CECO 10-K & 10-Q changes, risk factors and insider trading

An investment in our securities involves a high degree of risk. You should carefully consider the risk factors described below, together with the other information included in this Annual Report on Form 10-K, before you decide to invest in our securities. The risks described below are the material risks of which we are currently aware; however, they may not be the only risks that we may face. Additional risks and uncertainties not currently known to us or that we currently view as immaterial may also impair our business. Although the risks are organized by headings, and each risk is discussed separately, many are interrelated. If any of these risks develop into actual events, it could materially and adversely affect our business, financial condition, results of operationsoperations, and cash flows, and the trading price of your shares could declinedecline, and you may lose all or part of your investment.

The majority of our projects are currently performed on a fixed-price basis, while a limited number of projects are currently performed on a time and materials basis. Under a fixed-price contract, we agree on the price that we will receive for the entire project, based upon a defined scope, which includes specific assumptions and project criteria. If our estimates of the costs to complete the project are below the actual costs that we incur, our margins will decrease, or we may incur a loss. The revenue, cost and gross profit realized on a fixed-price contract will often vary from the estimated amounts because of unforeseen conditions or changes in job conditions and variations in labor and equipment productivity over the term of the contract. While our fixed-price contracts are typically not individually material to our operating results, ifIf we are unsuccessful in mitigating these risks, we may realize gross profits that are different from those originally estimated and incur reduced profitability or losses on projects. Depending on the size of a project, these variations from estimated contract performance could have a significant effect on our operating results. In general, turnkey contracts to be performed on a fixed-price basis involve an increased risk of significant variations. Generally, our contracts and projects vary in length, depending on the size and complexity of the project, project owner demands and other factors. The foregoing risks are exacerbated for projects with longer-term durations and the inherent difficulties in estimating costs and of the interrelationship of the integrated services to be provided under these contracts whereby unanticipated costs or delays in performing part of the contract can have compounding effects by increasing costs of performing other parts of the contract.

Contract revenue and total direct cost estimates are reviewed and revised periodically as the work progresses and as change orders are approved, and adjustments are reflected in contract revenue in the period when these estimates are revised. These estimates are based on management’s reasonable assumptions and our historical experience,experience and are only estimates. Variation of actual results from these assumptions, which are outside the control of management and can differ from our historical experience, could be material. To the extent that these adjustments result in an increase, a reduction or the elimination of previously reported contract revenue, we would recognize a credit or a charge against current earnings, which could be material.

Our backlog was $793.1 million at December 31, 2025, and $540.9 million at December 31, 2024 and $370.9 million at December 31, 2023.2024. Our ability to meet customer delivery schedules for our backlog is dependent on a number of factors including, but not limited to, access to the raw materials required for production, an adequately trained and capable workforce, project engineering expertise for certain large projects, sufficient internal manufacturing plant capacity, available subcontractorssubcontractors, and appropriate planning and scheduling of manufacturing resources. Our failure to deliver in accordance with customer expectations may result in damage to existing customer relationships and result in the loss of future business. Failure to deliver backlog in accordance with expectations could negatively impact our financial performance and cause adverse changes in the market price of our common stock.

We use a broad range of manufactured components and raw materials in our products, including raw steel, steel-related components, resin, filtration mediamedia, and equipment such as fans and motors. Materials, wageswages, and subcontracting costs comprise the largest components of our total costs, and increases in the price of these items could materially increase our operating costs and materially adversely affect our profit margins. Similarly, transportation, steel and health care costs have risen steadily over the past few years and could represent an increasing burden for us. Although we try to contain these costs whenever possible, and although we try to pass along increased costs in the form of price increases to our customers, we may be unsuccessful in doing so, and even when successful, the timing of such price increases may lag significantly behind our incurrence of higher costs.

Customers may cancel or delay projects for reasons beyond our control. Our orders normally contain cancellation provisions that permit us to recover our costs, and, for most contracts, a portion of our anticipated profit in the event a customer cancels an order. If a customer elects to cancel an order, we may not realize the full amount of revenues included in our backlog. If projects are delayed, the timing of our revenues could be affectedaffected, and projects may remain in our backlog for extended periods of time. Revenue recognition occurs over long periods of time and is subject to unanticipated delays. If we receive relatively large orders in any given quarter, fluctuations in the levels of our quarterly backlog can result because the backlog in that quarter may reach levels that may not be sustained in subsequent quarters. As a result, our backlog may not be indicative of our future revenues. With rare exceptions, we are not issued contracts until a customer is ready to start work on a project. Thus, it is our experience that the only relationship between the length of a project and the possibility that a project may be cancelled is simply the fact that there is more time involved. For example, in a year-long project as opposed to a three-month project, more time is available for the customer to experience a softening in its business, which may cause the customer to cancel a project.

An unsuccessful defense of a product liability or other claim could have an adverse effect on our financial condition, results of operations and cash flows. Even if we are successful in defending against a claim relating to our products, claims of this nature could cause our customers to lose confidence in our products and us.products.

Our products are generally sold under contracts that allow us to bill upon the completion of certain agreed uponagreed-upon milestones or upon actual shipment of the product, and certain contracts include a retention provision. We attempt to negotiate progress-billing milestones on all large contracts to help us manage the working capital and credit risk associated with these large contracts. Consequently, shifts in the billing terms of the contracts in our backlog from period to period can increase our requirement for working capital and can increase our exposure to credit risk.

As of December 31, 2024,2025, goodwill and indefinite lived intangibles were $279.2$297.9 million, or 36.8%,33.3%, of our total assets. Goodwill and indefinite lived intangible assets are not amortized, but instead are subject to annual impairment evaluationsevaluations, (or more frequently if circumstances require).require. Major factors that influence our evaluations are estimates for future revenue and expenses associated with the specific intangible asset or the reporting unit in which the goodwill resides. This is the most sensitive of our estimates related to our evaluations. Other factors considered in our evaluations include assumptions as to the business climate, industry and economic conditions. These assumptions are subjectivesubjective, and different estimates could have a significant impact on the results of our analyses. While management, based on current forecasts and outlooks, believes that the assumptions and estimates are reasonable, we can make no assurances that future actual operating results will be realized as planned and that there will not be material impairment charges as a result. In particular, an economic downturn could have a material adverse impact on our customers thereby forcing them to reduce or curtail doing business with us and such a result may materially affect the amount of cash flow generated by our future operations. Any write-down of goodwill or intangible assets resulting from future periodic evaluations could adversely materially impact our results of operations.

Our subsidiary,subsidiary Met-Pro,Met-Pro alongTechnologies withLLC numerous(“Met-Pro”), otherrelative thirdto parties,its former Dean Pump division, has been named as a defendant in asbestos-related lawsuits filed against a large number of industrial companies including, in particular, those in the pump and fluid handling industries. While we divested of the fluid handling business (also known as the Global Pump Solutions business) in the first quarter of 2025, we retained historical asbestos liabilities and the related legacy insurance policies. In management’s opinion, the complaints typically have been vague, general and speculative, alleging that Met-Pro, along with the numerous other defendants, sold unidentified asbestos-containing products and engaged in other related actions thatwhich caused injuries (including mesothelioma and death) and loss to the plaintiffs. The Company’sOur insurers have hired attorneys who, together with the Company,us, are vigorously defending these cases. TheMany Companycases believeshave been dismissed after the plaintiff fails to identify or produce evidence of exposure to Met-Pro’s products. In those cases, where evidence has been produced, our experience has been that the exposure levels are low and our position has been that its insuranceproducts coveragewere is adequate for the cases currently pending against the Company and for the foreseeable future, assumingnot a continuationcause of thedeath, currentinjury volume,or natureloss. We have been dismissed from a large number of casesthese andcases, settlementwith amounts.a However, the Company has no control over thesmall number and nature of casesthese thatdismissals areresulting filedin againstimmaterial it,settlements. nor as to the financial health of its insurers or their position as to coverage. The CompanyWe also presently believesbelieve that none of the pending cases will have a material adverse impact upon the Company’sour results of operations, liquidity or financial condition.

Concerns over the long-term impacts of climate change have led and will continue to lead to governmental efforts around the world to mitigate those impacts. Consumers and businesses also may change their behavior as a result of these concerns. We and our customers will need to respond to new laws and regulations as well as consumer and business preferences resulting from climate change concerns. We and our customers may face cost increases, asset value reductions and operating process changes. The impact on our customers will likely vary depending on their specific attributes, including reliance on or role in carbon intensive activities. Among the impacts toon us could be a drop in demand for our products and services, particularly in oil and gas industries. In addition, we could face reductions in our creditworthiness or in the value of our assets securing loans. Our efforts to take these risks into account in making business decisions, including by increasing our business with climate-friendly companies, may not be effective in protecting us from the negative impact of new laws and regulations or changes in consumer or business behavior.

Customer, investor and employee expectations relating to ESG have been rapidly evolving and increasing.evolving. In addition, certain government organizations are enhancing or advancing legal and regulatory requirements specific to ESG matters. The heightened stakeholder focus on ESG issues related to our business requires the continuous monitoring of various and evolving laws, regulations, standards and expectations and the associated reporting requirements. A failure to adequately meet stakeholder expectations may result in noncompliance, the loss of business, reputational impacts, diluted market valuation, an inability to attract customerscustomers, and an inability to attract and retain top talent. In addition, our adoption of certain standards or mandated compliance to certain requirements could necessitate additional investments that could impact our profitability.

Our future success depends upon the continued service of our executive officers and other key managementbusiness leaders and technical personnel, and on our ability to continue to identify, attract, retain and motivate them. Implementing our business strategy requires specialized engineering and other talent, as our revenues are highly dependent on technological and product innovations. The market for employees in our industry is extremely competitive, and competition for talent, particularly engineering talent, increasingly attempt to hire, and to varying degrees have been successful in hiring, our employees. If we are unable to attract and retain qualified employees, our business may be harmed.

Approximately 260250 of our approximately 1,6001,540 employees are represented by international or independent labor unions under various union contracts, which, for our covered employees in the United States, expireare betweenset Novemberto 12,renegotiate 2025collective andbargaining Mayagreements 1,in the first half of 2026. It is possible that our workforce will become more unionized in the future. Although we consider our employee relations to generally be good, our existing labor agreements may not prevent a strike or work stoppage at one or more of our facilities, which may have a material adverse effect on our business. Unionization activities could also increase our costs, which could have an adverse effect on our profitability.

We are highly dependent on information systems that are increasingly operated by third parties and as a result we have a limited ability to ensure their continued operation. We rely on information technology systems, networks and infrastructure in managing our day-to-day operations. In the event of systems failure or interruption, includingwhether thosecaused relatedby tonatural force majeure,disasters, telecommunications failures,outages, cyberattacks, criminal acts, including hardware or software break-ins or extortion attempts, or viruses, or other cybersecurity incidents, we willmay have limited ability to affectcontrol the timing and successeffectiveness of systemssystem restorationrestoration. Any resulting disruption to our operations could materially and anyadversely resulting interruption inaffect our abilitybusiness, tofinancial managecondition, and operate our business could have a material adverse effect on our operating results. Additionally, our vendors may incorporate artificial intelligence tools into their offerings, which may inhibit their ability to maintain an adequate levelresults of service and experience.operations.

Increased global information technology cybersecurity threats and more sophisticated and targeted computer crime, including utilization of generative artificial intelligence, pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data and communications. While we attempt to mitigate these risks by employing a number of measures, including employee training, comprehensive monitoring of our networks and systems, and maintenance of backup and protective systems, our systems, networks and products remain potentially vulnerable to advanced persistent threats. Depending on their nature and scope, such threats could potentially lead to the compromise of confidential information and communications, improper use of our systems and networks, manipulation and destruction of data, defective products, production downtimesdowntimes, and operational disruptions, which in turn could adversely affect our reputation, competitiveness and results of operations. We have cybersecurity insurance related to a breach event covering expenses for notification, credit monitoring, investigation, crisis management, public relations and legal advice. However, damage and claims arising from such incidents may not be covered or exceed the amount of any insurance available or may result in increased cybersecurity and other insurance premiums. In response to an increased reliance on our information technology systems, we have taken proactive measures to strengthen our information technology systems, including completion of a National Institute of Standards and Technology ("NIST") assessment, upgraded security patches across all servers, development of best-in-class hack protection service, implementation of recurring company-wide security training and enablement of advanced security for our major information systems. Management provides the Audit Committee with regular cybersecurity program updates including cybersecurity posture, risk management activities, and emerging risk.

We operate and do business in many countries in addition to the United States. For the year ended December 31, 2024,2025, approximately 33%34% of our total revenue was derived from products or services ultimately delivered or provided to end users outside the United States. As part of our operating strategy, we intend to expand our international operations through internal growth and selected acquisitions. Operations outside of the United States, particularly in emerging markets, are subject to a variety of risks that are different from or are in addition to the risks we face within the United States. Among others, these risks include: (i) local, economic, politicalpolitical, and social conditions, including potential hyperinflationary conditions and political instability in certain countries; (ii) tax-related risks, including the imposition of taxes and the lack of beneficial treaties, that result in a higher effective tax rate for us; (iii) imposition of limitations on the remittance of dividends and payments by foreign subsidiaries; (iv) difficulties in enforcing agreements and collecting receivables through certain foreign local systems; (v) domestic and foreign customs, tariffstariffs, and quotas or other trade barriers; (vi) risk of nationalization of private enterprises by foreign governments; (vii) managing and obtaining support and distribution channels for overseas operations; (viii) hiring and retaining qualified management personnel for our overseas operations; and (ix) the results of new trade agreements and changes in membership to international coalitions or unions.

The U.S. Foreign Corrupt Practices Act ("FCPA"), the U.K. Bribery Act of 2010 ("U.K. Bribery Act"), and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business. Our policies mandate compliance with these anti-bribery laws. We operate in many parts of the world that have experienced governmental corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. Despite our training and compliance programs, there is no assurance that our internal control policies and procedures will protect us from acts committed by our employees or agents. If we are found to be liable for FCPA, U.K. Bribery Act or other similar violationsviolations, (either due to our own acts or due to the acts of others),others, we could be subject to civil and criminal penalties or other sanctions, which could have a material adverse impact on our business, financial condition, and profits.

The stock market has experienced and may in the future experience volatility that has often been unrelated to the operating performance of particular companies. The market price of our common stock has experienced, and may continue to experience, substantial volatility. During 2024,2025, the sales price of our common stock on the NASDAQ ranged from $18.50$17.97 to $35.16$62.51 per share. We expect our common stock to continue to be subject to fluctuations. Broad market and industry factors may adversely affect the market price of our common stock, regardless of our actual operating performance. Factors that could cause fluctuation in the common stock price may include, among other things:

WeIf continuewe are unable to devoteremediate substantialthese timematerial andweaknesses, resourcesor to the documentation and testing of our controls, and to plan for and the implementation of remedial efforts in those instances where remediation is indicated. Ifif we fail to develop and maintain adequate internal controls in the adequacy of our internal controls,future, including remediating any material weaknesses or deficiencies in our internal controls, as such standards are modified, supplemented or amended in the future, we could be subject to regulatory actions, civil or criminal penalties or stockholder litigation. In addition, failure to maintain adequate internal controls could result in financial statements that do not accurately reflect our financial condition, results of operations and cash flows. We believe that the out-of-pocket costs, the diversion of management’smanagement's attention from running our day-to-day operations and operational changes caused by the need to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 will continue to be significant.

While we continue to take action to ensure compliance with the internal control, disclosure control and other requirements of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder by the SEC, there are inherent limitations in our ability to control all circumstances. Our management, including our Chief Executive Officer and Chief Financial and Strategy Officer, do not expect that our internal controls and disclosure controls can prevent all errors and all frauds. A control system, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints and the benefit of controls must be evaluated in relation to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Further, controls can be circumvented by individual acts of some persons, by collusion of two or more persons or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may be inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate. Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

If we are not able to establish and maintain effective internal control over financial reporting, including any failure to implement required new or improved controls, or if we experience difficulties in their implementation, our business, financial condition and operating results could be harmed. We can give no assurances that any additional material weaknesses will not arise in the future due to our failure to implement and maintain adequate internal control over financial reporting.

CECO is a leadingan 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.

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 ("LNG") demand and supply all stand to drive the need for our products.

The senior management team monitors and manages the Company’sCompany's ability to operate effectively as the result of market pressures. InAgainst particular,the current backdrop of a rapidly evolving global commercial environment, we believe we are currentlycomparatively experiencingwell-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 canwill be able to continue to do so in the future. InIf thiswe event,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.

Within our segmentssegments, 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 platformssegments and our centralized service teams ensuring optimal efficiency and alignment on growth and improvement initiatives.

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 vessels,naval, and midstreamnatural oilgas and natural gas liquids infrastructure, treatment and transport sectors. We seek to address the global demand for environmentalcontaminant removal and equipmentenvironmental protection solutions with ourits 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 air pollution and contamination control, fluidexhaust handling,air andtreatment, VOC abatement, process filtration and fluid handling in applications such as aluminum beverage can production, automobilevehicle production, food and beverage processing, semiconductor fabrication, electronics production, steel and aluminum millprocessing, engineered wood products manufacturing, chemical processing, woodgeneral manufacturing, desalination,manufacturing and aquaculturemachining, 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 ourits platforms including duct fabrication and installation, industrial air, and fluid handling.

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, thewe Company seeksseek to pass this cost onto our customers as price increases.

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. TheWe Companybelieve provides this supplementalthese non-GAAP financialmeasures information,are becauseuseful to investors and management in evaluating the Company’s management utilizes it to evaluate itsCompany's ongoing financial performanceperformance, and the Company believes itthey providesprovide 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 the adjustmentadjustments 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 evaluationthese 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 compared with prior and future periods can be enhanced by a presentation of results that exclude the impact of these items.performance. The Company has incurred substantial expense and generated substantial 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 chargestransactions as special items in its future presentation of non-GAAP results.

To compare operating performance between the years ended December 31, 2024,2025, 20232024 and 20222023 the Company has adjusted GAAP operating income to exclude (1) amortization of intangible assets, (2) acquisition and earnoutintegration expenses, which include legal, accounting, and other expenses, (23) 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, (3) acquisition and integration expenses, which include legal, accounting, and other expenses, (4) executive transition expenses, including severance for the Company's former executives, fees and expenses incurred in the search, for and hiring, of new executives and (5) asbestos litigation expenses relatedrelating to expected future settlement payments.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.

See the Management Discussion and Analysis section of our Annual Report on Form 10-K for the year ended December 31, 20232024 for a discussion of our consolidated results of operations for the year ended December 31, 20232024 compared to the year ended December 31, 2022.2023, which information is incorporated by reference herein.

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 thesegment “Incomeprofit, which represents income from operations” lineas onadjusted thefor Consolidatedcertain Statements of Income. The amounts presented in the Net Sales table below and in the following comments regarding our net sales at the reportable business segment level exclude both intra-segment and inter-segment net sales. The Income from Operations table and corresponding comments regarding operating income at the reportable segment level include both intra-segment and inter-segment operating income.items.

There have been no material changes in the Company’s risk factors that were disclosed in “Part I – Item 1A. Risk Factors” of the Company's Annual Report on Form 10-K for the year ended December 31, 20252025. The Company continues to evaluate and integrate Thermon’s operations, systems, controls, and personnel, and the risks associated with the integration are consistent with those described in the Company’s RegistrationAnnual StatementReport on Form S-410-K (File No. 333-294294), which was declared effective byfor the SECyear onended AprilDecember 22,31, 2026.2025.

The Company’s Condensed Consolidated Statements of Operations for the three and six months ended MarchJune 31,30, 2026 and 2025 reflect the consolidated operations of the Company and its subsidiaries.

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 CECOthe willparties acquireagreed to effect the merger transactions contemplated thereby. On June 1, 2026, the Company consummated the previously announced merger with Thermon in aaccordance cashwith andthe stock transaction. The consummationterms of the Merger isAgreement. subject to the satisfaction or waiver of customary closing conditions, including stockholder approvals and regulatory approvals. We expect to fund theThe cash portion of the merger consideration and related transaction costs were funded with available cash and borrowings under our existing credit facilities. For additional details, see Note 1514 to the unaudited condensed consolidated financial statements within Item 1 of this Quarterly Report on Form 10-Q. The acquisition of Thermon significantly impacts the comparability of the Company’s results of operations, financial condition, and cash flows for the three and six months ended June 30, 2026 compared to the corresponding prior-year periods.

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.

Our Condensed Consolidated Statements of Operations for the three and threesix months ended MarchJune 31,30, 2026 and 2025 are as follows:

To compare operating performance between the three and six months ended MarchJune 31,30, 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 16,15, and (4) other non-recurringexpenses, expenses,including restructuring expenses primarily relating to severance, facility exits, and associated legal expenses, asbestos litigation expenses relating to future settlement payments, executive transition expenses, purchase accounting inventory adjustments, and third party professional consulting fees associated with Enterprise Resource Planning system implementations.

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

Gross profit increased $1.7$19.4 million, or 2.7%,28.9%, to $63.9$86.5 million in the three months ended MarchJune 31,30, 2026 compared with $62.2$67.1 million in the three months ended MarchJune 31,30, 2025. The increase in gross profit wasis primarily attributable to higherthe increase in sales volume.volume as described above. Gross profit as a percentage of sales decreased to 31.0%30.3% in the three months ended MarchJune 31,30, 2026 compared with 35.2%36.2% in the three months ended MarchJune 31,30, 2025. The decrease wasis primarily attributable to project mix and the divestituretiming of project completions within the higher-marginpower Global Pump Solutions business in 2025, improved backlog conversion in international markets,generation and projectindustrial mix.solutions end markets. Adjusted gross profit margin was 33.7% for the three months ended June 30, 2026 and excludes acquisition-related costs associated with the Thermon acquisition.

AmortizationSelling expenseand wasadministrative $4.0expenses were $63.9 million for the three months ended MarchJune 31,30, 2026 compared with $3.1$48.8 million for the three months ended MarchJune 31,30, 2025. The increase inis expense isprimarily attributable to increasedselling intangibleand assetsadministrative attributableexpenses toassociated with the prior yearThermon acquisition.

AcquisitionSelling and integrationadministrative expenses were $10.3$110.0 million for the threesix months ended MarchJune 31,30, 2026 compared with $8.1$102.4 million for the threesix months ended MarchJune 31,30, 2025. The increase is drivenprimarily byattributable coststo incurredselling inand connectionadministrative expenses associated with the proposed Thermon transaction during the first quarter of 2026,acquisition, partially offset by lower selling and administrative expenses within the non-recurrenceIndustrial Process Solutions segment, primarily reflecting the absence of costs related to the ProfireGlobal acquisitionPump thatSolutions werebusiness incurredfollowing inits thedivestiture firston quarterMarch of31, 2025.

InterestAmortization expense decreasedwas to $4.2$11.8 million infor the threesix months ended MarchJune 31,30, 2026 compared with interest expense of $6.2$6.0 million for the threesix months ended MarchJune 31,30, 2025. The decreaseincrease in interest expense is primarily dueattributable to aincreased decreaseintangible inassets thefrom average outstanding debt balancecurrent and lowerprior interestyear rates.acquisitions.

OrdersOperating bookedincome weredecreased $449.5$51.3 million duringto $(33.2) million for the three months ended MarchJune 31,30, 2026 compared with $227.9operating income of $18.1 million infor the three months ended MarchJune 31,30, 2025, an increase of $221.6 million, or 98%.2025. The increasedecrease in operating income is primarily drivenattributable byto demand for the company’s emissionsacquisition and exhaustintegration systemsexpenses applicationsassociated thatwith support large scale natural gas power generation projects.Thermon.

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 twothree reportable segments. The results of the segments are reviewed through segment profit, which represents income from operations as adjusted for certain items.

Segment profit for theOur Engineered Systems segment net sales increased $7.0$45.2 million to $29.8$173.7 million for the three months ended MarchJune 31,30, 2026 compared with $22.8$128.5 million for the three months ended MarchJune 31,30, 2025.2025, inclusive of organic growth of 54.3%. The operating income increase is attributableled toby higherbacklog grossexecution profiton relatedlarge toscale increasednatural netgas sales.power generation projects.

Our Engineered Systems segment ordersnet bookedsales increased $220.1$75.3 million, or 135%,million to $383.0$324.2 million duringfor the threesix months ended MarchJune 31,30, 2026 compared with $162.9$248.9 million infor the threesix months ended MarchJune 31,30, 2025.2025, inclusive of organic growth of 48%. The increase is attributableled toby demandbacklog forexecution theon company’slarge emissions and exhaust systems technologies, supporting infrastructure projects inscale natural gas power generation.generation projects.

Our Industrial Process Solutions segment net sales decreasedincreased $0.9$4.8 million to $55.4$61.7 million for the three months ended MarchJune 31,30, 2026 compared with $56.3$56.9 million for the three months ended MarchJune 31,30, 2025.2025, inclusive of organic growth of 84%. The decreaseincrease is primarily attributable to the divestiture of the Global Pump Solutions business, nearly fully offset by backlogproject execution on industrialsemiconductor and industrial ducting applications.backlog.

Our Industrial Process Solutions segment ordersnet bookedsales increased $1.5$3.9 million, or 2%,million to $66.5$117.1 million duringfor the threesix months ended MarchJune 31,30, 2026 compared with $65.0$113.2 million infor the threesix months ended MarchJune 31,30, 2025.2025, inclusive of organic growth of 67%. The increase is primarily attributable to demandproject forexecution theon company’ssemiconductor scrubberand technology,industrial particularlyducting in international markets, partially offset by the divestiture of the Global Pump Solutions business.backlog.

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$1,819.1 million as of MarchJune 31,30, 2026, from $793.1 million as of December 31, 2025. Thermon contributed $262.0 million to our backlog figure as of June 30, 2026, with the remaining increase primarily attributable to our growing orders. 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.

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).

At MarchJune 31,30, 2026, the Company had working capital of $133.4$327.3 million, compared with $104.4 million at December 31, 2025. The ratio of current assets to current liabilities was 1.331.50 to 1.00 on MarchJune 31,30, 2026, as compared with a ratio of 1.34 to 1.00 on December 31, 2025.

At MarchJune 31,30, 2026 and December 31, 2025, cash and cash equivalents totaled $45.4$61.1 million and $33.1 million, respectively. As of MarchJune 31,30, 2026 and December 31, 2025, $36.0$49.1 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.

The Company’s outstanding borrowings in the United States consist of a senior secured revolver loan with sub-facilities for letters of credit, swing-line loans and multi-currency loans (collectively, the “Credit Facility”). As of MarchJune 31,30, 2026 and December 31, 2025, the Company was in compliance with all related financial and other restrictive covenants under the Credit Facility.

On January 30, 2026, the Company entered into the Fourth Amended and Restated Credit Agreement, which provided for a senior secured revolving credit facility in an initial aggregate principal amount of up to $700.0 million. On March 30, 2026, the Company entered into Amendment No. 1 to Fourth Amended and Restated Credit Agreement, which provides for a senior secured revolving credit facility in an initial aggregate principal amount of up to $740.0 million.million, and added an incremental senior secured delayed-draw term loan commitment in an initial aggregate principal amount of $235 million (the “Incremental Term A-1 Loan Facility”), subject only to the satisfaction or waiver of the related conditions precedent set forth in the Credit Agreement. On June 1, 2026, the Company borrowed $235.0 million on the Incremental Term A-1 Loan Facility.

The Company's available secured borrowing capacity under the Credit Facility is defined as the lower of (a) the Credit Facility amount less outstanding borrowings and Letters of Credit on the Credit Facility, and (b) the Company's trailing twelve month EBITDA, as defined in the Credit Agreement, by a factor of the maximum leverage ratio, less outstanding borrowings on the Credit Facility.

For the threesix months ended MarchJune 31,30, 2026, $13.1$32.4 million of cash was used in operating activities compared with $11.7$19.4 million used in operations in the prior year period, representing aan decrease of $1.4$13.1 million. TheCash decreaseflows from operating activities in the first six months of 2026 was primarily driven by unfavorable changeslower in net2026 working capital, which includes a substantial increase in accounts receivableprimarily due to longlarger durationinvestments projectsin foroperating emissionsassets managementand technologiesliabilities ascommensurate wellwith asgrowth timingin ofthe billings.business.

For the threesix months ended MarchJune 31,30, 2026, $34.6$509.0 million was provided by financing activities compared with $115.8$14.2 million provided by financing activities in the prior year period, for aan decreaseincrease of $81.1$494.9 million. The decrease is attributable to net borrowing activity in the periods. Net borrowing activity in the prior year periodincrease was driven by increased borrowings on the Company's Credit Facility, inclusive of the Incremental Term A-1 Loan Facility, to fund the cash consideration and other closing costs paid in connection with the acquisition of Profire.Thermon.

Management believes there have been no changes during the threesix months ended MarchJune 31,30, 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.

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 proposedintegration transaction withof Thermon Group Holdings, Inc. (“Thermon”), prowhich formawas acquired by the Company on June 1, 2026; the anticipated benefits and synergies of the Thermon acquisition; descriptions of the combined company and its operations,operations integrationfollowing andthe transition plans, synergies, opportunitiesacquisition; 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,10-Q and 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: