Ceco Environmental Corp Q1 FY2026 Earnings Call

Good day, and thank you for standing by. Welcome to the CECO Environmental First Quarter 2026 Earnings Call. Operator instructions: Please be advised that today's conference is being recorded. Operator instructions: I would now like to hand the conference over to your speaker today, Marcio Pinto, Vice President of Corporate Integration and Investor Relations.

Thank you, Josh, and thank you for joining us today on the CECO Environmental First Quarter 2026 Earnings Call. On the call with me today is Todd Gleason, Chief Executive Officer; and Peter Johansson, Chief Financial Officer. As a reminder, we're covering CECO Environmental's first quarter 2026 earnings results on a stand-alone basis. 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 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 good day, everyone. We are off to a strong start to 2026, and I look forward to sharing our progress. As always, I would like to thank Team CECO for your ongoing commitment to deliver for our customers and, of course, driving such strong results. Please turn to Slide #4, and let's discuss some of the key takeaways. Starting on the left side of the slide, we delivered another strong quarter with numerous financial records, headlined by tremendous orders, which increased our backlog to new levels. Revenue and EBITDA results were solidly in line with our expectations and position us nicely for the full year with strong continued momentum. Speaking of momentum, we don't just expect our second quarter to set new records for orders. We know it. The month of April alone is already higher than the record we just set in Q1. I will expand on this more in a few minutes. Even with the backdrop of uncertainty related to the Iran war and modestly higher inflation, we are raising our full year 2026 outlook, not inclusive of Thermon. Our growth trajectory remains robust, and we have nice visibility to our revenue and margin profile in our record backlog as well as larger-than-ever sales pipeline. This is our second guidance raise this year, and we are pleased to highlight our continued high performance. On the right side of the slide, we note the continued progress we are making with respect to the Thermon transaction. We remain on track for a Q2 close, and our current expectation is sometime in early June. Representatives from each company are working together on integration items and preparing for post-closing activities. We remain highly confident in the $40 million cost synergies we previously outlined, and we are evaluating additional opportunities as well as attractive commercial synergies. The combination is bolstered by each company's strong momentum and continued growth outlook. The combination into CECO Environmental will create a leading diversified global industrial company, and we are very excited to demonstrate the power of this combination. Additionally, over the past number of weeks, I've had the chance to meet hundreds of Thermon employees. The Thermon operating culture is very similar to how our businesses and operational teams function. And similar to CECO, I am incredibly impressed by their energy, their passion and market knowledge. Across the board, Thermon is a great company and will make for a very powerful combination. Now please turn to Slide #5, and let's review financials in a little bit more detail. This summary slide captures the main highlights for our first quarter: record backlog, record orders, strong revenue delivery and accelerating earnings. Our backlog is at its highest level ever, now over $1 billion, up almost 72% year-over-year. Revenue growth of 17% and adjusted EBITDA growth of 46% speak to our high-performance results. Our sales pipeline has grown to over $7 billion, which is the outcome of focused investments to best position our portfolio, the addition of diversified talent, the introduction of new commercial programs, our expanded global reach and our passion to advance market-leading engineered solutions. Now please turn to Slide #6. In the quarter, we continued our bookings momentum with orders of $449 million, an increase of 97%. To put that in perspective, we booked $221 million more in orders this year than we did in Q1 last year. That $221 million would have been a record on its own about a year ago. And when I joined CECO in 2020, we were averaging about $90 million a quarter. We have come a long way since then, and I believe we're just getting started. Speaking of just getting started, while the power super cycle has been in the headlines for over a year, CECO's participation is starting to hit its stride and gain further momentum. In the first quarter, we had several very nice orders servicing this power generation market. We are also seeing strong activity in natural gas infrastructure, semiconductor sectors, electronics in general, industrial water and U.S. industrial reshoring. We believe these markets remain attractive for the medium to longer term. And don't just take my word for it. As the right side of the slide highlights, and as I already mentioned, in April alone, we already booked over $400 million in new orders. That's almost $200 million more than we booked in all of Q2 2025, which at the time was a record. Yes, our April bookings alone are already larger than our just announced first quarter record of $449 million. Included in this April number is our largest ever order. This one is in the range of $300 million, which also serves the natural gas power generation market as we provide advanced emissions and noise abatement solutions. These are exciting times at CECO. And with our growing pipeline, we are bullish for our full year orders and backlog, which we believe will drive strong double-digit sales for a very sustainable period. And before I hand it over to Peter, let's move to Slide #7. To be brief, we are raising our full year 2026 guidance again. Our updated revenue outlook now expects sales to be between $940 million and $1 billion. It is exciting for us to highlight an outlook that includes sales of $1 billion for the first time ever. The midpoint of our revenue guidance now calls for organic sales to grow approximately 25% for the full year. We are also increasing our adjusted EBITDA outlook to $120 million to $140 million. The midpoint of this outlook calls for an approximate 44% EBITDA growth and 170 basis points of margin expansion for the full year. We continue to invest in growth while delivering sustainable margin expansion and utilizing the results of nice volume leverage. And with the recent implementation of 80/20, coupled with our ongoing excellent operating excellence programs, we are making meaningful progress and expect more margin expansion ahead. I will now hand it over to Peter, who will go into more detail on our financial results. Peter?

Thank you, Todd. Good day, everyone. Thank you for joining Todd and me for CECO's First Quarter 2026 Earnings Call this morning. Please turn to Slide #9, and I will provide more color on CECO's financial results for the quarter. CECO started 2026 with very strong results on most of our key metrics, continuing the momentum we built throughout 2025. We finished the first quarter with a record backlog of $1.035 billion, up 72% versus prior year and 31%, equivalent to $242 million sequentially. Backlog has now increased for 11 consecutive quarters and has surged upwards in the most recent 6 quarters, each delivering greater than $200 million in orders across a wide and highly diversified range of end markets, including power generation, liquefied natural gas, midstream gas transport and treatment, hydrocarbon processing, semiconductor and electronics and industrial water applications. First quarter orders were $449 million, a company record, representing a 97% increase over the prior year period or a book-to-bill of approximately 2.2. On a trailing 12-month basis, bookings reached $1.286 billion, a 71% increase over the prior trailing 12-month period, representing a book-to-bill of nearly 1.6. Revenue in the first quarter was $206 million, an increase of 17% year-over-year, reflecting a strong start to the year following CECO's record revenue quarter in the fourth quarter of 2025, which delivered $215 million. Revenue in the quarter overcame headwinds from the sale of the Global Pump Solutions business, which represented $14 million of revenue in the first quarter of 2025, a sale which closed at the quarter's end last year. On a TTM basis, revenue was $804 million, a record for any 12-month period in company history, up 32% or $195 million. Quarter 1 is typically CECO's seasonally smallest revenue quarter in the year. And with our growing backlog and strong opportunity pipeline, we are confident we will deliver sequential revenue increases throughout 2026. Gross profit for the quarter and for the trailing 12 months increased 3% and 27%, respectively, on higher volumes. Margins, however, did experience contraction in quarter 1, which was anticipated given last year's sale of the higher-margin but nonstrategic global pump business, combined with the revenue timing of lower-margin jobs booked in early 2025. We expect margins to improve in the second quarter and trend back towards our target gross profit margin level of 34% or greater as we progress throughout the year on improving volume mix dynamics on more recently booked large projects and new projects with faster revenue recognition profiles and improved cost cases. Adjusted EBITDA was $20.4 million in the quarter, an increase of 46% versus prior year for a margin of approximately 10%, a nearly 200 basis point improvement over prior year. First quarter adjusted EBITDA far surpassed any prior Q1 in company history. For the trailing 12-month period, adjusted EBITDA was $96.7 million, representing a margin of 12%, an increase of nearly 160 basis points, continuing the consistent trend of margin expansion toward our long-term goal of mid-teens adjusted EBITDA margin. A large part of the improvement came from lower operating G&A expenses as volume from large projects starts to be realized and the initial benefits from our Wave 1 80/20 projects. Corporate G&A spending was lower, reflecting the benefits from cost management actions taken in the middle of 2025. Please now turn to Page 10 for a quick look at how backlog is trending. Backlog growth continues to accelerate on a sequential basis with a book-to-bill in the quarter of approximately 2.2x, resulting in a record for any quarter ending backlog. Backlog, which reflects future sales, has now increased nearly fivefold since the end of 2021. This sustained strong orders performance when combined with our continued success in converting our growing $7 billion opportunity pipeline to new orders, underpins our 25% plus top line organic revenue growth for 2026. Orders in the quarter benefited from strong activity in natural gas power generation and industrial water applications, and this trend has continued into early second quarter. And we now expect to deliver another record quarter that will drive our backlog level even higher. Now please turn to Page 11 for a look at adjusted EBITDA and margin trends. With the delivery in quarter 1 of $20.4 million of adjusted EBITDA, the trailing 12-month period has reached $96.7 million of adjusted EBITDA and a 12% margin, both company records. We have expanded our TTM adjusted EBITDA margin steadily since 2022, a trend that we expect to continue throughout 2026 as we continue to target reaching a mid-teens adjusted EBITDA margin for stand-alone CECO. And we expect to cross the $100 million level for adjusted EBITDA very shortly. SG&A spending was down 14% or $7.5 million in the quarter on a year-over-year basis, reflecting an 800 basis point improvement as a percentage of revenue. This result overcame increased spending on seasonal items, including the payment of cash bonuses and sales incentives on our growing order base. For the remainder of 2026, we will continue to utilize the resources of our newly formed business transformation office and operating excellence teams to extend the deployment of our 80/20 strategy across more of CECO and to deliver incremental material sourcing and project execution benefits. Now please turn with me to Slide 12 for an update on cash flow and indebtedness. Quarter 1 cash flow for CECO is seasonally down to start the year, and this year was no exception. In the first quarter, we consumed approximately $16 million of cash, in line with 2025 on lower sales and order activity. Working capital was a headwind in the quarter as contract assets and customer AR grew while we executed against our growing backlog and issued substantial billings for milestones achieved in the quarter that we expect to collect in the second quarter. We also incurred material costs and cash expenses related to the Thermon transaction. Cash flow would have been in positive territory, except for a customer payment of nearly $20 million that was delayed but already received here early in the second quarter. We expect cash flow in the second quarter to revert back to a positive state, benefiting from billings in the first quarter, and we've already begun receiving large cash payments in April. Capital expenditure in the quarter was largely driven by our ongoing ERP implementation initiative, which we expect to be essentially completed by the end of 2026. Gross debt at the end of the first quarter increased by approximately $43 million from year-end 2025 as we used our revolver facility to finance the growth in working capital and expenses related to the Thermon transaction. Net debt increased by $31 million as our quarter ending cash balances grew by approximately $12.5 million, resulting in a comfortable quarter end leverage ratio of 2.3x, a modest increase of one-tenth of a turn from year-end 2025 as our leverage ratio also benefited from the increase in our trailing 12-month adjusted EBITDA delivery. During the quarter, we amended our credit agreement to increase financial capacity and liquidity and to improve certain covenants in support of CECO's continued strategic investments in organic growth and our programmatic acquisition strategy. We have now up to $975 million in committed funds on our amended credit agreement comprised of $740 million of revolver capacity and $235 million in a delayed draw term loan. With a Q1 ending 2026 gross debt of $252 million, we have $723 million in additional capacity to fund the cash portion of the Thermon acquisition and to use for further organic growth investments and working capital needs post-closing. That concludes my review of CECO's first quarter financial results. I will now pass it back to Todd for wrap-up and final remarks.

Thanks, Peter. Before I close, I want to share some additional thoughts and updates on the Thermon acquisition, a historic transaction for CECO and a major step forward in our strategic transformation. Please turn to Slide 14. The addition of Thermon will meaningfully extend CECO's leadership in industrial, environmental and engineered solutions by adding Thermon's established position in process heating, heat tracing and temperature management, creating a world-class industrial solutions platform with robust multiyear growth trajectory and a very strong and stable financial profile. This combination brings together two highly complementary businesses, creating opportunities to accelerate growth and expand accretive capital deployment. Bruce Thames, Thermon's CEO, and I are aligned in our enthusiasm for the future of the combined company and our respective teams. We expect the combination of CECO and Thermon will create a stronger enterprise, one that is well positioned to be a Rule of 30 or Rule of 40 company. By driving strong double-digit growth and producing enhanced operating margins, we believe we can achieve these levels and sustain very high performance. With our healthy balance sheet and robust free cash flow generation, we can accelerate shareholder value creation across a range of options. I'm excited to continue to lead the combined company with an estimated $1.5 billion in current run rate sales and with tremendous growth and synergy opportunities to take this much higher. I look forward to welcoming key additions across the leadership team as well as the Board of Directors. We have a lot to do. We have a lot of value to create. Now moving to Slide 15. Before we open up the call to questions, we'll conclude with this. CECO is very well positioned for today, very well positioned for tomorrow, and we believe our sustainable operating model makes us uniquely positioned for the long term. The combination with Thermon bolsters our portfolio with additional injection of leading businesses and great talent. More to come as we work towards a Q2 transaction close. Extremely proud of our team and all they do to serve our global customers. The first quarter is just another indication of our fantastic leadership and balance. With 97% orders growth and 17% revenue growth, we continue to demonstrate our investments pay off as we add installed base and advance our market positions. And finally, while this might be the final quarter as CECO stand-alone ahead of the combination with Thermon, we are once again pleased to raise our full year guidance. The visibility we have in our strong backlog and robust sales pipeline is truly unique and gives us a lot of confidence in the year ahead and years to come. We'll now open the line to questions. Operator?

Operator instructions: And our first question comes from Aaron Spychalla with Craig-Hallum Capital Group.

Maybe first for me, good to see the pipeline grow to $7 billion plus even with the strong activity. Can you maybe talk about the drivers of that? And then on Power Gen specifically, last quarter, you talked about a $1 billion to $2 billion kind of medium-term pipeline with visibility beyond that. Can you just maybe give an update there? It really seems like order sizes are starting to pick up. Maybe touch on just delivery timelines of some of these orders and then the supply chain ability to kind of meet everything that seems to be really accelerating for you.

Yes. The $7 billion is actually about $7.3 billion, I think Peter would say, of sales pipeline. To clarify how we calculate our sales pipeline: it is actual job pursuit opportunities that we see booking in the next one to two years, averaged around 18 months, though some projects may be further out. We do not include things beyond that horizon. These opportunities work through the funnel to a win-loss outcome in the current quarter. We've been growing the sales pipeline steadily through a range of investments as well as geographic reach and how our markets have been performing, which have been growing for the last few years. When I joined CECO in 2020, our sales pipeline was closer to $1 billion to $1.5 billion. So to be at $7 billion really speaks to this intentional expansion of how we look at our markets geographically and industrially, and that will continue. Getting that sales pipeline to greater than $7 billion required investments, expansion into new markets organically and inorganically, and we've benefited from those investments. We're also benefiting from tailwinds in some of our most important markets: natural gas power and natural gas infrastructure. Power generation writ large has been a significant driver and has added about $1 billion to our pipeline over the last few years, though not all of that is included in the $7 billion because some of it is further out. We see continued strong themes across reshoring in the U.S., electrification and digitization. Thermon has a large focus on digitization and decarbonization, which ties into our electrification theme. Semiconductor expansion is very strong right now, and we're well positioned for that in industrial air specifically. Industrial water is a market we've been investing in and it might be approaching $1 billion of our pipeline now, where a few years ago it was very little. We continue to see very strong themes across these markets, and we're participating well.

All right. And then maybe just — I mean, as these are substantial backlog and pipeline, just comfort with the supply chain and ability to meet everything?

I think that's been one of our more important investments, and we probably don't highlight it enough. To secure some of these larger orders, including jobs we've won over the last few years and certainly over the last few quarters, you need a great supply chain, great partners and redundant capabilities in fabrication and supply chain. We've invested in our teams and capabilities. Dan Berman and his team at the corporate operating excellence group continue to drive sourcing savings and establish redundant supply chain capabilities, managing logistics and quality. Across our businesses — Thermal Acoustics and emissions management through to our other units — teams are constantly validating new supply chain partners in North America, East Asia, Southeast Asia, the Middle East and India. We have a lot of visibility to our supply chain, which gives our customers more confidence in us than some competitors because we've invested heavily in that effort. We have visibility to secure materials. Yes, there is inflation, and we do a very disciplined job of prebuying or locking in rates. Sometimes prebuys show up negatively in our cash flows, but it's the right move to protect margins long term. I would give credit to Peter and the finance team, Dan Berman and the operating teams, our project managers and supply chain managers. We've consistently been getting ahead of this. We did so a year ago and again six months ago. This is one of our major operational strengths.

Good to hear. And then maybe last for me, just on the Middle East business. Can you kind of talk about impact there that you might be seeing or not? And then any thoughts on timing for some of the larger water opportunities that you've been targeting there?

It's an uncertain time and market in the Middle East. There have been impacts to how our teams can travel and work on certain projects in the region. We don't have a large number of projects that were tied to our 2026 performance in the region. We do have attractive programs in our pipeline that have been paused a bit, probably until the second half of the year. We're opportunistic and believe the conflict can be managed in that period. In our guidance, we've already accounted for any of those impacts. Our first quarter orders of roughly $450 million and our second quarter already at about $460 million, even before the quarter is complete, speak to the strength of our markets despite some pauses in the Middle East. When the region stabilizes, there will be rebuilding and projects will re-emerge. We're navigating the uncertainty and will keep everyone posted. We feel comfortable with our guidance and outlook.

Operator instructions: Our next question comes from Gerard Sweeney with ROTH Capital.

So a question on the power side. Obviously, it's great. I'm just curious, when do you get brought into some of these projects? What I'm looking at is some of the turbine manufacturers saying they're sold out to 2029, et cetera. But if you're brought into the projects later in the cycle, that actually gives you visibility out to 2030, 2031 plus. I'm curious as to how that all plays out.

Jerry, we begin work with our large gas turbine customers, the engineering firms and the OEMs years before we receive an order. We're today negotiating and working through technical configuration questions for orders that will deliver in 2029 and 2030. We essentially are done for the 2027 and 2028 installs. Now we're working on '29, '30 and beyond. So we're three to four years out ahead of delivery and have good visibility. The interesting sideline to that is repowering activity, which is taking an existing facility and updating it. That occurs much faster — it can happen in months and generally not more than a 12-month conversion. That is not something we typically are involved in years in advance; it happens quickly. Entergy, for example, had a program updating every one of their combined cycle plants, where we actually had a three-year MSA in place to support them over an extended period; that's a rare instance.

Got it. Okay. And then obviously, you talked a little bit about margins, 80/20, et cetera. But even on the power side, hearing that some of the project pricing is going up. That pricing doesn't always flow through to margins, obviously, because of inflation and other reasons. How much does pricing play into your margin expansion? Or is it more keeping it steady with inflation and other aspects?

Price is a lever to increase margins. We work with our large customers to ensure we capture appropriate value on projects. For natural gas power generation and longer-duration projects, we include estimates in our pricing and cost cases that assume some level of inflation. We also have contract escalators so if inflation exceeds assumptions, we can request recovery from clients. Two commodities particularly impacted today are catalyst, used in emissions treatment applications, and specialty steels. We do a good job managing through those cost pressures.

Operator instructions: Our next question comes from Rob Brown with Lake Street Capital Markets.

Congrats on the strong quarter. I wanted to dig in a little more on the industrial water side. You noted increasing pipeline strength there. To what degree is that a market trend versus your expansion in that market and activity? How do you see that playing out?

It's probably more about our participation and entrance into the market. That said, we do see investment in infrastructure and industrial water expansion in various geographies. I wouldn't claim to have a ten-year market view like some larger water companies; we're relatively new in scale, though many of our people have decades of experience in water. Our acquired businesses like Kemco feel good about organic growth. The main driver is our ability to participate in larger industrial and produced water treatment projects with medium to large-scale complex skid solutions. That investment positions us to pursue these opportunities. We see a healthy market, but I'm cautious to make a long-term market call without more data.

There are two core trends driving demand in industrial water. First, water scarcity — in water-scarce regions industrial customers face higher water tariffs, which makes them more willing to invest in reducing water use and increasing reuse. Second, the reuse trend benefits us: customers want to cut consumption and implement reuse solutions. We do work in water-scarce regions like North Africa, the Middle East and Southeast Asia, which have high demand for these solutions.

Okay. Great. And then on the commercial synergies as you've gotten into the Thermon acquisition work, have you become more confident? Could you talk about the commercial synergy opportunities you see?

We are confident there are attractive commercial synergies, though we haven't put a firm number on them yet. We want to complete integration planning and then quantify the opportunities after combining. Separately, we're already identifying product overlaps and opportunities. For projects that include heat trace, immersion heaters, controls and other solutions where Thermon is a leader, we've started assessing and getting proposals from Thermon as a supplier. We've won some large projects that include some of their products and have engaged Thermon in the approved vendor and bid process. We're already seeing millions of dollars of opportunity because our solutions and Thermon's solutions often coexist in the same project footprints globally. The combination could add a couple points of organic growth; we will provide a more detailed analysis post-close, but initial confidence is high. Our teams have been engaging positively at industry conferences and are already gelling on commercial ideas.

Operator instructions: Our next question comes from Bobby Brooks with Northland Capital Markets.

Congrats on the fantastic quarter. The power gen-related jobs have been strong. Where are the next two biggest areas of strength for current orders? Any context on how that has evolved over the past couple of quarters?

We're well positioned across a diversified set of industrial categories, so there are multiple areas of strength. Two I'm most excited about now are semiconductor expansion and industrial water. Semiconductor demand is strong and we are well positioned in industrial air. Industrial water is an area we've been investing in and we expect it to be a major piece of our portfolio by 2030; we're actively building capabilities there. Peter also noted natural gas infrastructure as a strong market. We are diversified and that diversification helps drive the book-to-bill and future sales growth. Some markets, like automotive and parts of Europe, are still recovering, but our broader end market exposure helps smooth that.

To add, the natural gas infrastructure value chain is also an area of strength globally. Natural gas continues to be a transition fuel and that transition appears to be longer than many anticipated. From wellhead to consumer, there are many points where CECO, including peerless brands and Thermon, have roles to play in delivering gas cleanly and efficiently. We have companies with long experience in that market and expect to find real commercial benefits from combined efforts with Thermon.

Operator instructions: Our next question comes from Jim Ricchiuti with Needham & Company.

Just in the interest of time, I had one question. Given where we're starting the year with gross margins, it sounds like you're expecting significant improvement as you go through the year. Can you talk a bit about how stand-alone CECO will drive higher gross margins through the year? Is it in the backlog?

There are three factors. First, volume and mix: there's a timing difference between when costs hit the income statement and when revenue is recognized. Upfront on projects we incur engineering and setup costs with less revenue recognized; later in the project revenue recognition accelerates, improving margins. Second, margins will improve from projects booked in late 2025 and early 2026 that are higher margin. Third, continued G&A footprint improvement and integration efficiencies from acquisitions. Combined, these factors should trend margins back toward our target gross profit margin of 34% or greater over the year. It won't all happen in one quarter, but the full-year outlook is close to that target. Also, EBITDA will continue to improve because large project volumes come with little to no additional fixed cost, making them accretive from an operating expense standpoint.

Operator instructions: Our next question comes from Joseph Giordano with TD Cowen.

This is Chris on for Joe. You had cited early benefits from 80/20. I was curious what specifically was in Wave 1, and how we should expect benefits to split between gross margin improvement versus SG&A leverage over the next few quarters? Also, with the Section 232 expansion earlier this month applying to full customs value, is there any incremental margin or backlog sensitivity for CECO, especially on projects booked prior to that revision, net of any pass-through clauses or sourcing actions you're taking?

80/20 is new at CECO. We began the implementation in Q4 with diagnosis and workplan development and launched across two of our smaller, recently acquired businesses. They're about a quarter of the way into implementation. There are multiple projects inside each deployment handled by business. About 10% of CECO's revenue today has been covered by our initial Wave 1. That will expand this quarter and by the end of the summer we'll be somewhere around 20% to 25% of CECO revenue being touched by 80/20. We'll accelerate penetration as we develop internal subject matter experts and grow the deployment across the portfolio through 2027. To date, benefits have primarily come from the G&A side, with some gross profit improvement. 80/20 focuses on customer and product simplification and rightsizing organizations toward priority customers and products. Regarding the tariff changes, we haven't identified any material impact from the change in tariff posture. Our operating model is to source, fabricate and deliver in-region to avoid most cross-border flows. Very little comes across borders that would be subject to tariffs. For example, if we deliver in Asia, fabrication occurs in Asia; same for the Middle East, India and Europe. In North America, we work with Canadian suppliers and most flows are covered under USMCA exemptions.

I would now like to turn the call back over to Todd Gleason for any closing remarks.

Thanks. Well, thanks for the questions and the interest in our information today. Again, thanks 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 look forward to being active at a handful of investor conferences in the second quarter as well as speaking with some of you today and over the next few weeks with respect to our results. I couldn't be more excited about the pending combination with the great team and organization that is Thermon, and we will keep everyone updated on that as we go forward. With that, we'll go ahead and close today's call. Thank you.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.