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CECO Environmental FY Conference Summary Company Overview - **Company**: CECO Environmental (NasdaqGS:CECO) - **Date of Conference**: January 14, 2026 - **Key Speakers**: Todd Gleason (CEO), Marcio Pinto (VP of P&A and Investor Relations) Key Themes and Transformations - **Transformation Journey**: CECO has undergone significant transformation since mid-2020, focusing on operational efficiency and market expansion. The initial step involved delayering the organization to enhance focus on individual markets [9][10]. - **Market Expansion**: Sales in emerging markets have increased from $30 million to nearly $150 million, with a notable expansion in the number of vertical markets pursued [10]. - **M&A Strategy**: CECO has engaged in approximately 14 acquisitions over the last three and a half years, maintaining a healthy balance sheet with an average acquisition multiple of 7-8 times [16]. Financial Performance - **Revenue Growth**: CECO reported a revenue of over $1 billion, with a strong pipeline of $6 billion, indicating significant growth potential in the next 18 months [44][66]. - **Bookings**: The company achieved $300 million in order intake for the quarter, with expectations for large projects in power and industrial water sectors [37][44]. Industry Dynamics - **Power Generation**: CECO has positioned itself to benefit from the resurgence in power generation, particularly in natural gas infrastructure and emissions management solutions [21][24]. - **Industrial Water Market**: The industrial water sector is highly fragmented, and CECO aims to build a $200 million to $300 million platform through organic growth and acquisitions [15][56]. Strategic Focus Areas - **AI and Electrification**: CECO recognizes the importance of AI and electrification trends, particularly in power generation and data centers, and is preparing to capitalize on these opportunities [49][50]. - **Global Presence**: Approximately 50% of CECO's revenue is generated outside North America, with significant growth expected in international markets, particularly in industrial water [57][58]. Challenges and Opportunities - **Margin Management**: CECO is focused on improving EBITDA margins, which have been impacted by investments in growth and lower-margin projects. The company aims for mid- to high-teens EBITDA margins in the future [59][61]. - **Visibility and Guidance**: The company has strong visibility into its pipeline, with a commitment to providing annual guidance based on its robust order book and market knowledge [66][68]. Conclusion CECO Environmental is on a transformative path, leveraging its strengths in industrial air and water solutions while expanding its market presence through strategic acquisitions and investments. The company is well-positioned to capitalize on emerging trends in power generation and industrial water, with a strong focus on maintaining financial health and improving margins.

Core Viewpoint - CECO Environmental Corp. is actively participating in the 28th Annual Needham Growth Conference on January 14, 2026, showcasing its commitment to investor engagement and transparency [1]. Group 1: Company Overview - CECO Environmental is a diversified industrial company focused on environmentally friendly solutions, serving various industrial air, water, and energy transition markets globally [2]. - The company operates through key business segments: Engineered Systems and Industrial Process Solutions, providing innovative technology and application expertise [2]. - CECO's solutions aim to protect people, the environment, and industrial equipment, contributing to improved air quality and optimized energy value chains [2]. Group 2: Market Applications - CECO provides custom solutions for a wide range of applications, including power generation, petrochemical processing, refining, midstream gas transport and treatment, electric vehicle and battery production, and battery recycling [2]. - The company also addresses needs in metals and mineral processing, polysilicon production, beverage can production, and produced and oily water/wastewater treatment [2]. Group 3: Corporate Information - CECO Environmental is listed on Nasdaq under the ticker symbol "CECO" and was incorporated in 1966, with its global headquarters located in Addison, Texas [2].

Group 1 - Loomis Sayles Small Cap Value Fund reported a return of 6.21% in Q3 2025, underperforming the Russell 2000 Value Index which returned 12.60% [1] - The strong performance of US equities in Q3 was attributed to easing tariff concerns, a pro-growth budget from Congress, and expectations of further rate cuts by the Federal Reserve [1] - CECO Environmental Corp. (NASDAQ:CECO) was highlighted as a key stock in the fund, with a one-month return of 20.40% and a 52-week gain of 113.27% [2] Group 2 - CECO Environmental Corp. provides solutions for industrial air quality, water treatment, and energy transition, and was added to the fund in September 2023 during a turnaround phase [3] - The company has shown consistent improvement in its business through organic growth and acquisitions, with strong earnings and exceptional incoming orders reported in Q3 [3] - CECO's stock closed at $62.51 on December 24, 2025, with a market capitalization of $2.228 billion [2]

Core Insights - CECO Environmental Corp. has announced its largest order to date, exceeding $135 million, which includes a comprehensive emissions management solution for a Texas-based natural gas power generation facility [1] - The company expects full-year 2025 bookings to surpass $1 billion, with a record backlog approaching or exceeding $800 million [1] - CECO's sales pipeline is projected to exceed $6 billion by the end of 2025, indicating strong future growth potential [2] Company Performance - CECO has been recognized in Newsweek's America's Greatest Companies 2025 list and Forbes' 2026 America's Most Successful Small-Cap Companies, highlighting its commitment to delivering world-class solutions and sustainable growth [3] - The CEO emphasized the company's strong performance in the energy transition and power generation sectors, as well as its emerging leadership in international industrial water treatment markets [2] Market Position - CECO operates in various industrial sectors, including air and water quality improvement, emissions management, and energy efficiency, serving markets such as power generation, semiconductor production, and electric vehicle manufacturing [5] - The company is well-positioned to benefit from ongoing trends in natural gas infrastructure expansions, industrial reshoring, and electrification [2]

CECO Environmental FY Conference Summary Company Overview - **Company**: CECO Environmental (NasdaqGS:CECO) - **Industry**: Environmental solutions focusing on air, water, and energy transition - **CEO**: Todd Gleason, who has been in position since 2020 and has driven growth through organic means and acquisitions [1][3][5] Key Points and Arguments Business Model and Strategy - CECO's products address environmental challenges, focusing on employee safety, industrial equipment protection, and environmental conservation [5][6][7] - The company emphasizes its commitment to creating value for customers, employees, and shareholders, with a long-term vision towards 2030 [10][11] - CECO has a diverse product offering and geographical presence, with approximately 45% of sales outside the U.S. [12][13] Financial Performance and Growth - CECO has achieved a significant increase in its sales pipeline, growing from $1.5 billion to nearly $6 billion over the past few years [25][26] - The company anticipates a book-to-bill ratio of 1.2 for the current year, indicating a growth in orders exceeding sales by 20-30% [27][28] - Revenue guidance for the upcoming year is projected between $7.25 billion and $7.75 billion, with adjusted EBITDA expected to be between $90 million and $100 million [28][29] Market Position and Opportunities - CECO is positioned to capitalize on strong market demand in power, natural gas, and industrial water sectors, with significant growth expected in nuclear applications [31][32][33] - The company has made strategic acquisitions to enhance its capabilities in industrial water, projecting $100 million in sales for the upcoming year [33][34] - CECO's industrial air segment has shown steady double-digit growth due to its ability to pivot resources to various industries based on market demand [35][36] M&A Strategy - CECO has a history of making accretive acquisitions, with over a dozen completed since Todd Gleason's tenure began [14][23][54] - The company focuses on acquiring businesses that can achieve 20-30% growth in their first few years post-acquisition [14][15] - Recent acquisitions include Transcend, which enhances CECO's capabilities in separation filtration [54][56] Financial Health and Cash Flow - CECO maintains a healthy balance sheet and aims for free cash flow to be around 50-60% of adjusted EBITDA [60] - The company is opportunistic in its use of cash, prioritizing acquisitions and debt repayment over stock buybacks [61][63] Market Dynamics - CECO operates in a diverse industrial landscape, with varying performance across sectors; however, the overall outlook remains positive due to strong demand in energy and industrial markets [66][68] - The company has not observed significant project cancellations, indicating a stable pipeline despite economic fluctuations [69][70] Additional Insights - CECO's leadership emphasizes a long-term growth strategy, focusing on sustainable value creation and market leadership in niche industrial sectors [48][49] - The company is exploring potential rebranding to better align with its market positioning in power [20] This summary encapsulates the key insights from CECO Environmental's FY conference, highlighting the company's strategic direction, financial performance, market opportunities, and operational strategies.

Financial Performance & Outlook - CECO's Market Cap has increased by approximately 860% since 2021[9] - The company anticipates revenue between $850 million and $950 million in 2026, representing a 15% to 25% year-over-year increase[32] - Adjusted EBITDA is projected to be between $110 million and $130 million in 2026, a 20% to 40% year-over-year increase[32] - The company expects adjusted free cash flow to be 50%-60% of adjusted EBITDA in 2026[32] - CECO's Q3 2025 backlog reached $720 million, a 64% increase year-over-year[48] Growth & Strategy - CECO has averaged over 10% organic growth since 2021[13] - Approximately 50% of CECO's orders originate outside the U S[17] - The company's sales pipeline is approximately $5 8 billion[32] - CECO has deployed $15 million in stock buybacks since 2021, with an average price of approximately $8 20 per share[47] Market Positioning - Approximately 40% of CECO's business is in Industrial Air, 35% in Industrial Water, and 25% in Energy Transition[22]

Core Insights - CECO reported an EPS of $0.26 for Q3 2025, slightly below the Zacks Consensus Estimate of $0.27, indicating a negative surprise of 3.70%, but an improvement from $0.14 EPS in the same quarter last year [1][5] - The company's revenue for the quarter was $197.6 million, exceeding the Zacks Consensus Estimate by 4.26%, and significantly up from $135.51 million in the same period last year [2][5] - CECO's orders totaled $232.9 million, a 44% increase, with a backlog of $719.6 million, up by 64%, reflecting strong financial health and growth potential [3] - The gross profit margin was reported at 32.7%, with a gross profit of $64.6 million, up 43%, reinforcing a positive outlook for 2026 [3] - Financial metrics indicate a P/E ratio of 33.06, a price-to-sales ratio of 2.39, and a low debt-to-equity ratio of 0.08, demonstrating conservative debt usage [4] - CECO's current ratio of 1.33 indicates strong liquidity, ensuring the company can effectively meet short-term obligations [4]

Financial Performance - Net sales for Q3 2025 increased by $62.1 million, or 45.8%, to $197.6 million compared to Q3 2024, with organic growth of 35%[122] - Net sales for the nine months ended September 30, 2025 increased by $160.3 million, or 40.1%, to $559.7 million compared to the same period in 2024, with organic growth of 24%[123] - Orders booked increased by $70.6 million, or 44%, to $232.9 million in Q3 2025 compared to Q3 2024, with organic growth of 33%[120] - Gross profit for Q3 2025 increased by $19.3 million, or 42.6%, to $64.6 million, with a gross profit margin of 32.7%[124] - Operating income for Q3 2025 increased by $2.2 million to $9.4 million compared to Q3 2024, with an operating margin of 4.8%[130] - Non-GAAP operating income for Q3 2025 was $17.5 million, with a non-GAAP operating margin of 8.9%[132] - Total net sales for the three months ended September 30, 2025, were $197.6 million, a 46% increase from $135.5 million in 2024, and for the nine months ended September 30, 2025, net sales were $559.7 million, up 40% from $399.4 million in 2024[137] Expenses and Costs - Selling and administrative expenses for Q3 2025 were $47.0 million, up from $34.3 million in Q3 2024[126] - Amortization expense for Q3 2025 was $6.1 million, compared to $2.5 million in Q3 2024, due to increased intangible assets from acquisitions[128] - Interest expense increased to $5.1 million in Q3 2025 from $2.6 million in Q3 2024, primarily due to increased debt balances[134] - Interest expense increased to $16.2 million for the nine months ended September 30, 2025, compared to $9.3 million for the same period in 2024, primarily due to increased debt balances[135] - Income tax expense for the nine months ended September 30, 2025, was $23.6 million, up from $2.7 million in the same period in 2024, with an effective tax rate of 32.8% compared to 21.8% in 2024[136] Orders and Backlog - Engineered Systems segment orders booked increased by $239.9 million, or 74%, to $562.6 million for the nine months ended September 30, 2025, with organic growth of 73%[140] - Industrial Process Solutions segment orders booked increased by $46.7 million, or 37%, to $172.3 million for the nine months ended September 30, 2025, with organic growth of 7%[146] - Backlog increased to $719.6 million as of September 30, 2025, from $540.9 million as of December 31, 2024[151] Cash Flow and Debt - Cash and cash equivalents totaled $32.8 million as of September 30, 2025, down from $37.8 million at December 31, 2024[155] - Total outstanding borrowings increased to $220.9 million as of September 30, 2025, compared to $218.9 million at December 31, 2024[156] - Net cash used in operating activities was $4.1 million for the nine months ended September 30, 2025, compared to $23.0 million provided in the prior year period[162] - Net cash provided by investing activities was $1.5 million for the nine months ended September 30, 2025, compared to $26.2 million used in the prior year period, primarily due to the sale of the Global Pump Solutions business[163] - The carrying value of the Company's total long-term debt and current maturities of long-term debt at September 30, 2025, was $222.4 million[169] Market and Operational Risks - The company experienced shortages of raw materials and inflationary pressures, which could adversely affect future business results[115] - Market risk is primarily related to changes in interest rates, with no derivatives held for trading or speculative purposes[168] - The Company is exposed to risks associated with fixed price contracts, including actual costs exceeding estimates[169] - Future changes in foreign exchange rates may impact revenues, operating expenses, and earnings[171] - The Company faces potential challenges in expanding operations in new and existing markets due to supply chain issues[169] - The Company has incurred substantial debt related to strategic transactions, impacting its ability to repay or refinance[169] Transaction Gains and Losses - Transaction gains and losses included in "Other expense, net" were $2.0 million for the three months ended September 30, 2025, compared to $0.3 million for the same period in 2024[171] - For the nine months ended September 30, 2025, transaction gains and losses were $1.1 million, down from $1.9 million in the same period in 2024[171] Subsidiaries - The Company has wholly-owned subsidiaries in several countries, including the Netherlands, Canada, China, and the United Kingdom[171]

Financial Data and Key Metrics Changes - The company reported a record backlog of $720 million, up 64% year-over-year and 5% sequentially [14][15] - Quarterly revenue reached $198 million, marking a 46% increase year-over-year [15][16] - Adjusted EBITDA increased by 62% to $23.2 million, with adjusted EPS rising 86% to $0.26 [9][16] Business Line Data and Key Metrics Changes - The company achieved $233 million in new bookings, a 44% increase compared to Q3 2024, with a book-to-bill ratio of approximately 1.2 times [14][15] - The backlog has more than tripled since the end of 2021, with a year-to-date book-to-bill ratio of approximately 1.3 times [18][19] Market Data and Key Metrics Changes - The sales pipeline now exceeds $5.8 billion, indicating strong future growth potential [8][35] - The company is well-positioned in sectors such as power generation, industrial water, and natural gas infrastructure, with substantial orders expected in the coming quarters [11][12] Company Strategy and Development Direction - The company aims to exceed $1 billion in orders for 2026, with projected revenue between $850 million and $950 million, reflecting a year-over-year increase of 15% to 25% [30][31] - Continued focus on operational excellence and cost management initiatives, including the implementation of the 80/20 model, to enhance efficiency and margins [22][54] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about market dynamics, particularly in energy transition investments and industrial reshoring [28][29] - The company is closely monitoring potential challenges such as tariffs and inflation but believes it is well-prepared to navigate these issues [14][29] Other Important Information - The company has not announced any new M&A transactions since the sale of its global pump business and the acquisition of Profire Energy, but it is actively building its M&A pipeline [13][27] - Free cash flow for the quarter was approximately $19 million, with a year-to-date capital expenditure of about $8.7 million [23][24] Q&A Session Summary Question: Update on large projects in industrial water and power generation - Management indicated strong positioning for large projects, particularly in the Middle East and Asia, focusing on produced water and water reuse applications [39][40] Question: Visibility on 2026 outlook and potential for upward adjustments - Management expressed confidence in the $5.8 billion sales pipeline and noted that winning additional large projects could enhance the 2026 outlook [41][43] Question: Update on the power generation pipeline - Management reported a robust pipeline exceeding $1 billion, with ongoing positive discussions with major OEMs [47][48] Question: Confidence in targeted adjusted EBITDA margin expansion - Management outlined a three-pronged approach to margin expansion, focusing on volume growth, operational investments, and cost management initiatives [52][54] Question: Opportunities in disaggregated power solutions - Management noted limited opportunities depending on the type of power solutions being implemented, with potential for small format gas turbines [61] Question: Macroeconomic backdrop for 2026 guidance - Management indicated a stable macroeconomic environment, with no significant changes expected to impact the company's outlook [69][71] Question: Cross-selling opportunities with Profire Energy - Management highlighted ongoing discussions and initiatives to leverage Profire's offerings across a broader industrial customer base [72][75] Question: Confidence in Q4 bookings potentially being the largest ever - Management cited strong order performance and a record backlog as reasons for confidence in achieving significant bookings in Q4 [76][77]