. Cash flow from operating activities in 2024 had an unfavorable impact year-over-year primarily due to changes in net working capital.

Investing Activities

In 2025, $1.1 million of cash was used in investing activities, which consisted of $97.6 million for acquisitions, driven by the first quarter acquisition of Profire Energy and $11.3 million for acquisition of property and equipment, offset by $108.8 million in cash proceeds from the sale of the Global Pump Solutions business in the first quarter.

In 2024, $105.3 million of cash was used in investing activities, which consisted of $87.9 million for acquisitions including the third quarter acquisition of EnviroCare and fourth quarter acquisitions of WK Group and Verantis, as well as $17.4 million for acquisition of property and equipment.

Financing Activities

Financing activities in 2025 used cash of $11.6 million, which consisted primarily of $7.8 million of net payments under the Credit Facility, using the cash proceeds from the sale of the Global Pump Solutions business, as well as $1.6 million of distributions to non-controlling interests and $2.8 million of deferred consideration for acquisitions.

Financing activities in 2024 provided cash of $65.9 million, which consisted primarily of $82.9 million of net borrowings under the Credit Facility, used to finance current year acquisitions. This was partially offset by $5.0 million for the repurchase and retirement of our common stock, $2.2 million relating to equity compensation, inclusive of awards surrendered for tax liabilities, proceeds from employee stock purchase plan and exercise of stock options, $2.1 million in distributions to non-controlling interest, $2.1 million of deferred consideration for acquisitions, $1.9 million of financing fees, $2.8 million of earnout payments, and $0.9 million in payments on our capital leases.

Our primary sources of liquidity are cash generated from operations and borrowing availability under the Credit Facility. We believe that cash flows from operating activities, together with our existing cash and borrowings available under our Credit Facility, will be sufficient for at least the next twelve months to fund our current anticipated uses of cash, inclusive of the cash portion of the Merger Consideration and transaction fees incurred as part of the Thermon proposed transaction. After that, our ability to fund these expected uses of cash and to comply with the financial covenants under our debt agreements will depend on the results of future operations, performance and cash flow. Our ability to fund these expected uses from the results of future operations will be subject to prevailing economic conditions and to financial, business, regulatory, legislative and other factors, many of which are beyond our control.

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Our material cash requirements included debt repayments with respect to our Credit Facility and joint venture term debt, interest expense, purchase obligations for costs associated with uncompleted sales contracts, operating and capital lease obligations and contingent liabilities related to acquisitions, including earnout liabilities and retention payments.

We are party to many contractual obligations involving commitments to make payments to third parties, and such commitments require a material amount of cash. The following table summarizes the Company’s material cash requirements from known contractual obligations as of December 31, 2025:

Payments Due by Period

(in thousands)

Total

Less than 1

year

1-3 years

3-5 years

More than

5 years

Term Loan Debt, including joint venture debt

$

5,647

$

1,879

$

3,768

$

—

$

—

Revolving Credit Loan

208,600

—

—

208,600

—

Interest expense (estimated)

47,494

13,789

33,705

—

—

Purchase obligations (1)

136,294

136,294

—

—

—

Operating lease obligations

36,195

7,417

12,494

7,656

8,628

   Totals

$

434,230

$

159,379

$

49,967

$

216,256

$

8,628

(1)
Primarily consists of purchase obligations for costs associated with uncompleted sales contracts.

Critical Accounting Estimates

Our consolidated financial statements are prepared in conformity with GAAP. Preparation of the consolidated financial statements in accordance with GAAP requires management to make estimates, judgments and assumptions affecting the reported amounts of assets, liabilities, revenues and expenses and related contingent liabilities. Critical accounting estimates or assumptions are those where the nature of the estimates or assumptions is material given the level of subjectivity and judgment necessary to account for uncertain matters, and the potential impact of the estimates and assumptions on financial condition or operating performance is material. We consider the estimates discussed below to be critical to the understanding of our financial statements. Actual results may differ from our estimates and assumptions, and any such differences could be material to our consolidated financial statements.

Revenue Recognition

A substantial portion of our revenue is derived from fixed-price contracts. We account for a contract after it has been approved by all parties to the arrangement, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

We recognize revenue as performance obligations are satisfied. A significant amount of our revenue is recognized over a period of time as we perform under the contract because control of the work in process transfers continuously to the customer. For performance obligations to deliver products with continuous transfer of control to the customer, revenue is recognized based on the extent of progress towards completion of the performance obligation. Progress is measured based on the ratio of costs incurred to date to the total estimated costs to complete the performance obligation. For these contracts, the cost-to-cost measure best depicts the continuous transfer of goods or services to the customer.

The judgments and estimates involved include management’s ability to accurately estimate the contracts’ progress to completion at each financial reporting period. In addition, certain contracts are highly dependent on the work of contractors and other subcontractors participating in a project, over which we have no or limited control, and their performance on such project could have an adverse effect on the profitability of our contracts. Delays resulting from these contractors and subcontractors, changes in the scope of the project, weather, and labor availability also can have an effect on a contract’s profitability. Changes to job performance, job conditions, and estimated profitability may result in revisions to contract revenue and costs and are recognized in the period in which the revisions are made.

Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. No provision for estimated losses on uncompleted contracts was needed at December 31, 2025, 2024 and 2023.

Inventories

The Company’s inventories are valued at the lower of cost or net realizable value. Cost is determined on a first-in, first-out or average cost basis. Inventory quantities are regularly reviewed and provisions for excess or obsolete inventory are recorded primarily based on

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our forecast of future demand and market conditions. Significant unanticipated changes to forecasts could require a change in the provision for excess or obsolete inventory.

Long-lived Assets

We complete an impairment assessment of the Company's long-lived assets, including property and equipment, right-of-use assets, and finite-lived intangible assets, whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. If such indicators exist, we compare the carrying amount of the asset group to the estimated undiscounted future cash flows expected to result from the use and eventual disposition of the asset group. If the carrying amount exceeds the undiscounted cash flows, an impairment loss is recognized based on the excess of the carrying amount over fair value.

During 2025, 2024, and 2023, we recognized no impairment charges related to long-lived assets. For additional information on impairment testing results, see Note 6 to the Consolidated Financial Statements.

Additionally, we review the remaining useful lives of assets to determine whether events and circumstances warrant a revision to the remaining period of depreciation or amortization. If the estimate of a long-lived asset’s remaining useful life is changed, the remaining carrying amount of the asset is depreciated/amortized prospectively over that revised remaining useful life.

Goodwill and Indefinite-lived Intangible Assets

We complete an impairment assessment annually in the fourth quarter or more often as circumstances require, of goodwill and indefinite-lived intangible assets on a reporting unit level, at or below the operating segment level. As a part of the annual assessment, we first qualitatively assesses whether current events or changes in circumstances lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If there is a qualitative determination that the fair value of a particular reporting unit is more likely than not greater than its carrying value, we do not need to quantitatively test for goodwill impairment for that reporting unit. If this qualitative assessment indicates a more likely than not potential that the asset may be impaired, the estimated fair value is determined using a weighting of the income method and the market method. If the estimated fair value of a reporting unit is less than its carrying value, an impairment charge is recorded.

During 2025, 2024, and 2023, our annual impairment assessment indicated no impairment of goodwill. Accordingly, we recognized no impairment charges in our financial results for the years ended December 31, 2025, 2024, and 2023. For additional information on impairment testing results, see Note 6 to the Consolidated Financial Statements.

Income Taxes

Income taxes are determined using the asset and liability method of accounting for income taxes in accordance with Financial Accounting Standards Board, Accounting Standards Codification Topic 740, “Income Taxes.” Income tax expense includes federal, state and foreign income taxes.

Deferred income taxes are provided using the asset and liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases and are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Tax credits and other incentives reduce income tax expense in the year the credits are claimed.

Management must assess the need to accrue or disclose uncertain tax positions for proposed potential adjustments from various federal, state and foreign tax authorities who regularly audit the Company in the normal course of business. In making these assessments, management must often analyze complex tax laws of multiple jurisdictions, including many foreign jurisdictions. The accounting guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. We record the related interest expense and penalties, if any, as tax expense in the tax provision.

Management must assess the realizability of the Company’s deferred tax assets. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carry forward periods), projected future taxable income, and tax-planning strategies in making this

39

assessment. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

The Company has made an accounting policy election to record the U.S. income tax effect of future global intangible low-taxed income (“GILTI”) inclusions in the period in which they arise, rather than establishing deferred taxes with respect to the expected future tax liabilities associated with future GILTI inclusion.

Certain of the Company’s undistributed earnings of its foreign subsidiaries are not permanently reinvested. A liability has been recorded for the deferred taxes on such undistributed foreign earnings. The amount is attributable primarily to the foreign withholding taxes that would become payable should the Company repatriate cash held in its foreign operations.

On July 4, 2025, the legislation HR-1, known as One Big Beautiful Bill Act (the "Act") was enacted, with tax changes phased in from 2025 to 2027, including the limitation on deductibility of interest expense, the capitalization of research expenditures, the allowance of immediate expensing of capital expenditures, and the taxation of foreign earnings. The Company recorded the impact of the Act in the third quarter of 2025, including the election to fully accelerate all domestic Section 174 expensing into 2025 and claim bonus depreciation, which reduced cash paid for taxes in 2025. Based on our current profile, we do not expect the Act's changes to the taxation of foreign earnings to have a material impact on our results in future periods when effective.

Other significant accounting policies

Other significant accounting policies, not involving the same level of uncertainties as those discussed above, are nevertheless important to an understanding of our financial statements. See Note 1 to the Consolidated Financial Statements, Summary of Significant Accounting Policies, which discusses accounting policies that must be selected by us when there are acceptable alternatives.

New Accounting Pronouncements

For information regarding recent accounting pronouncements, see Note 1 to the Consolidated Financial Statements included in this annual report on Form 10-K.