CECO Environmental (CECO) Q4 FY25 earnings call: guidance and Q&A

Can you frame the size and timeline of the industrial water pipeline, especially given it's described as the most active and largest?

The industrial water pipeline, particularly for produced water treatment in international locations like the Middle East, includes opportunities between $10 million to $50 million in size, with announcements expected throughout 2026. This growth is driven by both organic efforts and strategic acquisitions.

“So as we now look at both early in this year and throughout the year, opportunities that could be between $10 million to $50 million in size. We expect to be announcing throughout the year, maybe even each quarter, some pretty exciting produced water treatment opportunities in, let's say, the Middle East, other parts of the world with respect to water treatment for industrial applications.”

asked by Aaron Spychalla · answered by Todd Gleason

Given the complementary nature of Thermon's products and end markets, where are the low-hanging commercial synergies, customer overlap, and opportunities for a broader product set?

There is significant customer overlap, allowing for combined bids on advanced thermal applications. Both companies have relationships in different geographies and end markets, enabling cross-selling. Thermon's Genesis controls platform is also seen as a complementary opportunity to bring advanced controls and monitoring across CECO's portfolio.

“Not only have we known Thermon for a long time as a leader in what they do and certainly their reach and their capabilities, but we have a lot of customers in common. We -- the customers within the customers might be a little different. So if you're looking across energy or industrial organizations, we share a lot of customers, which means we can solve a lot of problems separately or together.”

asked by Aaron Spychalla · answered by Todd Gleason

Could you clarify how Thermon's short-cycle business works, its installed base, and the recurring nature of its revenue?

Thermon has a 75-year installed base, generating thousands of invoices monthly with smaller average sales. Their business is highly recurring, driven by constant product updates, replacement cycles, and new product categories like Liquid Load Bank, which enable penetration into new markets.

“They, like CECO are very proud of the durability and the long-lasting aspect of their product and solution set. So -- but at the end of the day, their customers rely on them to help them expand or as they build out their infrastructure or as they replace their infrastructure. So it's a -- their installed base is in the billions. They enjoy thousands of invoices probably a month as their average sale is much smaller than ours.”

asked by Robert Brown · answered by Todd Gleason

What is the current pipeline activity in the power vertical, and how would you characterize the opportunity?

The current power segmentation pipeline is well in excess of $1 billion, potentially approaching $2 billion, for short-to-medium term opportunities (next 2 years). CECO is uniquely positioned with emissions treatment solutions for large gas turbines, which are critical for permitting and in high demand.

“It's certainly well in excess of $1 billion, could even be approaching $2 billion in what we would call a short- or medium-term pipeline with respect to these power jobs.”

asked by Robert Brown · answered by Todd Gleason

Does Thermon bring opportunities to expand wallet share on projects and grow aftermarket exposure with CECO's existing customers?

Yes, there will be commercial synergies. Thermon's offerings can expand wallet share on complex projects requiring thermal management. Their large aftermarket exposure can also grow with CECO's customer base, leveraging strong relationships and addressing customer needs together.

“And look, we have incredibly strong relationships with customers and small, medium and large projects that we know require thermal applications. And why wouldn't we make sure that we work together to solve those customer needs.”

asked by Gerard Sweeney · answered by Todd Gleason

How far out on the curve is CECO looking when describing its power pipeline, considering turbine manufacturers are looking at 2028-2030?

The described pipeline of $1 billion to $2 billion represents opportunities expected to be booked within the next 12 to 24 months, aligning with customer needs for deliveries in 2028, 2029, and 2030. The demand for emissions treatment solutions is exceeding supply.

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

asked by Gerard Sweeney · answered by Todd Gleason

What are the thoughts on the revenue distribution for the full year 2026, specifically between the first and second halves?

Revenue is expected to be weighted more towards the second half of 2026, likely at least 55%, as larger booked jobs convert later in the year. Q1 is typically smaller, with Q4 almost always being the largest quarter.

“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 more clear on what that breakdown really looks like, but I'd go with at least 55% in the second half.”

asked by James Ricchiuti · answered by Todd Gleason

How flexible are Thermon's end markets, and what end markets offer the best cross-selling opportunities?

Thermon's end markets are similar to CECO's, with some distinct differences like substantial rail/transit and renewables opportunities. Their technology is adaptive to various temperature management needs. While cross-selling is interesting, the primary value driver is the complementary nature of their late-project specification with CECO's early-project procurement, creating longer client engagement. Thermon has also successfully diversified from a high oil & gas concentration over time.

“The mix is very complementary in that they can move and their technology is adaptive, both in heating as well as heat tracing to wherever you have a temperature management or thermal control issue, whether that -- and it doesn't necessarily mean it's cold out. It can be that the process requires a warm fluid to be passed or a dry gas to be moved or the application diversity is immense.”

asked by Robert Brooks · answered by Peter Johansson