Ceco Environmental Corp 2026 Q2 Earnings Call

Please go ahead. Thank you, Glaiza, and thank you for joining us on the CECO Environmental second quarter 2026 earnings call.

On the call with me today are Todd Gleason, Chairman and Chief Executive Officer, and Peter Johansson, Chief Financial Officer. Our second quarter reported results include one full month of Thermon financial performance following the June 1 closing of the acquisition. Where appropriate today, we will distinguish between reported results and pro forma information. This will also be addressed in our full-year consolidated outlook by Todd. As a reminder, this quarter's webcast, earnings release, and presentation, which include relevant disclosures and non-GAAP reconciliations, are available on our website at www.cecoenviro.com. Today's discussion includes forward-looking statements that are subject to risks and uncertainties, including those described in our SEC filings and in the legal disclosures included in today's presentation.

As always, we will leave time at the end of the call for analyst questions. With that, I'll turn the call over to Todd.

Thanks, Marcio, and good day, everyone. Before we begin, I want to thank Team CECO, including our new Thermon colleagues, for delivering tremendous value to our customers and our teams, which has enabled us to deliver outstanding quarter. Let's review our Q2 performance, integration activities, our full-year outlook, and our view of markets and opportunities. Please turn to slide 3. Simply put, this was a record-setting quarter across the board. We delivered record orders of $799 million. Our quarter-ending backlog is over $1.8 billion. We generated revenue of $285 million and our adjusted EBITDA of approximately $40 million. Our reported revenue increased 54% year-over-year with continued strong double-digit organic revenue growth. Adjusted EBITDA increased 73% and margins expanded approximately 150 basis points to 14.1%, marking CECO's first quarter with mid-teen EBITDA margins.

We expect EBITDA margins to rise in coming quarters with the full positive impact of Thermon, our integration synergies, and ongoing double-digit top-line growth. Additionally, we expect this high-performance growth and profitability to be largely sustainable. Our sales pipeline now exceeds $8.5 billion. Our trailing 12-month book-to-bill is over 2, and we remain bullish on the order environment as we enter the second half. We have delivered double-digit revenue and earnings growth for many quarters in a row. With our year-to-date bookings, we have high confidence and visibility that this trend will continue into the foreseeable future. The Thermon integration is well underway and going extremely well. Culturally, it is a great fit. While work remains, we continue to advance the integration program and have a solid start on our synergies.

We have already captured approximately $13 million of annualized EBITDA savings in just the first 60 days and have identified early commercial wins across the combined portfolio. Marcio Pinto, who is leading our integration program, will give additional color on this in a minute. Given our strong first half execution, record backlog, and accelerating order momentum, we are raising our full year consolidated 2026 outlook. I will come back to guidance towards the end of the call. Now please turn to slide number 4. This slide provides a good illustration of the consistent high-performance growth engine we have built. Our sales pipeline has expanded from approximately $1.5 billion in 2021 to more than $8.5 billion that I just mentioned. The strategic investments we made in markets, talent, solutions, and commercial presence are translating directly into sustained strong order levels and growing backlog.

First quarter 2026 orders, as shown on the slide, were $449 million, up 97% year-over-year. Second quarter orders further accelerated to $799 million, up 191% year-over-year. For the first half of 2026, we have booked approximately $1.25 billion of new orders, up approximately 150% versus the first half of last year, which had been a record set of quarters at the time. Our 2026 performance has driven backlog to more than $1.8 billion, up 164% over last year.

As I already mentioned, but it is worth repeating, our trailing 12-month book-to-bill is over 2. We continue to see strong demand and customer activity across a broad range of end markets globally, including power generation, semiconductor and electronics, natural gas processing and infrastructure, industrial water, and industrial reshoring related projects, and with the addition of the Thermal Solutions to the portfolio, exciting opportunities within data centers. The power generation opportunity remains particularly robust, but what gives us confidence is the breadth of the pipeline across our end markets and geographies. It is always good to remind everyone that our backlog is firm and supported by legally binding purchase orders and project commitments with permits already obtained by our customers. As we mentioned in the slide, these are not speculative opportunities or reservations for future projects, but instead, ongoing programs.

This backlog gives us substantial visibility to continued revenue growth. It also increasingly contains higher margin projects that we have discussed over the past few quarters, which supports the expectation for continued margin expansion as we convert on this backlog. Marcio and I will now review some additional materials related to the Thermon integration, and then we will hand it over to Peter to cover additional insights on our financials.

Marcio? Thank you, Todd. Please turn to slide 6.

We closed the Thermon acquisition on June 1, and I am very pleased with the engagement our teams have demonstrated in the first 2 months as a combined company. All major work streams spanning from corporate G&A to operations and commercial areas are active, and the teams are moving quickly from planning into execution mode. Our integration management office has been established, and our governance program is now in place to act as an accelerator of value creation. As a result, we are progressing ahead of our synergy expectations. As Todd mentioned in our opening chart, in the first 60 days, we have captured approximately $13 million of annualized net adjusted EBITDA savings, already representing roughly a third of our $40 million target.

These savings are driven primarily by public company cost reductions around headcount, board, and public company-related services, as well as incremental actions across the organization, touching a number of sites and departments. We expect approximately $5 million of the annualized savings captured thus far to be realized in our 2026 adjusted EBITDA results and are also included in our current outlook. On a total cost synergy basis, we have captured about $19 million of annualized savings when added for stock compensation and other items that are generally not included in CECO's adjusted EBITDA. Also noted on the slide, we have incurred about $21 million of year-to-date costs to achieve these savings, primarily related to change in control provisions and accelerated equity vesting for former Thermon officers.

Looking forward, we expect to have approximately $17 million to $20 million of annualized net adjusted EBITDA savings captured by year one of the transaction, which would represent about 45%-50% of our total target as we continue to work towards the full opportunity set and deliver incremental value in all areas where the combined scale of CECO and Thermon creates opportunity. To conclude, after 60 days working with a talented team across multiple functions and geographies, the key takeaway is clear. The original target of $40 million in synergies remains firmly intact. Based on the current pace of execution, we have increasing confidence in our ability to deliver it. With that, I'll turn it back to Todd to discuss the commercial side of the combination.