CECO ENVIRONMENTAL CORP

Previous wording

The Company’s Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2025 and 2024 reflect the consolidated operations of the Company and its subsidiaries.

Current wording

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.

Previous wording

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. Additionally, we are currently experiencing shortages of raw materials and 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.

Current wording

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.

Previous wording

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 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.

Current wording

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.

Previous wording

Our Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2025 and 2024 are as follows:

Current wording

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

Previous wording

To compare operating performance between the three and nine months ended September 30, 2025 and 2024, 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 as discussed in Note 16, 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.

Current wording

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.

Previous wording

Amortization expense was $6.1 million for the three months ended September 30, 2025 compared with $2.2 million for the three months ended September 30, 2024. The increase in expense is attributable to increased intangible assets attributable to current and prior year acquisitions.

Current wording

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.

Previous wording

Operating income increased $65.2 million to $89.3 million for the nine months ended September 30, 2025 compared with operating income of $24.1 million for the nine months ended September 30, 2024. The increase in operating income is primarily attributable to the gain on the sale of the Global Pump Solutions business and fair value adjustment to the earn-out liability associated with the acquisition of WK Group, partially offset by the increase in selling and administrative expenses described above.

Current wording

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.

Previous wording

Non-GAAP operating income was $17.5 million for the three months ended September 30, 2025 compared with $11.0 million for the three months ended September 30, 2024. Non-GAAP operating income as a percentage of sales increased to 8.9% for the three months ended September 30, 2025 from 8.1% for the three months ended September 30, 2024.

Current wording

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.

Previous wording

Interest expense increased to $5.1 million in the three months ended September 30, 2025 compared with interest expense of $2.6 million for the three months ended September 30, 2024. The increase in interest expense is primarily due to increased debt balances.

Current wording

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.

Previous wording

Income tax expense was $0.5 million for the three months ended September 30, 2025 compared with income tax expense of $1.6 million for the three months ended September 30, 2024. Income tax expense was $23.6 million for the nine months ended September 30, 2025 compared with income tax expense of $2.7 million for the nine months ended September 30, 2024. The effective income tax rate for the three months ended September 30, 2025 was 21.1% compared with 38.7% for the three months ended September 30, 2024. The effective income tax rate for the nine months ended September 30, 2025 was 32.8% compared with 21.8% for the nine months ended September 30, 2024. The effective income tax rates for the three and nine months ended September 30, 2025 and September 30, 2024 differ from the United States federal statutory rate. Our effective tax rate is affected by other permanent differences, including the gain on the sale of the Global Pump Solutions business, state income taxes, non-deductible incentive stock-based compensation, and differences in tax rates among the jurisdictions in which we operate.

Current wording

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-deductible incentive stock-based compensation, and differences in tax rates among the jurisdictions in which we operate. The prior year period was also impacted by the gain on the sale of the Global Pump Solutions business.

Previous wording

The Company’s operations are organized as groups of similar products and services, and are presented in two reportable segments. The results of the segments are reviewed through “Income from operations” on the unaudited Condensed Consolidated Statements of Income.

Current wording

serves and are presented in two reportable segments. The results of the segments are reviewed through segment profit, which

Previous wording

Our Engineered Systems segment net sales increased $52.4 million to $143.7 million for the three months ended September 30, 2025 compared with $91.3 million for the three months ended September 30, 2024, inclusive of organic growth of 47%. The increase is led by backlog execution on large scale power projects and inorganic sales growth attributable to Profire.

Current wording

Our Engineered Systems segment net sales increased $30.1 million to $150.5 million for the three months ended March 31, 2026 compared with $120.4 million for the three months ended March 31, 2025. The increase is led by backlog execution on large scale power projects.

Previous wording

Operating income for the Engineered Systems segment increased $9.2 million to $25.0 million for the three months ended September 30, 2025 compared with $15.8 million for the three months ended September 30, 2024. The operating income increase is attributable to higher gross profit related to increased net sales, partially offset by an increase in selling and administrative expense.

Current wording

Segment profit for the Engineered Systems segment increased $7.0 million to $29.8 million for the three months ended March 31, 2026 compared with $22.8 million for the three months ended March 31, 2025. The operating income increase is attributable to higher gross profit related to increased net sales.

Previous wording

Backlog (i.e., unfulfilled or remaining performance obligations) represents the sales we expect to recognize for our products and services for which control has not yet transferred to the customer. Backlog increased to $719.6 million as of September 30, 2025, from $540.9 million as of December 31, 2024. Our customers may have the right to cancel a given order. Historically, cancellations have not been significant. Backlog is adjusted on a quarterly basis for adjustments in foreign currency exchange rates. Substantially all backlog is expected to be delivered within 12 to 30 months. Backlog is not defined by GAAP and our methodology for calculating backlog may not be consistent with methodologies used by other companies.

Current wording

Backlog (i.e., unfulfilled or remaining performance obligations) represents the sales we expect to recognize for our products and services for which control has not yet transferred to the customer. Backlog increased to $1,035.1 million as of March 31, 2026, from $793.1 million as of December 31, 2025. Our customers may have the right to cancel a given order. Historically, cancellations have not been significant. Backlog is adjusted on a quarterly basis for adjustments in foreign currency exchange rates. Substantially all backlog is expected to be delivered within 12 to 24 months, with a majority within 12 months. Backlog is not defined by GAAP and our methodology for calculating backlog may not be consistent with methodologies used by other companies.

Previous wording

When we undertake large jobs, our working capital objective is to make these projects self-funding. We work to achieve this by obtaining customer advanced payments, structuring our contracts with progress billing provisions, 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 working capital is funded by cash flows from operations and by our revolving line of credit under our Credit Facility (as defined below).

Current wording

When we undertake large jobs, our working capital objective is to make these projects self-funding. We work to achieve this by obtaining customer advanced payments, structuring our contracts with progress billing provisions, when possible, utilizing extended payment terms from material suppliers, and paying sub-contractors after payment from our customers, which is an industry practice.

Previous wording

At September 30, 2025, the Company had working capital of $97.2 million, compared with $86.3 million at December 31, 2024. The ratio of current assets to current liabilities was 1.33 to 1.00 on September 30, 2025, as compared with a ratio of 1.35 to 1.00 on December 31, 2024.

Current wording

At March 31, 2026, the Company had working capital of $133.4 million, compared with $104.4 million at December 31, 2025. The ratio of current assets to current liabilities was 1.33 to 1.00 on March 31, 2026, as compared with a ratio of 1.34 to 1.00 on December 31, 2025.

Previous wording

At September 30, 2025 and December 31, 2024, cash and cash equivalents totaled $32.8 million and $37.8 million, respectively. As of September 30, 2025 and December 31, 2024, $25.4 million and $29.7 million, respectively, of our cash and cash equivalents were held by certain foreign subsidiaries, as well as being denominated in foreign currencies.

Current wording

At March 31, 2026 and December 31, 2025, cash and cash equivalents totaled $45.4 million and $33.1 million, respectively. As of March 31, 2026 and December 31, 2025, $36.0 million and $26.4 million, respectively, of our cash and cash equivalents were held by certain foreign subsidiaries, as well as being denominated in foreign currencies.

Previous wording

Management believes there have been no changes during the nine months ended September 30, 2025 to the items that the Company disclosed as its critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

Current wording

Management believes there have been no changes during the three months ended March 31, 2026 to the items that the Company disclosed as its critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

Previous wording

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as amended, which are intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. Any statements contained in this Quarterly Report on Form 10-Q, other than statements of historical fact, including statements about management’s beliefs and expectations, are forward-looking statements and should be evaluated as such. These statements are made on the basis of management’s views and assumptions regarding future events and business performance. We use words such as “believe,” “expect,” “anticipate,” “intends,” “estimate,” “forecast,” “project,” “will,” “plan,” “should” and similar expressions to identify forward-looking statements. Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. Potential risks and uncertainties, among others, that could cause actual results to differ materially are discussed under “Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q and in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and include, but are not limited to:

Current wording

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as amended, which are intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. Any statements contained in this Quarterly Report on Form 10-Q, other than statements of historical fact, including statements about management’s beliefs and expectations or that otherwise address events, or developments that CECO expects, believes, or anticipates will or may occur in the future, are forward-looking statements and should be evaluated as such. These statements are made on the basis of management’s views and assumptions regarding future events and business performance. We use words such as “believe,” “expect,” “anticipate,” “intends,” “estimate,” “forecast,” “project,” “will,” “plan,” “should” and similar expressions to identify forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, statements regarding the proposed transaction with Thermon Group Holdings, Inc. (“Thermon”), pro forma descriptions of the combined company and its operations, integration and transition plans, synergies, opportunities and anticipated future performance. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. Potential risks and uncertainties, among others, that could cause actual results to differ materially are discussed under “Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q, in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, and in the Company’s Registration Statement on Form S-4 (File No. 333-294294), which was declared effective by the SEC on April 22, 2026, and include, but are not limited to:

Previous wording

the effect of recent acquisitions and the divestiture of our Fluid Handling Business (together, the “transactions”) on business relationships, operating results, and business generally, disruption of current plans and operations and potential difficulties in employee retention as a result of the transactions, diversion of management’s attention from ongoing business operations in connection with the integration of recent acquisitions, the amount of the costs, fees, expenses and other charges related to the transactions, the achievement of the anticipated benefits of transactions, our ability to successfully integrate acquired businesses and realize the synergies from acquisitions, as well as a number of factors related to our business, including the sensitivity of our business to economic and financial market conditions generally and economic conditions in CECO’s service areas;

Current wording

diversion of management's attention from ongoing business operations in connection with the proposed Thermon transaction and the integration of recent acquisitions;

Previous wording

dependence on fixed price contracts and the risks associated therewith, including actual costs exceeding estimates and method of accounting for revenue;

Current wording

dependence on fixed price contracts and the risks associated with the Thermon business, including actual costs exceeding estimates and method of accounting for revenue;

Previous wording

the potential for contract delay or cancellation as a result of on-going or worsening supply chain challenges, or other customer-driven project delays relating to supply chain challenges or other customer considerations;

Current wording

the potential for contract delay or cancellation as a result of on-going or worsening supply chain challenges, or other customer-driven project delays relating to supply chain challenges or other customer considerations, including those related to the conflict in the Middle East;

Previous wording

our ability to repurchase shares of our common stock and the amounts and timing of repurchases;

Current wording

our ability to repurchase shares of our common stock and the amounts and timing of repurchases, if any;

Previous wording

our ability to optimize our business portfolio by identifying acquisition targets, executing upon any strategic acquisitions or divestitures, integrating acquired businesses and realizing the synergies from strategic transactions; and

Current wording

our ability to optimize our business portfolio by identifying acquisition targets, executing upon any strategic acquisitions or divestitures, integrating acquired businesses and realizing the synergies from strategic transactions;

Previous wording

Many of these risks are beyond management’s ability to control or predict. Should one or more of these risks or uncertainties materialize, or should any related assumptions prove incorrect, actual results may vary in material aspects from those currently anticipated. Investors are cautioned not to place undue reliance on such forward-looking statements as they speak only to our views as of the date the statement is made. Except as required under the federal securities laws or the rules and regulations of the SEC, we undertake no obligation to update or review any forward-looking statements, whether as a result of new information, future events or otherwise.

Current wording

All forward-looking statements are based on assumptions that CECO believes to be reasonable but that may not prove to be accurate as many of these risks are beyond management’s ability to control or predict. Such forward-looking statements are based on assumptions and analyses made by management in light of their perceptions of current conditions, expected future developments, and other factors that management believe are appropriate under the circumstances. These statements are subject to a number of known and unknown risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should any related assumptions prove incorrect, actual results may vary in material aspects from those currently anticipated. Investors are cautioned not to place undue reliance on such forward-looking statements as they speak only to our views as of the date the statement is made. Except as required under the federal securities laws or the rules and regulations of the SEC, we undertake no obligation to update or review any forward-looking statements, whether as a result of new information, future events or otherwise.