Ceco Environmental Corp Q4 FY2025 Earnings Call

Thank you, Danielle, and thank you for joining us on the CECO Environmental Fourth Quarter 2025 Earnings Call. On the call with me today is Todd Gleason, Chief Executive Officer; and Peter Johansson, Chief Financial Officer. In today's call, we are covering CECO Environmental fourth quarter earnings results as well as the transaction that will combine CECO with Thermon, a publicly traded global leader and end-to-end solution provider to process heat, temperature management, and asset protection with a strong aftermarket presence. As a reminder, this quarter's webcast, earnings release, and presentation, which include relevant disclosures and non-GAAP reconciliations are available on our website. Today's discussion includes forward-looking statements that are subject to risks and uncertainties, including the ones described in our SEC filings, as we have also noted in our presentation legal disclosures. As always, we will leave time at the end of the call for analyst questions. And with that, I'll turn the call over to Todd.

Thanks, Marcio, and welcome, everyone. It is a pleasure to speak about two highlights today. We delivered a strong quarter and year and full-year results with many financial records. Importantly, we are also announcing a transformational transaction between CECO and Thermon. Please turn to Slide #4, and let's discuss each at a high level. On the left side of the slide, we outline the CECO, Thermon transaction. This is truly a combination of two proud and winning organizations. Each company is clicking on so many of the right cylinders. Together, we expect the union will create an even stronger global leader with enhanced financial agility and expanded strategic capabilities. When we close the transaction, we will continue to trade as CECO Environmental, and I am excited and very much looking forward to leading the future combined company and working closely with the outstanding leadership and employees at Thermon. More on this transaction in just a minute. Now turning to the right side of the slide. We delivered another strong quarter for CECO Environmental with full-year results for revenue and adjusted EBITDA largely in line with our final expectations. We are raising our full-year 2026 guidance, not inclusive of Thermon as we have tremendous visibility given our record backlog and growing sales pipeline. Now please turn to Slide #6, and let's review the financials in a little more detail. This executive summary slide captures the main points from today's financial earnings release. Q4 delivered numerous new records. Our backlog is at the highest level ever, approaching $800 million, up almost 50% year-over-year. Revenue growth of 35% and adjusted EBITDA growth of 57% speak to our high-performance results. In the quarter, we booked our largest ever project valued at approximately $135 million for a large-scale natural gas power generation facility based in Texas. For the full year, 2025 orders surpassed $1 billion for the first time, which we signaled we would likely accomplish in our December 15th, 2025 press release. As we shared in today's press release, we are raising our 2026 full-year guidance to reflect our tremendous visibility in backlog and that record sales pipeline I just mentioned. Our increased 2026 guidance reflects strong full-year orders growth as well as a full-year revenue outlook of between $925 million to $975 million, which is up from our previous outlook of $850 million to $950 million. Our full-year 2026 adjusted EBITDA outlook is now between $115 million to $135 million. So again, we feel we are clicking on many of the right cylinders. Now before I hand it over to Peter, let's move to Slide #7. We continue to enjoy a strong market backdrop in the power generation, industrial reshoring, industrial water, and natural gas infrastructure customer segments. In each of the past five quarters, we have booked orders in critical infrastructure projects to support domestic power generation and energy delivery investments and our pipeline indicates we have the opportunity to maintain that pace in 2026. In fact, we have already secured two large natural gas power generation orders exceeding $175 million in aggregate value at this point in Q1, and we have numerous similarly sized and larger opportunities in our current pipeline. We remain bullish on the industrial water and wastewater treatment sector, particularly the international water infrastructure projects where we now have our most active and largest pipeline of opportunities associated with water reuse and recycling applications. Industrial Air will continue to benefit from industrial reshoring programs, semiconductor investments, and our international expansion activities. As the slide shows, quarter-to-date on February 24, which is today, we have booked just over $270 million in orders. So we are well on pace for another record quarter and obviously, a great start to 2026. I will now hand it over to Peter, who will go into more detail on our financial results.

Thank you, Todd. Good day, everyone. Thank you for joining Todd and me for CECO's Fourth Quarter 2025 Earnings Call. Please turn to Slide #8. CECO finished 2025 with very strong results for both the fourth quarter and the full year across all our key metrics. We ended the fourth quarter with a record backlog of $793 million, a 47% increase compared to the previous year and a 10% increase sequentially. Backlog has grown for eight consecutive quarters and surged in the last five, with each quarter featuring over $200 million in bookings, particularly in power generation, LNG, midstream gas transport and treatment, global semiconductor, and international water markets. Fourth quarter orders reached $329 million, a record increase of 50% from the prior year, with a book-to-bill ratio of about 1.5 times. For the entire year, bookings totaled $1.064 billion, a 60% increase over 2024 levels, with a book-to-bill ratio of nearly 1.4 times. These results were primarily driven by robust demand in our power generation, natural gas infrastructure, semiconductor, and industrial water applications. We saw strength globally across all our major operating regions. Revenue in the fourth quarter and for the full year was $215 million and $774 million, respectively, both representing company records. For the full year, revenue grew by 39%, with 25% of this growth being organic. This achievement is particularly notable given that we faced $25 million in revenue challenges related to the sale of our global pump solutions business in late Q1 of 2025. Our second half revenue was up 40% compared to 2024, fueled by the acceleration of our power generation projects booked in late 2024 and 2025. Adjusted EBITDA for the quarter was $29.8 million, marking a 57% increase over the previous year, with margins at 13.9%, reflecting a 180 basis point improvement. For the full year, adjusted EBITDA grew by 44% to surpass $90 million for the first time in company history, with a margin expansion of 40 basis points. Much of the improvement came from a lower G&A expense rate, somewhat offset by $800,000 in costs associated with strategic reductions in our legal entities to support our accelerating ERP migration program and to finalize some integration steps from acquisitions made in 2024. Let’s turn to Page 9 for now. In this chart, we are presenting CECO's gross profit and gross margin performance by quarter on a trailing twelve-month basis to account for quarter-to-quarter fluctuations. We have started this chart at the point when CECO's operating excellence initiative was launched in Q4 of 2022, showcasing substantial improvement and steady performance around the 35% gross profit margin mark. This quarter, we saw margins rebound from Q3, exceeding the 35% target level, thanks to strong short-cycle volumes and effective project execution and closeouts. This sequential improvement was about 240 basis points, reflecting a typical recovery from third quarter seasonal challenges. Looking ahead to 2026, we will intensify our focus on sourcing and productivity while managing price and costs amidst an uncertain economic environment, additionally starting to see benefits from our initial wave of 80/20 deployments. This is a multi-year journey we’ve embarked on, which we expect will yield significant cost reductions and performance enhancements. I will now move more quickly through the next few slides to ensure we have enough time for this morning's announcement and for Q&A. Moving to Slide 10. For cash flow, 2025 was truly a tale of two halves, with the first half consuming roughly $20 million in cash and the second half generating about $30 million, resulting in a positive cash flow of approximately $10 million for the year, a 30% increase year-over-year. Our cash conversion in the second half was quite strong at 52%, fitting within our target range for cash flow conversion, and we anticipate maintaining this in 2026. Both gross debt and net debt ended the year lower than they began, with our leverage ratio comfortably positioned at 2.2x and liquidity rising to $124 million. With the reduction in leverage, the growth of trailing twelve-month EBITDA, and enhanced pricing from our recently concluded and upsized Revolver Credit Facility, we expect to benefit from a 50 basis point reduction in interest rates following a 25 basis point reduction realized in Q4. This will provide additional annualized interest expense savings of around $1.1 million if we retain the current gross debt balance. I will now move to Slides 11 and 12 and go through them quickly. On Slide 11, the book-to-bill ratio in the quarter of about 1.5 times, paired with record orders and revenues, is noteworthy. This sustained strong order performance, leading to a record year-end backlog, together with our $6.5 billion opportunity pipeline, supports our anticipated top-line growth of over 20% in 2026. Now moving to Slide 12. We have adjusted our outlook for all four key metrics, projecting revenue growth of 23% at the midpoint of our estimates and adjusted EBITDA growth of 38% at the midpoint. As Todd mentioned earlier, our visibility is exceptional due to our record backlog and the momentum in bookings, alongside a sales pipeline that now exceeds $6.5 billion and is converting rapidly. That concludes the earnings presentation part of our prepared remarks this morning. I will now turn the mic back over to Todd, who will guide us through the materials regarding the exciting strategic combination of CECO Environmental and Thermon.

Thanks, Peter. Let's now discuss an important transaction for CECO that marks a significant step in our industrial leadership journey. The addition of Thermon will greatly enhance CECO's leadership in industrial, environmental, and thermal solutions by incorporating Thermon's established expertise in process heating, heat tracing, and temperature management, creating a world-class industrial solutions platform. This merger combines two highly complementary businesses, offering opportunities to accelerate growth through broader customer relationships and global reach. Bruce and I are optimistic about the future of the combined company and our teams. I am eager to meet more of Thermon’s leaders and employees. Now, let's go over the key terms of the transaction. The agreement, which both companies’ Boards have unanimously approved, will be carried out via a stock and cash merger with a total value of about $2.2 billion. Thermon shareholders will receive $10 in cash and $0.684 of CECO common stock for each share, ensuring a significant premium while enabling them to benefit from the future growth of the combined company. The cash part will be financed through our existing credit facilities, indicating an implied value of around 17 times adjusted EBITDA or 13 times when including synergies. Upon completion, expected in mid-2026, CECO shareholders will own about 62.5% of the merged entity, while Thermon shareholders will hold about 37.5%. From a leadership standpoint, I will continue as CEO of the combined firm, and Thermon will designate two Board members for the new Board. Both leadership teams will remain intact during the pre-closing phase, and I look forward to collaborating with Thermon’s leaders and teams as we work to find the best model for the combined organization. We also highlight the pro forma financials for the merged companies, projecting revenues of approximately $1.5 billion and adjusted EBITDA of $295 million, factoring in about $40 million in potential synergies, which should yield margins in the lower 20s. From a financial perspective, we anticipate a robust balance sheet with a pro forma net leverage of 2.5 times, which will provide us with plenty of opportunities to invest in our workforce, processes, markets, and growth prospects. Thermon is a leading provider of process heating, temperature management, and asset protection solutions with a strong aftermarket presence. For this fiscal year, they project over $520 million in revenue, with around 85% of their sales categorized as operational expenditures, which CECO refers to as shorter cycle sales. Thermon has a gross profit margin of 45%, driven by their top-notch products and operational discipline. Currently, their adjusted EBITDA margins stand at approximately 23%. Turning to Thermon's solution offerings, they are a diversified leader in the industrial sector, similar to CECO, providing engineered solutions to address crucial environmental challenges. We are extremely excited to explore their innovations and growth strategies further. Both companies prioritize protecting individuals, the environment, and industrial equipment, making for an excellent partnership. Thermon's sales segmentation includes about half of their revenue from heat tracing, approximately 35% from heating systems, and around 15% from transport heating, tubing, and digital solutions. They've introduced several innovative solutions, like their Genesis controls and the newly launched Liquid Load Bank, which have gained significant traction. We are proud of what Thermon has accomplished, and we look forward to supporting their continued growth. This combination positions us as a leading global provider of essential environmental and thermal solutions. We view this merger as a strategic fit that strengthens our role as a premier engineered solutions provider. Again, this will enhance CECO's presence in industrial, environmental, and thermal solutions through Thermon's established expertise in process heating, heat tracing, and temperature management. We aim to build a world-class integrated industrial platform that leverages our combined 75 years of experience in installation and product delivery, resulting in increased high-margin recurring and replacement revenue. By merging, we will expand our addressable market to over $30 billion across high-growth sectors. Both companies align well with major industry trends such as electrification, energy transition, data centers, and water management. Thermon's recurring short-cycle business model complements CECO’s longer-cycle project approach. Financially, this deal is advantageous; even before factoring in synergies, it is accretive in the first year. With an anticipated $40 million in annualized synergies by year three, the merger will enhance shareholder value even further. We anticipate achieving strong double-digit growth and margin improvements through our productivity and efficiency programs. A crucial part of our transaction discussions has included shared values, cultures, and operating styles. We have come to know the Thermon team, and it is clear that they possess outstanding employees who share our core values. Our business culture emphasizes disciplined execution and innovative thinking, and I believe this alignment will facilitate a smooth integration process. In summary, this is a powerful merger that checks all the boxes: two successful Texas-based companies with aligned operating philosophies dedicated to serving our industrial clients effectively. I genuinely believe this collaboration will yield greater value together. Looking at CECO's projected financials, they paint a compelling picture. Including the anticipated $40 million in synergies, we see combined sales reaching $1.5 billion and adjusted EBITDA nearing $300 million with close to 20% EBITDA margins, positioning us for leadership in the industrial sector. Although we have substantial pre-integration work ahead, those identified synergies significantly enhance this accretive deal. These synergies stem from two main categories: costs related to merging the two public companies, tackling redundancies and efficiency savings, alongside operational efficiencies, rationalization of our footprint, and leveraging supply chains. While we indicate a third category for potential future commercial synergies, this is an avenue we will actively explore as our teams begin collaborating. We also have a global operational footprint, with the combined company operating in over 15 countries, incorporating engineering and manufacturing sites to support our worldwide customers. Our collective workforce will exceed 3,000 employees, including many skilled engineers and technical experts. Together, we have the capability to provide vital environmental and thermal solutions worldwide, addressing our customers' most pressing challenges. On the financial side, CECO's revenue primarily comes from mid- to longer cycle projects, with a portion from shorter cycle offerings, while Thermon generates most of its revenue from shorter cycle sales. This merger creates a balanced company regarding revenue cycles, offering the right blend of longer-cycle backlog work and steady shorter-cycle sales. I'm proud of the achievements we've made at CECO over the past five years. I have the privilege of leading a high-performing industrial organization that has consistently delivered strong results. Since 2022, both our growth and margin expansion have been impressive, alongside a strategic M&A program that has allowed us to enhance our operational portfolio significantly. This track record has generated substantial shareholder value, and we aim for our merger with Thermon to elevate that further. In conclusion, CECO's strong performance in recent years, combined with a strong outlook for 2026, along with Thermon's equally robust results, positions us for enhanced resilience and growth post-merger. The combination of CECO and Thermon will strengthen our financial profile, scale agility, and create powerful value from day one and beyond. I'm now happy to take your questions, and thank you for your attention.

Our first question will be from Aaron Spychalla of Craig-Hallum Capital Group.

Maybe first for me, you kind of talked about industrial water, just the most active and kind of largest pipeline that you've had there. Can you just kind of maybe frame that for us what that business is today and just some of the timelines and sizes and kind of what that opportunity looks like for you in the next couple of years?

Yes, thanks, Aaron. I'll begin, and then I'll let Peter provide some additional insights. We have been strategically building what we see as a very promising industrial water segment within CECO Environmental, both through organic growth and acquisitions. Over the past few years, we've successfully entered new markets in the U.S. and internationally. We currently have a significant pipeline of projects expected to materialize by 2026 in the areas of industrial water treatment and produced water, particularly in international markets linked to energy and heavy industries. As we assess the early months of this year and the remainder of the year, we foresee opportunities ranging from $10 million to $50 million each. We anticipate announcing some exciting produced water treatment projects throughout the year, potentially in every quarter, including initiatives in the Middle East and various other global locations focusing on industrial water treatment. The acquisitions we've completed have been beneficial, and I also believe that our engineering expertise and customer relationships have positioned us to address these critical challenges that our clients have faced for years.

Understood. And then on the Thermon acquisition, I appreciate not kind of no commercial synergies outlined kind of yet. But it seems pretty complementary from a product and end market standpoint. But can you just maybe give a little bit of detail on where you kind of see some of the low-hanging fruit as you kind of go-to-market with just a much broader kind of product set? Any kind of customer overlap? Any other details you can provide there would be helpful.

Yes, we appreciate your familiarity with both CECO and Thermon, and we're eager to discuss this further. There are clear opportunities available. We have a long-standing relationship with Thermon as a leader in their field, and we share a significant number of customers, even though the specifics might vary. Within the energy and industrial sectors, we have many mutual clients, allowing us to address various challenges both independently and collaboratively. We see potential for advanced thermal applications in joint projects. Thermon has connections in markets and regions where we don’t, and vice versa. This dynamic has been a beneficial growth factor in our past acquisitions. By leveraging new product offerings across different regions and markets, we believe this combination will be exciting. Additionally, I want to highlight their Genesis controls platform, which we see as a great opportunity. In our initial discussions, it seems like a complementary fit for enhancing our control and monitoring capabilities across our portfolio. This is definitely a key discussion point for us moving forward.

And our next question will be coming from Rob Brown of Lake Street Capital Markets.

Congratulations on the progress. Just following up a little bit more on Thermon. The short-cycle business, could you sort of clarify how that business works? What's the sort of installed base that you expect? And how recurring is that business?

Well, they have a 75-year installed base, right? This is an organization that has long proven their high quality and ability to deliver for their customers every day around the world in some of the harshest operating environments. They, like CECO, are very proud of the durability and long-lasting aspect of their product and solution set. Their installed base is in the billions. They enjoy thousands of invoices probably a month as their average sale is much smaller than ours. They are constantly providing updated products for their customers in their markets while they are also working with new customers to solve their complex thermal needs in other areas. With their launch of Liquid Load Bank, and some of their other new product categories, they are very excited, and so are we, that they have a very strong, not just replacement cycle in front of them, but a penetration in some new market categories that their investments are going to yield outstanding results. I would also point you, Rob, that Thermon has some very good material on their investor presentations, including one from late 2025, where they really show how they break down their segmentation of their revenue. For our analysts and our shareholders, we will be showing more combined materials going forward, but I would point you to their website and on their Investor Relations section, they have very good materials for you.

Okay. Great. And then to the base CECO business, the order pipeline, you noted continued very strong into the year here with a couple of power projects. But what's sort of the pipeline activity, I guess, specifically in the power vertical at this point? Do you have multiples of these or just let me characterize the pipeline of the power market at this point?

Yes. Peter certainly has a ton of depth on this as we continue to do operating reviews with our businesses. The current power segmentation of our pipeline is well in excess of $1 billion. We're in regular dialogue with the most important end customers in the power generation space. I believe, and we have been saying for quite a number of quarters, that CECO is really well positioned for these large gas natural gas turbine power jobs that are now coming down the pipeline that require our advanced solutions. We would signal that late last year and already early this year, we're starting to see even more of these larger opportunities. We have a lot of visibility in our pipeline. We're in regular dialogue about these projects. It's certainly well in excess of $1 billion, could even be approaching $2 billion in what we call a short- or medium-term pipeline with respect to these power jobs. Peter, I don't know if you want to add more to that.

We've become fond of saying, Rob, and you may have picked up on that in past discussions that it feels like POs are falling from the sky or occasionally, you wake up in the morning and trip on one. It is such a dynamic environment that all the behind-the-meter and front-of-the-meter with providers of power are moving very, very quickly to put solutions in place. The one thing they all have in common regardless of the form of generation is they need emissions treatment. Having an emissions solution, and we're one of three companies in the world that can deliver a comprehensive end-to-end solution for emissions management around gas turbines and large gas engine fleets, having that emissions treatment solution gets you permitted faster. This has become critical to both the utilities that are going to buy the power or the OEMs that are going to deliver it. We may reprioritize one project over another based on those dynamics. But ultimately, it comes down to how much capacity we need to have in place to deliver the solutions that are being demanded of us across thermal, acoustic, emissions, and inlet air treatment, and we're in a very good position to supply all that well into the 2030s.

And our next question will be coming from Gerry Sweeney of ROTH Capital.

Obviously, first question is going to be on Thermon. I wanted to see if you could give a little bit more detail. It sounds as though Thermon is a little bit more short cycle. Obviously, you're long cycle, and that's one of the points you highlighted in your prepared remarks. But how much of this is there an opportunity for maybe wallet share on some projects that you're going after versus maybe just access to new customers or new customers within existing customers?

Yes. Look, we have a consistent track record, Gerry, in our acquisitions of identifying and combining with companies with great growth profiles. When we look at any transaction, we're focused on how we invest in those organizations or how they help us rapidly invest in growth pursuits before we're really looking at synergies. This transaction stands on its own before we even talk about the word synergy. When you add the early identified synergies, you start to get an even more powerful financial combination. Back to, I think, the root of your question, we enjoy being diversified. We are focused on continuing to build what we believe is the premier industrial solutions provider with respect to environmental products, services, and engineered solutions. That's exactly what Thermon is doing as well. If there's an opportunity, and there certainly will be opportunities for us to look at customers, customer relationships, markets, and growth to go at things together, we will do that. We are on very large complex projects where heat and thermal management are required, and we don't think of those previously. We'll certainly be thinking about those going forward. We have a need and an interest in advanced controls applications, and we haven't made that investment yet. Thermon, we know, has. Our customers rely on Thermon for protective services to ensure that their environment is clean and safe and that their employees are benefiting from the efficiencies of their processes. So do we. When both of you are solving problems for your customers in unique ways but for a similar reason, then there is just going to be commercial synergies.

I understand. I am particularly interested in the short cycle that aids your cash conversion. From a broader perspective, it seems that Thermon provides opportunities for you to increase your share of projects. On the other hand, there is a significant aftermarket potential with some of your customers that might not be fully addressed. Is that a reasonable assessment?

Yes. That's a fair generalization. I think over the next few months, as we start to really now intentionally roll up our sleeves appropriately with Thermon and evaluate the synergies that we're talking about here, I think there's going to be exciting ones. We've mentioned some of their investments and innovations already; more to come on that. We have incredibly strong relationships with customers and projects that require thermal applications. Why wouldn't we work together to solve those customer needs?

Got it. And it wouldn't be a Q&A if I didn't ask one more question on the power side. Large turbine makers, manufacturers, they're starting to look at '28, '28 may be sold out, starting to look at '29 and '30. When you discuss your pipeline, how far out on the curve are you looking? And this is more of a question of like, obviously, there's a longevity issue or opportunity here. I'm just curious as to when you look and describe your pipeline, how many years out are you looking in regards to that?

When we describe our pipeline of between $1 billion to $2 billion, those are opportunities that we expect to book in the next 12 to 18 months, maybe two years. That doesn't mean there's not overlap that it could extend a little beyond that. So think of it as a two-year pipeline for us.

Yes, Gerry, we need to see orders in the next 12 months to deliver in 2028, and we need them in the next 24 months to meet 2029 and 2030. We are aligned with our customers. We do joint planning. We do joint project assessments. They move in and out. Customers' timing changes as they solidify their investment and permits. But what is clear is the demand is exceeding supply in all categories of equipment. There is no shortage of consumer for this equipment. We may reprioritize one project over another based on those dynamics. Ultimately, it comes down to how much capacity we need to have in place to deliver the solutions that are demanded across thermal, acoustic, emissions, and inlet air treatment, and we're in a good position to supply all that well into the 30s.

And our next question will be coming from Jim Ricchiuti of Needham & Company.

Just on the full year revenue guidance for the base CECO business, any thoughts on the revenue distribution as you go through the year, first half versus second half, just given the backlog, the timing of some of this?

Yes. Thanks, Jim. We don't break down our quarters in terms of guidance. But we have a profile that is typical when we think about our years in terms of when projects are at their peak. There's a part of me that wants to indicate that Q1 is typically one of our smaller quarters, and Q2 really ramps up from there. I think just like in previous years, you're going to see. I'm not suggesting it's 55% or 60% in the second half of the year, but certainly more in the second half. Q4 is almost always our largest quarter. It's Q4 in a fiscal calendar year. I think you're going to see slightly more in the second half. Our pipeline, some of these larger jobs start turning into revenue in the second half, not in the first half. We know what the schedules are. As Peter mentioned, one thing on these power-related projects is there's not a lot of wiggle room for calendar moves. These are jobs that are happening, that are funded, that are prefunded and required to meet certain deadlines. We probably have the tightest backlog that we've had in maybe ever with respect to timing. I'd say it's slightly more in the second half than the first half for sure. We'll think about how we can be clearer on what that breakdown really looks like, but I'd go with at least 55% in the second half.

And just on Thermon. Todd, you characterized them as being a leader in their markets. I'm just wondering if you could give us any color on the competitive landscape or their market share position as it relates to some of the larger markets that they address.

Yes. I think we'll hold off on market share, but they're certainly a leader. We know the space. You work in the industrial arena like we have for just a few years, like 30. You know who's strong and where they're strong and why they're strong and why you see their names when you walk indoor or outdoor on heavy industrial manufacturing facilities. Both they compete with a variety of smaller private companies when it comes to some of their specific market categories or product categories or solution categories. They also compete with large privately-owned organizations that are in the heat tracing space for quite a while. There has been some consolidation here, but Thermon, in their many, many decades of leadership, has continued to be a top two or three player in their key markets. They're introducing some new products, and we're excited to continue those investments as they move into adjacent spaces where that share is sort of emerging because these are new categories. Similar to CECO and our brands, we believe that we're a top two or three player in many of our niche markets. Thermon clearly reflects that.

Okay. Did you say what the organic growth rate was in Q4? I may have missed it. I think you gave it for the year.

It's around a little over 25% in the quarter. I might be as accurate as 26%, but I just know it was a little over 25% in the quarter organically.

And our next question will be coming from the line of Bobby Brooks of Northland Capital Markets.

I wanted to ask and hear a little bit more on Thermon's end market splits and how similar that is to you? Are there end markets as flexible as yours where it can consistently change to where the puck is going? I'm guessing maybe not as much since it's more short cycle focused. I just wanted to hear more on that. Along those lines, what end markets do you feel at this early stage have the best opportunity for cross-selling?

I'll provide a summary of their revenue distribution that you'll find in one of the charts at the end of the presentation. There are both similarities and distinct differences. Although cross-selling could be appealing, it isn't the main driver of value creation in this scenario. The end markets they currently operate in are quite similar to ours, with the exception that they have a significant rail and transit opportunity which we don't engage in. They possess unique capabilities in renewables, like preventing ice buildup on wind turbines and stopping solar panels from fogging due to condensation, among other innovative solutions that are expected to grow. Their technology is adaptable for heating and thermal control, catering to various temperature management issues, which doesn't always mean cold conditions; sometimes it involves heating fluids or moving dry gas. This diversity in applications gives us strong confidence that our mix of projects and short-cycle engagements will continue to yield steady revenue growth. Additionally, it's important to note that they are usually brought in late in a project's timeline, while we tend to be involved early on. This will allow us to engage with clients for a longer duration throughout the purchasing process and explore new opportunities.

Part of the reason is in a previous organization I worked with, we had a business at the time that was also in the space, well positioned in this space. Most people had a view that this was highly leveraged or positioned with large and important markets, but in cyclical spaces around oil and gas, specifically places like the oil sands in Canada, and the cyclicality was limiting. Hats off to Bruce and the leadership team and the organization at Thermon because intentionally and successfully, like we've done at CECO over the last five to ten years, they have been diversifying into general industrial, diversifying into new end markets geographically, introducing new innovations and offsetting some of those cyclical markets. Their diversification is a result of a focused and capable expansion into those new markets. When you look at them today, 30% comes from oil and gas, let's say. If you went back 10 or 15 years, that might have been as high as 75% or 80%. I want to say that they might not have the same opportunities for us in an immediate short term to be quite as nimble and move from industry to industry, but they certainly have proven that over time, they have a lot of athleticism to expand into adjacent markets and to become much more balanced.

That's super helpful color. I really appreciate that, Todd and Peter. And then the produced water, that's something that I'm very interested in, and I don't think enough people appreciate the large opportunity there when every barrel of oil in the Permian comes with five to seven barrels of produced water. What I was curious to hear from you guys is when you talk about the opportunity, it seems more internationally focused than domestically. I'm just curious as to why is that?

Yes, Bobby, that's a straightforward question. Our solution is tailored for large fields and fixed process equipment. In the Permian and other basins, the focus is on mobile equipment. They drill a well, produce it, and then move the equipment to the next well pad, making it more of a gathering process rather than a fixed installation. At the appropriate time, when we are ready, we will show you the photographs of what we are providing, so you can see that you wouldn't want to move it. Additionally, we are dealing with much larger volumes of water than what comes from a frac well. That’s typically the reason for it. You are correct that the Permian does produce a significant amount of water, and that is increasing, but there are already very competent suppliers addressing that need.

And our next question will be coming from Amit Dayal of H.C. Wainwright.

So Todd, just on CECO's stand-alone outlook for 2026, does that include any potential small acquisitions? Or is that all organic?

This is all organic. Our current outlook reflects our aforementioned backlog pipeline and inorganic investments.

Awesome. And then for the combined company, how should we think about potential growth rates? You're above 20% as a stand-alone entity right now. I mean, could this accelerate even further as a combined entity on the revenue side?

Look, we have very good visibility to a medium and longer term with our pipeline. We'll learn more about Thermon's pipeline as we go forward. Their growth has been at a very attractive rate in this market. We believe and certainly from our conversations and our analysis that they have a rich opportunity set in front of them, not just with their installed base, not just because of their exposure to these growth markets, but because of their great innovations that they've been launching, which open up an ability for them to have points of growth higher than their historic average. We have this incredible super cycle with us right now with power and natural gas infrastructure on the industrial air side with what we see as continuous reshoring. These are not small projects. When we win in semiconductor, we're winning fairly large and long-standing applications and relationships with those customers. I'm bullish, you can tell. We have an outlook for 2026, which is completely organic, at the greater than 20% level. We believe our outlook into the next few years represents a similar opportunity to maintain strong double-digit growth. Look, Thermon solidifies that. If it doesn't add to the growth rate in terms of percentages, it adds to the consistency in the business mix that we'll have quarter by quarter. These adjacent markets and the opportunity to work together with innovation is going to be powerful. This is a growth story here. This is an investment. At the risk of sounding like it's hyperbole, we are two companies that are really clicking on many cylinders. We have an opportunity, much like we've done with the vast majority of our previous M&A activity, to maximize growth together. And that's what we plan to do with Bruce and the team.

And I would now like to turn the call back to Todd for closing remarks.

Thank you. I was anticipating that. Well, thanks, everybody, for the questions and the interest. To our new friends at Thermon, we can't wait to meet many of you in the coming period. Thanks again to our global teams that are delivering incredible value to our customers as we continue to protect people, protect the environment, and protect our customers' investment in their industrial equipment. We will be participating at some upcoming conferences in March, both ROTH and Citadel's Small Mid-Cap Industrials Conference. We hope to see you in March at those events or at other opportunities to meet, whether it's in Dallas or on the road. Thanks, everyone. Have a great day, and we'll talk to you soon.

And this concludes today's program. Thank you for participating. You may now disconnect.