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YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.12pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
+0.13pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.11pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
negative+3
closing+3
termination+3
failure+2
litigation+2
Positive rising
satisfaction+2
opportunities+1
satisfied+1
positively+1
Risk Factors (Item 1A)
10,057 words
ITEM 1A. Risk Factors
The following risk factors address the material risks concerning our business. If any of the risks discussed in this annual report were to occur, our business, prospects, financial condition, results of operations and our ability to service our debt could be materially and adversely affected and the trading price of our common stock could decline significantly. Some statements in this annual report, including statements in the following risk factors, constitute forward-looking statements. Please refer to the section entitled "Forward-Looking Statements."
Risks Relating to the Pending Merger with CECO Environmental
The completion of the Merger is subject to the satisfaction or waiver of various closing conditions, and there can be no assurances as to whether and when the Merger will be completed.
The completion of the Merger is subject to the satisfaction or waiver of a number of conditions, including, among others, the approval of the stock issuance by the CECO stockholders, the adoption of the Merger Agreement by the Thermon stockholders, the listing of shares of CECO common stock to be issued in the Merger on the Nasdaq, the receipt by Thermon of a tax opinion regarding the qualification of the Merger as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended; the appointment of the new board designees to the CECO board, and the of any law or order prohibiting the Merger. There can be no assurance that all required conditions will be or waived, or that the Merger will be completed on the expected terms or schedule, or at all. If the Merger is not completed for any reason, including as a result of the of CECO stockholders to approve the stock issuance or the of Thermon stockholders to adopt the Merger Agreement, the ongoing businesses of CECO and Thermon may be materially affected, and CECO and Thermon would be subject to a number of risks, including: each company may experience reactions from the financial markets, including impacts on their respective stock prices; each company may experience reactions from their respective customers, suppliers, employees and other business partners; CECO and Thermon will still be required to pay certain significant costs relating to the Merger, such as legal, accounting, consulting, financial advisory and printing fees, regardless of whether the Merger is completed; under certain circumstances, CECO may be required to pay Thermon a fee of $105.0 million, or Thermon may be required to pay CECO a fee of $74.7 million; and matters relating to the Merger require substantial commitments of time and resources by each company’s management, which could otherwise be devoted to day-to-day operations and other business .
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
force+2
declined+2
critical+1
against+1
decline+1
Positive rising
improved+4
benefit+1
effective+1
leadership+1
enhanced+1
MD&A (Item 7)
5,915 words
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with, and is qualified in its entirety by reference to our consolidated financial statements and related notes included elsewhere in this annual report. The discussions in this section contain forward-looking statements that involve risks and uncertainties, including, but not limited to, those described in Item 1A, "Risk Factors." Actual results could differ materially from those discussed below. Please refer to the section entitled "Forward-Looking Statements."
Overview
For a complete overview of our business, please refer to Item 1. "Business" disclosed above in this annual report.
Recent Developments. On February 23, 2026, the Company entered into a definitive merger agreement (the “Merger Agreement”) with CECO Environmental Corp. (“CECO”) to combine the two companies in a stock‑and‑cash two-step merger transaction valued at approximately $2.2 billion (the “Merger”). The Merger is expected to create a global industrial leader in mission‑critical environmental and thermal solutions by combining CECO’s capabilities in environmental systems with the Company’s leadership in industrial process heating, heat tracing, and temperature management. Upon completion of the Merger, which is subject to customary closing conditions and regulatory and stockholder approvals, the combined company will operate under the CECO Environmental Corp. name and is expected to from scale, expanded product offerings, and increased exposure to long‑term secular growth trends. The transaction is expected to close in June 2026. See also “Risks Relating to the Pending Merger with CECO Environmental” under Item 1A, “Risk Factors” for information regarding the additional risk factors related to the Merger.
CECO and Thermon will incur significant direct and indirect costs as a result of the Merger, regardless of whether the Merger is completed.
CECO and Thermon have incurred, and expect to continue to incur, significant costs, expenses and fees for professional services and other transaction costs in connection with the Merger. Many of these costs will be borne by CECO or Thermon even if the Merger is not completed. In addition, the Merger Agreement provides that certain expenses incurred in connection with the filing, printing and mailing of the joint proxy statement/prospectus and the registration statement on Form S-4, and all filing and other fees paid to the SEC in connection with the Merger (other than attorneys’ fees, accountants’ fees and related expenses), will be shared equally by CECO and Thermon.
CECO and Thermon may be subject to litigation related to the Merger, which could result in substantial costs and prevent or delay the completion of the Merger.
It is common for public companies to be targeted by securities class action and derivative lawsuits following the announcement of a Merger. CECO and Thermon may become involved in this type of litigation in connection with the Merger. Such lawsuits could seek, among other things, injunctive relief or other equitable relief, including a request to rescind parts of the Merger Agreement already implemented or to otherwise enjoin the parties from consummating the Merger. Defending such claims could result in substantial costs and divert management time and resources.
Because the market price of CECO common stock will fluctuate, Thermon stockholders cannot be sure of the exact value of the stock consideration or mixed consideration they will receive.
The stock consideration and the stock portion of the mixed consideration are fixed at an exchange ratio of 0.8110 and 0.6840 shares of CECO common stock, respectively, per share of Thermon common stock. These ratios will not be adjusted to reflect changes in the market price of CECO common stock prior to the closing of the Merger. Consequently, the implied value of the stock consideration and mixed consideration will fluctuate as the market price of CECO common stock fluctuates. In contrast, the cash consideration is fixed at $63.89 per share. A decline in the market price of CECO common stock could result in the stock consideration or mixed consideration having a significantly lower value than the cash consideration at the time of closing. The Merger Agreement does not provide CECO or Thermon with a termination right or other similar protection relating to the market price of CECO common stock.
Risks Related to Our Business and Industry
Macroeconomic and Industry Risks
Suspensions and delays in large capital projects, especially in the United States and Canada, have adversely affected our results of operations in recent years. Continued significant volatility in these capital projects could further decrease demand for some of our products and services and adversely affect our business, financial condition and results of operations.
A significant portion of our revenue historically has been generated by end-users in connection with the development of large capital projects. The businesses of most of our large capital project customers are, to varying degrees, cyclical and historically have experienced periodic downturns. Profitability in the development of large capital projects is highly sensitive to supply and demand cycles and commodity prices, which historically have been volatile, and our customers in this industry have tended to delay large capital projects, including expensive maintenance and upgrades, during industry downturns. The demand for large capital projects may be further constrained by the uncertainty caused by the recent changes in United States trade policy. Customer project delays and cancellations may limit our ability to realize value from our backlog as expected and cause fluctuations in the timing or the amount of revenue earned and the profitability of our business in a particular period. In addition, such delays and cancellations may lead to significant fluctuations in results of operations from quarter to quarter, making it difficult to predict our financial performance on a quarterly basis.
Demand for a significant portion of our products and services in connection with large capital projects depends upon the level of capital expenditure by companies in the energy industry, which depends, in part, on energy prices, which can be volatile. In recent years, we have experienced suspensions or delays in large capital projects within the energy sector, especially in the upstream exploration and production sector, and most notably in the U.S. and Canada. The impact on oil and gas commodity markets has further been impacted by the heightened level of global instability. A sustained downturn in the capital expenditures of our customers, whether due to the significant volatility in the market price of oil and gas or demand for oil and gas products, may delay projects, decrease demand for our products and services, which, in turn, could have an adverse effect on our business, financial condition and results of operations. Such volatility, including the perception that it might continue, could also have a significant negative impact on the market price of our common stock.
As a global business, we are exposed to economic, political and other risks in a number of countries, which could materially reduce our revenues, profitability, cash flows, or materially increase our liabilities. If we are unable to continue operating successfully in one or more foreign countries, it may have an adverse effect on our business and financial condition.
For fiscal 2026, approximately 51% of our revenues were generated outside of the U.S., and approximately 20% of our revenues were generated outside of North America. One of our key growth strategies is to continue to expand our global footprint in emerging and high growth markets around the world; however, we may be unsuccessful in expanding our international business.
Conducting business outside the U.S. subjects us to additional risks that may impact our revenues, profitability or cash flows or increase our liabilities, including the following:
• changes in a specific country's or region's political, social or economic conditions, particularly in emerging markets;
• changes in trade relations between the U.S., Canada, China or Europe and foreign countries in which our customers and suppliers operate, including protectionist measures such as tariffs, import or export licensing requirements and trade sanctions;
• restrictions on our ability to own or operate subsidiaries in, expand in and, if necessary, repatriate cash from, foreign jurisdictions;
• exchange controls and currency restrictions;
• the burden of complying with numerous and potentially conflicting legal requirements;
• potentially negative consequences from changes in U.S. and foreign tax laws;
• difficulty in staffing and managing (including ensuring compliance with internal policies and controls) geographically widespread operations;
• different regulatory regimes controlling the protection of our intellectual property;
• difficulty in the enforcement of contractual obligations in non-U.S. jurisdictions and the collection of accounts receivable from foreign accounts; and
• transportation delays or interruptions, including those caused by the escalation of conflicts in the Middle East.
One or more of these factors could prevent us from successfully expanding our presence in international markets, could have an adverse effect on our revenues, profitability or cash flows or cause an increase in our liabilities. We may not succeed in developing and implementing policies and strategies to counter the foregoing factors effectively in each location where we do business. In addition, the imposition of trade restrictions, economic sanctions or embargoes by the U.S. or foreign governments could adversely affect our future sales and results of operations.
Uncertainty over and changes in government administrative policy, including changes to existing trade agreements and government sanctions, including the recently enacted tariffs on trade between the U.S. and other countries, could have a material adverse effect on our business, results of operations and financial condition.
As a result of changes to government administrative policy, there may be changes to existing trade agreements, greater restrictions on free trade generally, significant increases in tariffs on goods imported into the U.S., Canada or the European Union, particularly tariffs on products manufactured in China, Canada, and Mexico, among other possible changes. Changes in social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories and countries where we currently manufacture and sell products, and any resulting negative sentiments towards U.S. companies as a result of such changes, could have an adverse effect on our business, financial condition, results of operations and cash flows. Trade restrictions, including withdrawal from or modification of existing trade agreements, negotiation of new trade agreements and imposition of new (and retaliatory) tariffs, including any tariffs proposed by the current U.S. administration, against certain countries or covering certain products, could increase our costs and impair our ability to expand the business. Based on our manufacturing practices and locations, there can be no assurance that any future executive or legislative action in the U.S. or other countries relating to trade regulation would not adversely affect our business, operations and financial results.
The markets we serve are subject to general economic conditions and cyclical demand, which could harm our business and lead to significant shifts in our results of operations from quarter to quarter that make it difficult to project long-term performance.
Our operating results have been and may in the future be adversely affected by general economic conditions and the cyclical pattern of certain industries in which our customers and end-users operate. Demand for our products and services depends in large part upon the level of capital and maintenance expenditures by many of our customers and end-users, in particular those in the energy, chemical processing and power generation industries, and firms that design and construct facilities for these industries. These customers' expenditures historically have been cyclical in nature and vulnerable to economic downturns. In addition, these customers' expenditures may be further constrained by the uncertainty caused by the recent changes in United States trade policy. Prolonged periods of little or no economic growth could result in lower demand for our products and a negative impact on our results of operations and cash flows. In addition, this historically cyclical demand may lead to significant shifts in our results of operations from quarter to quarter, which limits our ability to make accurate long-term predictions about our future performance.
Business Risks
If we are unable to successfully develop and improve our products and successfully implement new technologies in the markets that we serve and develop solutions for diversified new markets, our business and results of operations could be adversely affected.
Our future success will depend upon our continued investment in research and development of new products, improvement and enhancement of our existing product offerings and our ability to continue to achieve new technological advances in the process heating industry. Our inability to continue to successfully develop and market new products or our inability to implement technological advances on a pace consistent with that of our competitors could adversely affect our business and results of operations.
We may be unable to compete successfully in the highly competitive markets in which we operate.
We operate in domestic and international markets and compete with highly competitive domestic and international manufacturers and service providers. The fragmented nature of the process heating industry and the similarly fragmented nature of the industrial process heating industry makes the market for our products and services highly competitive. A number of our direct and indirect competitors are major multinational corporations, some of which have substantially greater technical, financial and marketing resources, and additional competitors may enter these markets at any time. In addition, we compete against many regional and lower-cost manufacturers. Our competitors may develop products that are superior to our products, develop methods of more efficiently and effectively providing products and services, adapt more quickly than we do to new technologies or evolving customer requirements, or attempt to compete based primarily on price, localized expertise and local relationships. If we are unable to continue to differentiate our products and services or if we experience an increase in competition, it may cause us to lose market share or compel us to reduce prices to remain competitive, which could result in a reduction in our revenues and results of operations.
Our backlog may fluctuate and a failure to deliver our backlog on time could affect our future sales, profitability and our relationships with our customers, and if we were to experience a material amount of modifications or cancellations of orders, our sales could be negatively impacted.
Our backlog is comprised of the portion of firm signed purchase orders or other written contractual commitments received from customers that we have not recognized as revenue. Backlog may increase or decrease based on the addition of
large multi-year projects and their subsequent completion. Backlog may also be favorably or unfavorably affected by foreign currency rate fluctuations. The dollar amount of backlog as of March 31, 2026, was $254.9 million. The timing of our recognition of revenue out of our backlog is subject to a variety of factors that may cause delays, many of which, including fluctuations in our customers' delivery schedules, are beyond our control and difficult to forecast. Such delays may lead to significant fluctuations in results of operations from quarter to quarter, making it difficult to predict our financial performance on a quarterly basis. Further, while we have historically experienced few order cancellations and the amount of order cancellations has not been material compared to our total contract volume, if we were to experience a significant amount of cancellations of or reductions in purchase orders, it would reduce our backlog and, consequently, our future sales and results of operations.
Our ability to meet customer delivery schedules for our backlog is dependent on a number of factors including, but not limited to, access to raw materials, an adequate and capable workforce, engineering expertise for certain projects, sufficient manufacturing capacity and, in some cases, our reliance on subcontractors. The availability of these factors may in some cases be subject to conditions outside of our control. A failure to deliver in accordance with our performance obligations may result in financial penalties and damage to existing customer relationships, our reputation and a loss of future bidding opportunities, which could cause the loss of future business and could negatively impact our future sales and results of operations.
Our future revenue depends in part on our ability to bid and win new contracts. Our failure to effectively obtain future contracts could adversely affect our profitability.
Our future revenue and overall results of operations require us to successfully bid on new contracts and, in particular, contracts for large projects, which are frequently subject to competitive bidding processes. Our revenue from major projects depends in part on the level of capital expenditures in our principal end markets, including the general industrial, chemical and petrochemical, oil, gas, power generation, commercial, food and beverage, rail and transit, and other industries. If we fail to replace completed or canceled large projects with new order volume of the same magnitude, our backlog will decrease and our future revenue and financial results may be adversely affected. The number of such projects we win in any year fluctuates, and is dependent upon the number of projects available and our ability to bid successfully for such projects. Contract proposals and negotiations are complex and frequently involve a lengthy bidding and selection process, which is affected by a number of factors, such as competitive position, market conditions, financing arrangements and required governmental approvals. For example, a client may require us to provide a bond or letter of credit to protect the client should we fail to perform under the terms of the contract. If we fail to secure adequate financial arrangements or required governmental approvals, we may not be able to pursue particular projects, which could adversely affect our profitability.
Our current or future indebtedness could impair our financial condition and reduce the funds available to us for other purposes. Our debt agreements impose certain operating and financial restrictions, with which failure to comply could result in an event of default that could adversely affect our results of operations.
At March 31, 2026, we had $141.1 million of outstanding indebtedness. If our cash flows and capital resources are insufficient to fund the interest payments on our outstanding borrowings under our credit facility and other debt service obligations and keep us in compliance with the covenants under our debt agreements or to fund our other liquidity needs, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness. We cannot guarantee that we would be able to (i) take any of these actions or that these actions would permit us to meet our scheduled debt service obligations or that these actions would be permitted under the terms of our existing or future debt agreements, which may impose significant operating and financial restrictions on us and could adversely affect our ability to finance our future operations or capital needs; (ii) obtain standby letters of credit, bank guarantees or performance bonds required to bid on or secure certain customer contracts; (iii) make strategic acquisitions or investments or enter into alliances; (iv) withstand a future downturn in our business or the economy in general; (v) engage in business activities, including future opportunities, that may be in our interest; and (vi) plan for or react to market conditions or otherwise execute our business strategies.
If we cannot make scheduled payments on our debt, or if we breach any of the covenants in our debt agreements, we will be in default under such agreements and, as a result, our debt holders could declare all outstanding principal and interest to be due and payable, the lenders under our credit facility could terminate their commitments to lend us money and forecloseagainst the assets securing our borrowings, and we could be forced into bankruptcy or liquidation.
In addition, we and certain of our subsidiaries may incur significant additional indebtedness, including additional secured indebtedness. Although the terms of our debt agreements contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and additional indebtedness incurred in compliance with these restrictions could be significant. Incurring additional indebtedness could increase the risks associated with our substantial indebtedness, which may impact our ability to meet our debt service obligations.
Our gross margins depend, in part, on our revenue mix. Although large project revenues, which provide for an ongoing stream of future high-margin revenues, are critical to our success and growth, increased large project revenues can adversely affect our gross margin.
Typically, both large project and maintenance customers require our products as well as our engineering and construction services. We tend to experience lower margins from our design optimization, engineering, installation and maintenance services than we do from sales of our heating cable, tubing bundle and control system products. We also tend to experience lower margins from our outsourced products, such as electrical switch gears and transformers, than we do from our manufactured products. Accordingly, our gross margins are impacted by our mix of products and services. Although our product mix varies from period to period due to a variety of factors, during fiscal year ended March 31, 2026, revenue recognized over time accounted for approximately 30% of our total revenue. Although over time revenues, which provide for an ongoing stream of future high-margin maintenance revenues, are critical to our long-term success and growth, a revenue mix higher in lower-margin over time revenues relative to historical levels could adversely affect our gross margins and results of operations.
Our business strategy includes growth and product diversification through strategic acquisitions. These acquisitions and investments could be unsuccessful or consume significant resources, which could adversely affect our results of operations.
Acquisitions and investments may involve cash expenditures, debt incurrence, operating losses and expenses that could have an adverse effect on our financial condition and results of operations. Acquisitions involve numerous other risks, including:
• diversion of management time and attention from daily operations;
• difficulties integrating acquired businesses, technologies and personnel into our business;
• difficulties in realization of expected synergies and revenue creation or cross-selling opportunities;
• potential loss of key employees, key contractual relationships or key customers of acquired companies or of us; and
• assumption of the liabilities and exposure to unforeseen liabilities of acquired companies.
We have limited experience in acquiring or integrating other businesses or making investments or undertaking joint ventures with others. It may be difficult for us to complete transactions quickly and to integrate acquired operations efficiently into our current business operations. It may also be difficult for us to identify suitable acquisition candidates, which may inhibit our growth rate. Any acquisitions or investments may ultimately harm our business or financial condition if they are unsuccessful and any acquisitions or investments ultimately result in impairment charges.
We carry insurance against many potential liabilities, but our management of risk may leave us exposed to unidentified or unanticipated risks.
Although we maintain insurance policies with respect to our related exposures, including certain casualty, property and business interruption programs, these policies contain deductibles, self-insured retentions and limits of coverage. In addition, we may not be able to continue to obtain insurance at commercially reasonable rates or may be faced with liabilities not covered by insurance, such as, but not limited to, environmental contamination, conflicts, or terrorist attacks. We estimate our liabilities for known claims and unpaidclaims and expenses based on information available as well as projections for claims incurred but not reported. However, insurance liabilities, some of which are self-insured, are difficult to estimate due to various factors. If any of our insurance policies or programs are not effective in mitigating our risks, we may incur losses that are not covered by our insurance policies, that are subject to deductibles or that exceed our estimated accruals or our insurance policy limits, which could adversely impact our business and results of operations.
Volatility in currency exchange rates may adversely affect our financial condition, results of operations or cash flows.
We may not be able to effectively manage our exchange rate and/or currency transaction risks. Volatility in currency exchange rates may decrease our revenue and profitability, adversely affect our liquidity and impair our financial condition. While we have entered into hedging instruments to manage our exchange rate risk as it relates to certain intercompany balances with certain of our foreign subsidiaries, these hedging activities do not eliminate exchange rate risk, nor do they reduce risk associated with total foreign sales. In addition, we may not be able to obtain hedging instruments with respect to certain currencies.
Our non-U.S. subsidiaries generally sell their products and services in the local currency, but obtain a significant amount of their products from our facilities located elsewhere, primarily the U.S., Canada or Europe. In particular, significant fluctuations in the Canadian Dollar, the Euro or the Pound Sterling against the U.S. Dollar could adversely affect our results of operations. During fiscal 2026, the value of the U.S. Dollar overall weakened in relation to the principal non-U.S. currencies from which we derive revenue, which positively impacted revenue by $6.1 million. During fiscal 2025, the value of the U.S. Dollar overall strengthened in relation to the principal non-U.S. currencies from which we derive revenue, which negatively
impacted revenue by $1.0 million. Any further appreciation in the U.S. Dollar relative to such non-U.S. currencies could continue to have a significant negative impact on our results of operations in future periods. We also bid for certain foreign projects in U.S. Dollars or Euros. If the U.S. Dollar or Euro strengthen relative to the value of the local currency, we may be less competitive in bidding for those projects. In addition, currency variations can adversely affect margins on sales of our products in countries outside of the U.S. and margins on sales of products that include components obtained from suppliers located outside of the U.S. See Item 7A, "Quantitative and Qualitative Disclosures about Market Risk" for additional information regarding our foreign currency exposure relating to operations.
Because our consolidated financial results are reported in U.S. Dollars and we generate a substantial amount of our sales and earnings in other currencies, the translation of those results into U.S. Dollars can result in a significant decrease in the amount of those sales and earnings. Fluctuations in currencies relative to the U.S. Dollar may make it more difficult to perform period-to-period comparisons of our reported results of operations. In addition, the net asset values of foreign operations are adjusted upward and downward based on currency exchange rate fluctuations and are reported in our foreign currency translation adjustment as part of other comprehensive income in our consolidated statements of operations and comprehensive income.
Additional liabilities related to taxes, potential tax adjustments or changes to tax policy in foreign jurisdictions could adversely impact our financial results, financial condition and cash flows.
We are subject to tax and related obligations in the jurisdictions in which we operate or do business, including state, local, federal and foreign taxes. The taxing laws of the various jurisdictions in which we operate or do business often are complex and subject to varying interpretations. Tax authorities may challenge tax positions that we take or historically have taken, and may assess taxes where we have not made tax filings or may audit the tax filings we have made and assess additional taxes, as they have done from time to time. Some of these assessments may be substantial, and may involve the imposition of substantial penalties and interest. The resolutions of our tax positions are unpredictable. The payment of substantial additional taxes, penalties or interest resulting from any assessments could adversely impact our results of operations, financial condition and cash flows.
We have significant goodwill and other intangible assets and future impairment of our goodwill and other intangible assets could have a material negative impact on our financial results.
We test goodwill and indefinite-life intangible assets for impairment on an annual basis, and more frequently if circumstances warrant, by comparing the estimated fair value of each of our reporting units to their respective carrying values. As of March 31, 2026, our goodwill and other intangible assets balance was $372.7 million, which represented 45% of our total assets. Long-term declines in projected future cash flows could result in future goodwill and other intangible asset impairments. Because of the significance of our goodwill and other intangible assets, any future impairment of these assets could have a material adverse effect on our financial results.
If we lose our senior management or other key employees or cannot successfully execute succession plans, our business may be adversely affected.
Competition for qualified management and key technical and sales personnel in our industry is intense. Our ability to successfully operate and grow our global business and implement our strategies is largely dependent on the efforts, abilities and services of our senior management and other key employees. If we lose the services of our senior management or other key employees for any reason and are unable to timely find and secure qualified replacements with comparable experience in the industry, our business could be negatively affected.
We rely heavily on trade secrets to gain a competitive advantage in the market and the unenforceability of our nondisclosure agreements may adversely affect our operations.
The process heating industry is highly competitive and subject to the introduction of innovative techniques and services using new technologies. We rely significantly on maintaining the confidentiality of our trade secrets and other information related to our operations. Accordingly, we require all employees to sign a nondisclosure agreement to protect our trade secrets, business strategy and other proprietary information. If the provisions of these agreements are found unenforceable in any jurisdiction in which we operate, the disclosure of our proprietary information may place us at a competitive disadvantage. Even where the provisions are enforceable, the confidentiality clauses may not provide adequate protection of our trade secrets and proprietary information in every such jurisdiction and our trade secrets and proprietary information could be compromised as a result.
Intellectual property challenges may hinder our ability to develop, engineer and market our products, and we may incur significant costs in our efforts to successfully avoid, manage, defend and litigate intellectual property matters.
Patents, non-compete agreements, proprietary technologies, trade secrets, customer relationships, trademarks, trade names and brand names are important to our business. Intellectual property protection, however, may not preclude competitors
from developing products similar to ours or from challenging our trade names or products. Our pending patent applications and our pending copyright and trademark registration applications may not be allowed or competitors may challenge the validity or scope of our patents, copyrights or trademarks. In addition, our patents, copyrights, trademarks and other intellectual property rights may not provide us a significant competitive advantage, particularly in those countries where the laws do not protect our intellectual property rights as fully as in the U.S. Participants in our markets may use challenges to intellectual property as a means to compete. Patent and trademark challenges increase our costs to develop, engineer and market our products. We may need to spend significant resources monitoring our intellectual property rights and we may or may not be able to detect infringement by third parties. If we fail to successfully enforce our intellectual property rights or register new patents, our competitive position could suffer, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
In addition, any dispute or litigation involving intellectual property could be costly and time-consuming due to the complexity and the uncertainty of intellectual property litigation. Our intellectual property portfolio may not be useful in asserting a counterclaim, or negotiating a license, in response to a claim of infringement or misappropriation. In addition, as a result of such claims, we may lose our rights to utilize critical technology, may be required to pay substantial damages or license fees with respect to the infringed rights or may be required to redesign our products at a substantial cost, any of which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Operational Risks
Breaches of our information technology systems could occur that materially damage business partner and customer relations and subject us to significant reputational, financial, legal and operational consequences.
As a company we store company, customer, employee and business partner information, which may include, among other information, trade secrets, names, addresses, phone numbers, email addresses, tax identification numbers, payment account information and customer facility information. We could be subject to sophisticated and targeted attacks attempting to obtain unauthorized access to confidential information, destroy data, disrupt or degrade service, sabotage systems or cause other damage, including via the introduction of computer viruses or malware and cyber-attacks. These attacks are constantly evolving in nature, increasing the efforts and controls required to prevent, detect and defendagainst them. We require user names and passwords as well as multi-factor authentication ("MFA") in order to access our information technology systems. These security measures are subject to potential third-party security breaches, employee error, malfeasance and faulty password management, among other limitations. Third parties may attempt to fraudulently induce employees or customers into disclosing user names, passwords or other sensitive information, which may in turn be used to access our information technology systems. We may not be able to anticipate, detect or recognize threats to our system or to implement effective preventive measures against all security breaches. If we were to experience a breach of our systems and were unable to protect sensitive data, such a breach could, among other things:
• risk exposing our confidential manufacturing processes and other trade secret information that may lead to new and increased entrants and competitors in our business or cause other damage to the business;
• expose our customers' facilities and projects to increased safety and security risk;
• materially damage business partner and customer relationships;
• impact our reputation in the markets in which we compete for business;
• adversely impact our financial results and expose us to potential risk of loss or litigation; and/or
• require us to incur substantial costs or require us to change our business practices.
A material disruption at any of our manufacturing facilities could adversely affect our financial performance and results of operations.
If operations at any of our manufacturing facilities were to be disrupted as a result of significant equipment failures, natural disasters, pandemics, power outages, fires, explosions, terrorism, adverse weather conditions, labor disputes or other reasons, we may be unable to fill customer orders and meet customer demand for our products, which could adversely affect our financial performance and results of operations. For example, our marketing and research & development buildings, located on the same campus as our former corporate headquarters and primary manufacturing facility in San Marcos, Texas, were destroyed by a tornado in January 2007. In addition, during fiscal 2021 and 2022, precautionary measures instituted by government authorities in certain markets and sanitization procedures adopted to protect our employees in response to the COVID-19 pandemic required us to temporarily suspend operations at certain of our manufacturing facilities.
Interruptions in production, in particular at our manufacturing facilities in the U.S. or Canada, at which we manufacture the majority of our products, could increase our costs and reduce our sales. Any interruption in production capability could require us to make substantial capital expenditures to fill customer orders, which could negatively affect our
profitability and financial condition. We maintain property damage insurance that we believe to be adequate to provide for reconstruction of facilities and equipment, as well as business interruption insurance to mitigate losses resulting from any production interruption or shutdown caused by an insured loss. However, any recovery under our insurance policies may not offset the lost sales or increased costs that may be experienced during the disruption of operations, which could adversely affect our financial performance and results of operations.
Our dependence on subcontractors and third-party suppliers could adversely affect our results of operations.
We often rely on third-party subcontractors, suppliers and manufacturers to produce our products and complete our projects. To the extent we cannot engage subcontractors or acquire supplies or raw materials from third parties, our ability to produce our products or complete our projects in a timely fashion or at a profit may be impaired. If the amount we are required to pay for these goods and services exceeds the amount we have estimated in bidding for fixed-price contracts, we could experience losses on these contracts. Rapid price increases caused by changes in U.S. or international trade policy or tariffs may limit our ability to accurately estimate costs for our fixed-price contract bids. In addition, if a subcontractor or supplier is unable to deliver its services or materials according to the negotiated contract terms for any reason, including the deterioration of its financial condition or over-commitment of its resources, we may be required to purchase the services or materials from another source at a higher price or, if unavailable, limit the availability of products critical to our operations. Such shortages or disruptions could be caused by factors beyond the control of our subcontractors, our suppliers or us, including inclement weather, natural disasters, conflicts, tariffs, increased demand, problems in production or distribution, disruptions in third party logistics or transportation systems or the inability of our subcontractors or suppliers to obtain credit. These factors could be exacerbated by the impact of geopolitical instability, trade policy changes or pandemics. This may reduce the profit we realize or result in a loss on a project for which the services or materials were needed or, if the product is unavailable, prevent us from accepting orders.
We may lose money on fixed-price contracts, and we are exposed to liquidateddamages charges and warranty claims in many of our customer contracts.
We often agree to provide products and services under fixed-price contracts, including our turnkey solutions. Under these contracts, we are typically responsible for all cost overruns, other than the amount of any cost overruns resulting from requested changes in order specifications. Our actual costs and any gross profit realized on these fixed-price contracts could vary from the estimated costs on which these contracts were originally based. This may occur for various reasons, including errors in estimates or bidding, changes in availability and cost of labor and raw materials, including those caused by tariffs, and unforeseen technical and logistical challenges, including with managing our geographically widespread operations and use of third party subcontractors, suppliers and manufacturers in many countries. These variations and the risks inherent in our projects may result in reduced profitability or losses on projects. Depending on the size of a project, variations from estimated contract performance could have a material adverse impact on our project revenue and operating results. In addition, many of our customer contracts, including fixed-price contracts, contain liquidateddamages and warranty provisions for which we are responsible in the event that we fail to perform our obligations thereunder in a timely manner or our products or services fail to perform, in accordance with the agreed terms, conditions and standards.
We extend credit to customers in conjunction with our performance under fixed-price contracts which subjects us to potential credit risks.
We typically agree to allow our customers to defer payment on projects until certain milestones have been met or until the projects are substantially completed, and customers typically withhold some portion of amounts due to us as retainage. Our payment arrangements subject us to potential credit risk related to changes in business and economic factors affecting our customers, including material changes in our customers' revenues or cash flows. If we are unable to collect amounts owed to us, or retain amounts paid to us, our cash flows would be reduced, and we could experience losses if those amounts exceed current allowances. Any of these factors could adversely impact our business and results of operations.
We may not achieve some or all of the expected benefits of our operational initiatives.
In order to align our operational resources with our business strategies, operate more efficiently and control costs, we may periodically announce plans to restructure certain of our operations, such as consolidation of manufacturing facilities, transitions to cost-competitive regions and product line rationalizations. We may also undertake restructuring actions and workforce reductions. For example, we enacted certain restructuring initiatives to streamline certain operations, reduce our manufacturing footprint, and position us for more profitable growth. Refer to Item 8, Financial Statements and Supplementary Data for more discussion. Risks associated with these actions include delays in execution, additional unexpected costs, realization of fewer than estimated productivity improvements and adverse effects on employee morale. If these risks materialize, we may not realize all or any of the anticipated benefits of such restructuring plans, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Unforeseendifficulties with expansions, relocations or consolidations of existing facilities could adversely affect our operations.
From time to time, we may decide to enter new markets, build or lease additional facilities, expand our existing facilities, relocate or consolidate one or more of our operations or exit a facility we may own or lease. Increased costs and production delays arising from the staffing, relocation, sublease, expansion or consolidation of our facilities could adversely affect our business and results of operations.
Legal and Regulatory Risks
Due to the nature of our business, we may be liable for damages based on product liability claims. We are also exposed to potential indemnity claims from customers for losses due to our work or if our employees are injured performing services.
We face a risk of exposure to legal claims and costs of litigation in the event that the failure, use or misuse of our products results in, or is alleged to result in, death, bodily injury, property damage or economic loss. Although we maintain quality controls and procedures, we cannot be sure that our products will be free from defects. If any of our products prove to be defective, we may be required to replace the product. In addition, we may be required to recall or redesign such products, which could result in significant unexpected costs. Some of our products contain components manufactured by third parties, which may also have defects. In addition, if we are installing our products, we may be subject to claims that our installation has caused damage or loss. Our products are often installed in our customers' or end-users' complex and capital-intensive facilities involved in inherently hazardous or dangerous industries, including energy, chemical processing and power generation, where the potential liability from risk of loss could be substantial. Although we currently maintain product liability coverage, which we believe is adequate for the continued operation of our business, we cannot be certain that this insurance coverage will continue to be available to us at a reasonable cost or, if available, will be adequate to cover any potential liabilities. With respect to components manufactured by third-party suppliers, the contractual indemnification that we seek from our third-party suppliers may be insufficient to cover claims made against us. In the event that we do not have adequate insurance or contractual indemnification, product liabilities and other claims could have a material adverse effect on our business, financial condition or results of operations.
Under our customer contracts, we often indemnify our customers from damages and losses they incur due to our work or services performed by us, as well as for losses our customers incur due to any injury or loss of life suffered by any of our employees or our subcontractors' personnel occurring on our customers' property. Substantial indemnity claims may exceed the amount of insurance we maintain and could have a material adverse effect on our reputation, business, financial condition or results of operations.
We operate in many different jurisdictions and we could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar foreign anti-corruption laws.
The U.S. Foreign Corrupt Practices Act (the “FCPA”) and similar foreign anti-corruption laws generally prohibit companies and their intermediaries from making improper payments or providing anything of value to influence foreign government officials for the purpose of obtaining or retaining business or obtaining an unfairadvantage. Recent years have seen a substantial increase in the global enforcement of anti-corruption laws, with more frequent voluntary self-disclosures by companies, aggressive investigations and enforcement proceedings by both the DOJ and the SEC resulting in record fines and penalties, increased enforcement activity by non-U.S. regulators, and increases in criminal and civil proceedings brought against companies and individuals. Because many of our customers, sales channels and end-users are involved in infrastructure construction and energy production, they are often subject to increased scrutiny by regulators. Our internal policies mandate compliance with these anti-corruption laws. However, we operate in many parts of the world that are recognized as having governmental corruptionproblems to some degree and where strict compliance with anti-corruption laws may conflict with local customs and practices. Our continued operation and expansion outside the U.S., including in developing countries, could increase the risk of such violations in the future. Despite our training and compliance programs, we cannot assure you that our internal control policies and procedures always will protect us from unauthorizedreckless or criminal acts committed by our employees or agents. In the event that we believe or have reason to believe that our employees or agents have or may have violated applicable anti-corruption laws, including the FCPA, we may be required to investigate or have outside counsel investigate the relevant facts and circumstances, which can be expensive and require significant time and attention from senior management. Violations of these laws may result in severecriminal or civil sanctions, which could disrupt our business and result in adverse effects on our reputation, business, results of operations or financial condition.
Our international operations and non-U.S. subsidiaries are subject to a variety of complex and continually changing laws and regulations and, in particular, export control regulations or sanctions.
Due to the international scope of our operations, we are subject to a complex system of laws and regulations, including regulations issued by the U.S. Department of Justice (the “DOJ”), the SEC, the IRS, the U.S. Department of the Treasury, the U.S. Department of State, Customs and Border Protection, Bureau of Industry and Security (“BIS”), Office of Anti Boycott
Compliance (“OAC”) and Office of Foreign Assets Control (“OFAC”), as well as the counterparts of these agencies in foreign countries. Since the commencement of the Russo-Ukrainian war in 2022, many of these regulations have expanded significantly and become increasingly complex. While we believe we are in material compliance with these regulations and maintain programs intended to achieve compliance, we may currently or may in the future be in violation of these regulations. For example, in 2009, we entered into settlement agreements with BIS and OFAC, and in 2010, we entered into a settlement agreement with OAC, in each case with respect to matters we voluntarily disclosed to such agencies. Any alleged or actual violations of these regulations may subject us to government scrutiny, investigation and civil and criminalpenalties and may limit our ability to export our products or provide services outside the U.S. Additionally, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered or interpreted.
In addition, our geographically widespread operations, coupled with our relatively smaller offices in many countries and our reliance on third party subcontractors, suppliers and manufacturers in the completion of our projects, make it more difficult to oversee and ensure that all our offices and employees comply with our internal policies and control procedures. We have experienced immaterial employee theft in the past, and we cannot assure you that we can ensure our employees' compliance with our internal control policies and procedures.
We are subject to numerous environmental and health and safety laws and regulations, as well as potential environmental liabilities, which may require us to make substantial expenditures.
Our operations and properties are subject to a variety of federal, state, local and foreign environmental laws and regulations, including those governing the discharge of pollutants into the air or water, the management and disposal of hazardous substances or wastes, the cleanup of contaminated sites and workplace health and safety. As an owner or operator of real property, or generator of waste, we could become subject to liability for environmental contamination, regardless of whether we caused such contamination. Certain environmental laws, including the Comprehensive Environmental Response, Compensation, and Liability Act, impose joint and several liability for cleanup costs, without regard to fault, on persons who have disposed of or released hazardous substances into the environment. In addition, we could become liable to third parties for damages resulting from the disposal or release of hazardous substances into the environment. Some of our operations require environmental permits and controls to prevent and reduce air and water pollution, and these permits are subject to modification, renewal and revocation by issuing authorities. From time to time, we could be subject to requests for information, notices of violation, and/or investigations initiated by environmental regulatory agencies relating to our operations and properties. Violations of environmental and health and safety laws can result in substantial penalties, civil and criminal sanctions, permit revocations, and facility shutdowns. Environmental and health and safety laws may change rapidly and have tended to become more stringent over time. As a result, we could incur costs for past, present, or future failure to comply with all environmental and health and safety laws and regulations. In addition, we could become subject to potential regulations concerning the use of per- or polyfluoroalkyl substances ("PFAS"), the emission of greenhouse gases or disclosure regarding such emissions, and while the effect of such future regulations cannot be determined at this time, they could require us to incur substantial costs in order to achieve and maintain compliance. For example, European Union regulatory authorities and certain other governmental authorities are contemplating regulations to restrict and phase-out PFAS. In the ordinary course of business, we may be held responsible for any environmental damages we may cause to our customers' premises.
The effects of climate change and any related regulation of greenhouse gases could have a negative impact on our business.
Governments around the world are increasingly focused on enacting laws and regulations regarding climate change and regulation of greenhouse gases. Lawmakers and regulators in the jurisdictions where we operate have proposed or enacted regulations requiring reporting of greenhouse gas emissions and the restriction thereof, including the SEC’s recent rule proposal for climate change disclosure, increased fuel efficiency standards, carbon taxes or cap and trade systems, restrictive permitting, and incentives for renewable energy. In addition, efforts have been made and continue to be made in the international community toward the adoption of international treaties or protocols that would address global climate change issues and impose reductions of hydrocarbon-based fuels, including plans developed in connection with the Paris climate conference in December 2015 and the Katowice climate conference in December 2018. Laws or regulations incentivizing or mandating the use of alternative energy sources such as wind power and solar energy have also been enacted in certain jurisdictions. Additionally, numerous large cities globally and several countries have adopted programs to mandate or incentivize the conversion from internal combustion engine powered vehicles to electric-powered vehicles and placed restrictions on non-public transportation. Such policies or other laws, regulations, treaties and international agreements related to greenhouse gases and climate change may negatively impact the price of oil relative to other energy sources, reduce demand for hydrocarbons, or otherwise unfavorably impact our customers in the oil, gas, power generation and petrochemical industries. To the extent our customers, particularly our energy and industrial customers, are subject to any of these or other similar proposed or newly enacted laws and regulations or impacted by the change in energy prices due to such laws and regulations, we are exposed to risks that the additional costs incurred by customers to comply with such laws and regulations or that the deterioration of customers’ financial results as a result of changing energy prices could impact our customers’ ability or desire to continue to
operate at similar levels in certain jurisdictions as historically seen or as currently anticipated, which could negatively impact their demand for our products and services. These laws and regulations could also increase costs associated with our operations, including costs for raw materials and transportation and compliance with enhanced climate change-related disclosure requirements. The ultimate impact of greenhouse gas emissions-related agreements, legislation, disclosure requirements and related measures on our financial performance is highly uncertain because we are unable to predict with certainty, for a multitude of individual jurisdictions, the outcome of political decision-making processes and the variables and trade-offs that inevitably occur in connection with such processes.
In addition to potential impacts on our business resulting from climate-change legislation or regulations, our business also could be negatively affected by climate-change related physical changes or changes in weather patterns. An increase in severe weather patterns could result in damages to or loss of our manufacturing facilities, impact our ability to conduct our operations and/or result in a disruption of our customers’ operations. In addition, volatility in weather patterns could exacerbate the cyclicality of demand for our heating products.
Risks Related to Ownership of Our Common Stock
Our quarterly operating results may vary significantly, which could negatively impact the price of our common stock.
Our quarterly results of operations have fluctuated in the past and will continue to fluctuate in the future. You should not rely on the results of any past quarter or quarters as an indication of future performance in our business operations or the price of our common stock. Factors that might cause our operating results to vary from quarter to quarter include, but are not limited to:
• general economic conditions and cyclicality in the end markets we serve;
• the effects of the COVID-19 pandemic or other global pandemics, conflicts, changes in U.S. or international trade policy or catastrophes;
• future growth of energy and chemical processing capital investments;
• a material disruption at any of our manufacturing facilities;
• delays in our customers' projects for which our products are a component;
• the timing of completion of large projects;
• costs associated with regulatory compliance;
• competition from various other sources providing similar heat tracing products and services, or other alternative technologies, to customers; and
• the seasonality of demand for maintenance orders, which is typically highest during our second and third fiscal quarters.
If our results of operations from quarter to quarter fail to meet the expectations of securities analysts and investors, the price of our common stock could be negatively impacted.
The market price of our common stock may fluctuate significantly, and this may make it difficult for holders to resell our common stock when they want or at prices that they find attractive.
The price of our common stock on the New York Stock Exchange ("NYSE") constantly changes. We expect that the market price of our common stock will continue to fluctuate. The market price of our common stock may fluctuate as a result of a variety of factors, many of which are beyond our control. These factors include, but are not limited to:
• quarterly fluctuations in our operating results;
• changes in investors' and analysts' perception of the business risks and conditions of our business or our competitors;
• our ability to meet the earnings estimates and other performance expectations of financial analysts or investors;
• unfavorable commentary or downgrades of our stock by equity research analysts;
• the emergence of new sales channels in which we are unable to compete effectively;
• disruption to our operations;
• fluctuations in the stock prices of our peer companies or in stock markets in general; and
• general economic or political conditions, including the effects of global trade policies.
In addition, in recent years, global equity markets have experienced extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons often unrelated to their operating performance. These broad market fluctuations may adversely affect the market price of our common stock, regardless of our operating results and cash flows.
Anti-takeover provisions contained in our charter and bylaws could impair a takeover attempt that our stockholders may find beneficial.
Our second amended and restated certificate of incorporation, amended and restated bylaws and Delaware law contain provisions that could have the effect of rendering more difficult, or discouraging, an acquisition deemed undesirable by our board of directors. Our corporate governance documents include provisions:
• authorizing our board of directors, without further action by the stockholders, to issue blank check preferred stock;
• limiting the ability of our stockholders to call and bring business before special meetings and to take action by written consent in lieu of a meeting;
• requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors;
• authorizing our board of directors, without stockholder approval, to amend our amended and restated bylaws;
• limiting the determination of the number of directors on our board of directors and the filling of vacancies or newly created seats on our board of directors to our board of directors then in office; and
• subject to certain exceptions, limiting our ability to engage in certain business combinations with an "interested stockholder" for a three-year period following the time that the stockholder became an interested stockholder.
These provisions, alone or together, could delayhostile takeovers and changes in control of the Company or changes in our management.
Though we have opted out of the Delaware anti-takeover statute, our second amended and restated certificate of incorporation contains provisions that are similar to the Delaware anti-takeover statute, which may impair a takeover attempt that our stockholders may find beneficial. Any provision of our second amended and restated certificate of incorporation or amended and restated bylaws that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.
We do not currently intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.
We do not expect to pay dividends on our common stock. Any future dividend payments are within the discretion of our board of directors or a duly authorized committee of the board of directors and will depend on, among other things, our results of operations, working capital requirements, capital expenditure requirements, financial condition, level of indebtedness, contractual restrictions with respect to payment of dividends, business opportunities, anticipated cash needs, provisions of applicable law and other factors that our board of directors may deem relevant. In particular, our credit facility limits our ability to pay dividends from cash generated from operations. We may not generate sufficient cash from operations in the future to pay dividends on our common stock. See Item 5, "Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities-Dividend Policy."
benefit
enhanced
The Company has incurred, and anticipates incurring additional, significant transaction‑related costs in connection with the Merger, including legal, accounting, financial advisory, and other professional fees, of which approximately $13 million was incurred during the three months ended March 31, 2026.
Revenue. Our revenues are derived from providing customers with a full suite of innovative and reliable process heating solutions, including advanced heating and filtration solutions for industrial and hazardous area applications. Revenue recognized at a point in time based on when control transitions to the customer is generally related to our product sales. Point in time revenue does not typically require engineering or installation services. Revenue recognized over time generally occurs on our projects where engineering or installation services, or a combination of the two, are required. We recognize revenue related to such projects in a systematic way that reflects the transfer of goods or services, or a combination of goods and services, to the customer.
We believe that our pipeline of planned projects, in addition to our backlog of signed purchase orders, provides us with visibility into our future revenue. Historically, we have experienced few order cancellations, and the cancellations that have occurred in the past have not been material compared to our total contract volume or total backlog. The small number of order cancellations is attributable in part to the fact that a large portion of our solutions are ordered and installed toward the end of large project construction. Our backlog at March 31, 2026 was $254.9 million as compared to $240.3 million at March 31, 2025. The timing of recognition of revenue out of backlog is not always certain, as it is subject to a variety of factors that may cause delays, many of which are beyond our control (such as, customers' delivery schedules and levels of capital and maintenance expenditures). When delays occur, the recognition of revenue associated with the delayed project is likewise deferred.
Cost of sales. Our cost of sales includes primarily the cost of raw material items used in the manufacture of our products, cost of ancillary products that are sourced from external suppliers and construction labor costs. Additional costs of sales include contract engineering costs directly associated with projects, direct labor costs, shipping and handling costs, and other costs associated with our manufacturing/fabrication operations. The other costs associated with our manufacturing/fabrication operations are primarily indirect production costs, including depreciation, indirect labor costs, warranty-related costs and the costs of manufacturing support functions such as logistics and quality assurance. Key raw material costs include polymers, copper, stainless steel, insulating material, electronic components and other miscellaneous parts related to products manufactured or assembled. We cannot provide any assurance that we will be able to mitigate potential raw material shortages or be able to pass along raw material cost increases, including the potential impacts of tariffs, to our customers in the future, and if we are unable to do so, our results of operations may be adversely affected.
Operating expenses. Our selling, general, and administrative expenses ("SG&A") are primarily comprised of compensation and related expenses for sales, marketing, pre-sales engineering and administrative personnel, as well as other
sales related expenses and other expenses related to research and development, insurance, professional fees, the global integrated business information systems, and provisions for credit losses.
Key drivers affecting our results of operations. Our results of operations and financial condition are affected by numerous factors, including those described under the caption “Risk Factors” in Item 1A of this annual report. These factors include the following:
• Impact of product mix. Typically, our customers require our products as well as our engineering and construction services. The level of service and construction needs affect the profit margin for each type of revenue.
We tend to experience lower margins from our design optimization, engineering, installation and maintenance services, which are typically large projects tied to our customers' capital expenditure budgets and are comprised of more than $0.5 million in total revenue. For clarity, we will refer to these as "Over time large projects." Our results of operations in recent years have been impacted by the various construction phases of Over time large projects. We are typically designated as the heat tracing or heating system engineering provider of choice by the project owner. We then engage with multiple contractors to address incorporating various heat tracing solutions throughout the overall project. Our largest projects may generate revenue for several quarters. In the early stages of an Over time large project, our revenues are typically realized from the provision of engineering services. In the middle stages, or the material requirements phase, we typically experience the greatest demand for our heat tracing cable, at which point our revenues tend to accelerate. Revenues tend to decrease gradually in the final stages of a project and are generally derived from installation services and demand for electrical panels and other miscellaneous electronic components used in the final installation of heat tracing cable, which we frequently outsource from third-party manufacturers.
Projects that do not require installation and maintenance services are smaller in size and representative of maintenance, repairs and small upgrades necessary to improveefficiency and uptime. These small projects are typically tied to our customers' operating expense budgets, are generally less than $0.5 million in total revenue, and have relatively higher profit margins. We will refer to such projects as "Over time small projects."
The most profitable of our sales are derived from selling our heating products, for which we recognize revenue at a point in time. We also tend to experience lower margins from our outsourced products, such as electrical switch gears and transformers, than we do from our manufactured products. Accordingly, our results of operations are impacted by our mix of products and services.
We estimate that Point in time and Over time revenues have each contributed the following as a percentage of total revenue in the periods listed:
Year-Ended March 31, 2026
Year-Ended March 31, 2025
Year-Ended March 31, 2024
Point in time
Over time:
Small projects
Large projects
Our Over time revenue includes (i) products and services which are billed on a time and materials basis, and (ii) fixed fee contracts for complex turnkey and other solutions such as some engineered products. For our time and materials service contracts, we recognize revenues as the products and services are provided over the term of the contract.
Our fixed fee projects typically offer our customers a comprehensive solution for heat tracing from the initial planning stage through engineering/design, manufacture, installation and final proof-of-performance and acceptance testing. Turnkey services also include project planning, product supply, system integration, commissioning and ongoing maintenance. Fixed fee projects, containing multiple deliverables, are customer specific, do not have an alternative use and have an enforceable right to payment, and thus are treated as a single performance obligation with revenues recognized over time as work progresses.
For revenue recognized under fixed fee contracts, we measure the costs incurred that contribute towards the satisfaction of our performance obligation as a percentage of the estimated total cost of production (the “cost-to-cost method”), and we recognize a proportionate amount of contract revenue, as the cost-to-cost method appropriately depicts performance towards satisfaction of the performance obligation. Changes to the original cost estimate may be required during the life of the contract and such estimates are reviewed on a regular basis. Sales
and gross profits are adjusted using the cumulative catch-up method for revisions in estimated contract costs. Reviews of estimates have not generally resulted in significant adjustments to our results of operations.
Point in time revenue represents goods transferred to customers at a point in time and is recognized when obligations under the terms of the contract with the customer are satisfied; generally this occurs with the transfer of control upon shipment.
• Cyclicality of end users' markets. Demand for our products and services depends in large part upon the level of capital and maintenance expenditures of our customers and end users, in particular those in the energy, oil, gas, chemical processing and power generation industries, and firms that design and construct facilities for these industries. These customers' expenditures historically have been cyclical in nature and vulnerable to economic downturns. Large projects historically have been a substantial source of revenue growth, and large project revenues tend to be more cyclical than maintenance and repair revenues. A sustained decrease in capital and maintenance spending or in new facility construction by our customers could have a material adverse effect on the demand for our products and services and our business, financial condition and results of operations.
• Acquisition strategy. In recent years, we have been executing on a strategy to grow the Company through the acquisition of businesses that are either in the process heating solutions industry or provide complementary products and solutions for the markets and customers we serve. Refer to Note 2, "Acquisition," for more discussion.
Results of Operations
The following table sets forth data from our statements of operations for the periods indicated.
Consolidated Statements of Operations Data
Fiscal Year Ended March 31,
Change
(Dollars in thousands)
Sales
Cost of sales
Gross profit
Operating expenses:
Selling, general and administrative expenses
Deferred compensation plan expense/(income)
Amortization of intangible assets
Restructuring and other charges/(income)
Income from operations
Other income/(expenses):
Interest expense, net
Other income/(expense)
Income before provision for income taxes
Income tax expense
Net income
As a percent of sales:
Gross profit
60 bps
Selling, general and administrative expenses
350 bps
Income from operations
(280 bps)
Net income
(240 bps)
Effective tax rate
690 bps
Year Ended March 31, 2026 ("fiscal 2026") Compared to the Year Ended March 31, 2025 ("fiscal 2025")
Revenues. The $38.1 million increase in fiscal 2026 compared to fiscal 2025 was driven primarily by higher project‑related and point in time activity, as well as contributions from the F.A.T.I. Acquisition, which completed in October 2024. Since the acquisition in October 2024, we have significantly expanded the F.A.T.I. business which has been bolstered by robust demand for electrification solutions in Europe as well as targeted commercial and operational initiatives. We experienced revenue growth in all geographic segments, with the exception of APAC, during fiscal 2026 compared to fiscal 2025. Revenue growth also reflected continued progress in portfolio diversification, with approximately 70% of total revenue derived from non‑oil and gas end markets, including industrial, commercial, power generation, and other diversified applications.
For fiscal 2026, revenue recognized at a point in time represented 70% of total revenue, reflecting strong demand for core products and improved pricing realization, while revenue recognized over time accounted for the remaining 30%. This compares to 71% point in time revenue and 29% over time revenue in fiscal 2025.
Segment performance varied during fiscal 2026 compared to fiscal 2025.
US-LAM revenue increased by $7.3 million, or 2.8%, to $263.3 million. The increase reflected growth in both revenue recognized at a point in time and revenue recognized over time. Point in time revenue increased by $3.9 million, or 2.0%, while over time revenue increased by $3.4 million, or 5.3%.
Canada revenue increased by $4.9 million, or 3.1%, to $163.8 million. The increase was driven primarily by higher revenue recognized over time, which increased by $4.1 million, or 8.4%, reflecting improved project activity. Revenue recognized at a point in time increased modestly by $0.8 million, or 0.7%.
EMEA revenue increased by $26.2 million, or 57.9%, to $71.6 million. The increase was driven by significant growth in revenue recognized at a point in time, which increased by $22.9 million, or 86.3%, as well as an increase of $3.3 million, or 17.6%, in revenue recognized over time. F.A.T.I. contributed $26.4 million in fiscal 2026, compared with $6.6 million for a partial year in fiscal 2025.
APAC revenue decreased by $0.3 million, or 0.9%, to $37.6 million. Revenue recognized at a point in time declined by $3.3 million, or 13.8%, due to lower product sales and timing of customer orders, while revenue recognized over time increased by $3.0 million, or 22.2%, reflecting higher project activity. The increase in over‑time revenue partially offset the decline in point‑in‑time revenue.
Separately, revenue was positively affected in fiscal 2026 by foreign exchange rate impacts of approximately $6.1 million.
Gross profit. The increase in gross profit and gross margin were driven primarily by higher sales volumes, improved execution on project activity, pricing realization, and operational productivity improvements, partially offset by mix impacts and inflationary cost pressures.
Selling, general and administrative expenses. The increase in SG&A expense was driven primarily by higher variable compensation costs associated with performance above plan as well as charges approximating $12.9 million related to the announced Merger with CECO. SG&A as a percentage of sales increased by 350 basis points related to the above.
Deferred compensation plan expense/(income). The change in deferred compensation plan activity is primarily attributable to market fluctuations in the underlying balances owed to employees. This compensation plan expense/(income) is materially offset in Other income/(expense) where the Company records market gains/(losses) on related investment assets.
Amortization of intangible assets. The change in amortization of intangible assets is attributable to ordinary recurring amortization commensurate with the balances held in each fiscal 2026 and 2025.
Restructuring and other charges/(income) . In the first quarter of fiscal 2025, we enacted a reduction-in-force as well as the closure of our Denver manufacturing facility as part of consolidating our overall manufacturing footprint. The sale of our Denver facility land and building resulted in a gain of $3.0 million, which more than offset the costs incurred for the reduction in force and facility consolidation. No such activity was present in fiscal 2026.
Interest expense, net. Interest expense, net declined compared to fiscal 2025, driven primarily by a reduction in the average interest rate to 5.51% from 6.44%. In addition, a lower average outstanding balance of $142.1 million in fiscal 2026, compared to $156.8 million in fiscal 2025, further contributed to the favorable change in interest expense. We amended our credit facility in fiscal 2026. See Note 12, "Long-Term Debt," for additional information.
Other income/(expense). The change in other income/(expense) primarily relates to market fluctuations in the underlying investments associated with our non-qualified deferred compensation plan. These unrealized gains and losses on investments were materially offset by deferred compensation plan expense/(income) as noted above.
Income taxes. Income tax expense was $19.7 million, or 30.6%, on pretax income of $64.2 million in fiscal 2026 as compared to income tax expense of $16.6 million, or 23.7%, on a pretax income of $70.1 million in fiscal 2025. Substantially all of the $12.9 million of SG&A expense related to the CECO Merger is not deductible for tax purposes, resulting in an increase of our effective tax rate of approximately 5.0% in fiscal 2026. Tax expense in fiscal 2025 included a $1.0 million, or 1.4%, reduction associated with the release of an uncertain tax position. See Note 17, “Income Taxes,” for further information.
Net income. The change in net income is explained by the changes noted in the sections above.
Consolidated Statements of Operations Data
Fiscal Year Ended March 31,
Change
(Dollars in thousands)
Sales
Cost of sales
Gross profit
Operating expenses:
Selling, general and administrative expenses
Deferred compensation plan expense/(income)
Amortization of intangible assets
Restructuring and other charges/(income)
Income from operations
Other income/(expenses):
Interest expense, net
Other income/(expense)
Income before provision for income taxes
Income tax expense
Net income
As a percent of sales:
Gross profit
190 bps
Selling, general and administrative expenses
100 bps
Income from operations
80 bps
Net income
30 bps
Effective tax rate
Year Ended March 31, 2025 ("fiscal 2025") Compared to the Year Ended March 31, 2024 ("fiscal 2024")
See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2025, filed with the SEC on May 22, 2025, for a discussion of the results of operations in fiscal 2025 as compared to fiscal 2024.
Contingencies
We are involved in various legal and administrative proceedings that arise from time to time in the ordinary course of doing business. Some of these proceedings may result in fines, penalties or judgments being assessed against us, which may adversely affect our financial results. In addition, from time to time, we are involved in various disputes, which may or may not be settled prior to legal proceedings being instituted and which may result in losses in excess of accrued liabilities, if any, relating to such unresolveddisputes. As of March 31, 2026, management believes that adequate reserves have been established for any probable and reasonably estimable losses. Expenses related to litigation reduce operating income. We do not believe that the outcome of any of these proceedings or disputes would have a significant adverse effect on our financial position, long-term results of operations, or cash flows. It is possible, however, that charges related to these matters could be significant to our results of operations or cash flows in any one reporting period.
For information on legal proceedings, see Note 14, "Commitments and Contingencies" to our consolidated financial statements contained elsewhere in this annual report, which is hereby incorporated by reference into this Item 7.
To bid on or secure certain contracts, we are required at times to provide a performance guaranty to our customers in the form of a surety bond, standby letter of credit or foreign bank guaranty. On March 31, 2026, we had in place standby letters of credit, bank guarantees and performance bonds totaling $11.4 million to back our various customer contracts. In addition, our Indian subsidiary also has $3.9 million in customs bonds outstanding. Refer to Note 14, "Commitments and Contingencies" for more information on our letters of credit and bank guarantees.
In connection with the Merger with CECO, the Company has entered into an engagement with Morgan Stanley for financial advisory and related services, pursuant to which fees of approximately $33.1 million may become payable. As of the reporting date, no liability has been recorded for these fees, as the services giving rise to the obligation had not yet been rendered.
Liquidity and Capital Resources
Our primary sources of liquidity are cash flows from operations and funds available under our revolving credit facility. Our primary liquidity needs are to finance our working capital, capital expenditures, debt service, share repurchases and potential future acquisitions.
Cash and cash equivalents. At March 31, 2026, we had $52.3 million in cash and cash equivalents. We manage our global cash requirements by maintaining cash and cash equivalents at various financial institutions throughout the world where we operate. Approximately $25.2 million, or 48%, of these amounts were held in domestic accounts with various institutions and approximately $27.1 million, or 52%, of these amounts were held in accounts outside of the U.S. with various financial institutions. While we have cash needs at our various foreign operations, excess cash is available for distribution to the U.S. through intercompany dividends.
Generally, we seek to maintain a cash and cash equivalents balance between $30.0 and $40.0 million. We will encounter periods where we may be above or below this range, due to, for example, inventory buildup for anticipated seasonal demand in fall and winter months, related cash receipts from credit sales in months that follow, debt maturities, restructuring activities, larger capital investments, severe and/or protracted economic downturns, acquisitions, share repurchases, or some combination of the above activities. The Company continues to manage its working capital requirements effectively through optimizing inventory levels, doing business with creditworthy customers, and extending payment terms with its supplier base.
In connection with the Merger with CECO, the Company has also entered into an engagement with Morgan Stanley for financial advisory and related services. Refer to Note 14, "Commitments and Contingencies" for more information.
Share repurchases
On May 22, 2025, the Company announced that the board of directors had refreshed the authorization back to $50.0 million for the repurchase of the Company's outstanding shares of common stock, exclusive of any fees, commissions or other expenses related to such repurchases. As of March 31, 2026, we have $38.5 million of remaining unused and authorized availability under the Repurchase Program. The Repurchase Program does not include a specific timetable or price targets and may be suspended or terminated at any time. Shares may be purchased through open market or privately negotiated transactions at the discretion of management based on its evaluation of prevailing market conditions and other factors. Refer to Note 6, "Net Income per Common Share" for more information.
Senior secured credit facility
See Note 12, “Long-Term Debt” to our consolidated financial statements and accompanying notes thereto included in Item 8 of this annual report for additional information on our senior secured term loan and revolving credit facilities, which are hereby incorporated by reference into this Item 7. At March 31, 2026, we had $19.7 million outstanding borrowings under our revolving credit facility and $94.3 million of available capacity thereunder, after taking into account the borrowing base and letters of credit outstanding, which totaled $1.0 million. From time to time, we may choose to utilize our revolving credit facility to fund operations, acquisitions or other investments, despite having cash available within our consolidated group in light of the cost, timing and other business considerations.
As of March 31, 2026, we had $121.4 million of outstanding principal on our term loan facilities, net of deferred debt issuance costs. Each of the term loans will amortize as set forth in the table below, with payments due on the first day of each January, April, July and October, with the balance of each term loan facility due at maturity.
Quarterly Installment Dates
Principal Amount
December 31, 2025, through September 30, 2026
December 31, 2026, through June 30, 2030
Future capital requirements
Our future capital requirements depend on many factors as noted throughout this report. We believe that, based on our current level of operations and related cash flows, plus cash on hand and available borrowings under our revolving credit facility, we will be able to meet our liquidity needs for the next 12 months and the foreseeable future.
We expect our capital expenditures to approximate 3% to 3.5% of revenue in fiscal 2027. Additionally, we will be required to pay $7.8 million in principal payments and approximately $6.1 million in interest payments on our long-term debt in the next 12 months. Our estimate of interest expense above was derived from our variable interest rates at March 31, 2026, and is subject to change. See further details in Note 12, "Long-Term Debt." We also have payment commitments of $1.7 million, mostly related to long-term information technology contracts, of which $1.0 million are due within the next 12 months.
Selected Cash Flow Data:
Year Ended March 31,
(Dollars in thousands)
Total cash provided by/(used in):
Operating activities
Investing activities
Financing activities
Free Cash Flow (1)
Cash provided by operating activities
Less: Cash used for purchases of property, plant, and equipment
Free Cash Flow
(1) "Free Cash Flow" is a non-GAAP financial measure, which we define as net cash provided by operating activities less cash used for the purchase of property, plant, and equipment. Free Cash Flow is one measure management uses internally to assess liquidity. Our calculation may not be comparable to similarly titled measures reported by other companies. See further discussion of Non-GAAP Financial Measures below.
Year Ended March 31, 2026 ("fiscal 2026") Compared to the Year Ended March 31, 2025 ("fiscal 2025")
Net cash provided by/(used in) operating activities. Net cash provided by operating activities declined primarily due to relatively greater cash used in working capital needs, such as accounts receivable and inventory, which resulted from improved business activity and demand for liquid load bank products. Additionally, net income was lower in fiscal 2026, mainly as a result of the transaction costs in connection with the Merger with CECO. This collective use of cash was partially offset by higher non-cash activity, such as increased stock compensation expense.
Net cash provided by/(used in) investing activities. Cash used in investing activities decreased in fiscal 2026 compared to fiscal 2025. In fiscal 2025, we acquired F.A.T.I., while no acquisitions were made in fiscal 2026. Additionally, fiscal 2025 included $5.8 million of proceeds from the sale of our Denver property, with no similar transaction in fiscal 2026. These fiscal 2025 items resulted in a net use of cash. The relative year over decrease caused by these items was mostly muted by relatively higher capital expenditures in fiscal 2026.
Net cash provided by/(used in) financing activities. Cash used in financing activities decreased in fiscal 2026 compared to fiscal 2025, primarily due to lower payments against term and revolving debt as a result of relatively lower cash flows from operations as described above. Plus, the Company maintained a relatively higher cash balance at the end of fiscal 2026 versus the prior year.
Free Cash Flow (Non-GAAP)
In addition to evaluating our cash flow generation based upon operating, investing, and financing activities, the Company believes that Free Cash Flow as used in this section may provide investors and key stakeholders with another important perspective regarding our performance. The Company does not intend for this non-GAAP metric to be a substitute for the related GAAP measure, nor should it be viewed in isolation and without considering all relevant GAAP measurements. Moreover, our calculation may not be comparable to similarly titled measures reported by other companies. Refer to the reconciliation of cash provided by/(used in) operating activities to Free Cash Flow under "Non-GAAP Financial Measures" below.
We define “Free Cash Flow” as net cash provided by operating activities less cash used for the purchase of property, plant, and equipment. This metric should not be interpreted to mean the remaining cash that is available for discretionary spending, dividends, share repurchases, acquisitions, or other purposes, as it excludes significant, mandatory obligations, such as principal payments on the Company’s long-term debt facility. Free cash flow is one measure that the Company uses internally to assess liquidity.
Free Cash Flow totaled $32.9 million for fiscal 2026 as compared to $52.9 million for fiscal 2025, a decrease primarily due to lower cash flows from operations, which stemmed from the investments in inventory and other working capital needs as described above.
Year Ended March 31, 2025 ("fiscal 2025") Compared to the Year Ended March 31, 2024 ("fiscal 2024")
See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2025, filed with the SEC on May 22, 2025, for a discussion of net cash provided by operating activities, net cash used in investing activities and net cash provided by (used in) financing activities in fiscal 2025 as compared to fiscal 2024.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements not already disclosed. In addition, we do not have any interest in entities commonly referred to as variable interest entities, which include special purpose entities and other structured finance entities.
Critical Accounting Policies and Estimates
The preparation of our financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures of contingent assets and liabilities. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. Our critical accounting policies are those that materially affect our financial statements and involve difficult, subjective or complex judgments by management. Our most significant financial statement estimates include revenue recognition and valuation of goodwill and other intangible assets.
Although these estimates are based on management's best knowledge of current events and actions that may impact the Company in the future, actual results may be materially different from the estimates.
Revenue recognition . Refer to Note 1, "Organization and Summary of Significant Accounting Policies" of our consolidated financial statements included below in Item 8 of this annual report for further discussion.
Valuation of goodwill and other intangible assets. Refer to Note 1, "Organization and Summary of Significant Accounting Policies" of our consolidated financial statements included below in Item 8 of this annual report for further discussion.
Non-GAAP Financial Measures
Disclosure in this annual report of "Adjusted EPS," "Adjusted EBITDA," "Adjusted Net Income," and "Free Cash Flow," which are "non-GAAP financial measures" as defined under the rules of the Securities and Exchange Commission (the "SEC"), are intended as supplemental measures of our financial performance that are not required by, or presented in accordance with, U.S. generally accepted accounting principles ("GAAP"). "Adjusted Net Income" and "Adjusted fully diluted earnings per share" ("Adjusted EPS") represents net income attributable to Thermon before costs related to acceleration of unamortized debt costs, the tax benefit from income tax rate reductions in certain foreign jurisdictions, withholding tax on dividend related to the debt amendment, amortization of intangible assets, transaction-related costs, the income tax effect on any non-tax adjustments, costs associated with our restructuring and other income/(charges), other impairment charges/(income), and loss on debt extinguishment, per fully-diluted common share in the case of Adjusted EPS. "Adjusted EBITDA" represents net income attributable to Thermon before interest expense (net of interest income), income tax expense, depreciation and amortization expense, stock-based compensation expense, impairment and other charges/(income), loss on debt extinguishment, transaction-related costs, expenses associated with our restructuring and other income/(charges), and expenses related to our Enterprise Resource Planning ("ERP") system implementation. "Free cash flow" represents cash provided by operating activities less cash used for the purchase of property, plant and equipment.
We believe these non-GAAP financial measures are meaningful to our investors to enhance their understanding of our financial performance and are frequently used by securities analysts, investors and other interested parties to compare our performance with the performance of other companies that report Adjusted EPS, Adjusted EBITDA, or Adjusted Net Income. Adjusted EPS, Adjusted EBITDA, and Adjusted Net Income should be considered in addition to, not as substitutes for income from operations, net income, net income per share, and other measures of financial performance reported in accordance with GAAP. We provide Free Cash Flow as one measure of our liquidity. Note that our calculation of Adjusted EPS, Adjusted EBITDA, Adjusted Net Income, and Free Cash Flow may not be comparable to similarly titled measures reported by other companies.
The following table reconciles net income to Adjusted EBITDA for the periods presented:
Year Ended March 31,
(Dollars in thousands)
Net income
Interest expense, net
Income tax expense
Depreciation and amortization
EBITDA (non-GAAP)
Stock-based compensation
Transaction-related costs (1)
Restructuring and other charges/(income) (2)
Debt issuance costs (3)
ERP implementation-related costs
Adjusted EBITDA (non-GAAP)
(1) Fiscal 2026 charges relate to the pending Merger with CECO. Fiscal 2025 charges relate to the October 2024 F.A.T.I. acquisition.
(2) Fiscal 2026 charges associated with cost-cutting measures. Fiscal 2025 charges associated with cost-cutting measures including reduction-in-force and facility consolidation, of which $0.1 million are in cost of sales.
(3) Debt issuance costs related to the July 2025 refinancing of the Company's credit facility.
The following table reconciles net income to Adjusted Net Income and Adjusted EPS for the periods presented:
Year ended March 31,
(Dollars in thousands, except per share data)
Net income
Amortization of intangible assets
Transaction-related costs (1)
Restructuring and other charges/(income) (2)
ERP implementation-related costs
Tax benefit from the release of uncertain tax position reserve
Debt issuance costs (3)
Tax effect of adjustments
Adjusted net income (non-GAAP)
Adjusted fully diluted earnings per common share (non-GAAP)
Fully-diluted common shares - (thousands)
(1) Fiscal 2026 charges relate to the pending Merger with CECO. Fiscal 2025 charges relate to the October 2024 F.A.T.I. acquisition.
(2) Fiscal 2026 charges associated with cost-cutting measures. Fiscal 2025 charges associated with cost-cutting measures including reduction-in-force and facility consolidation, of which $0.1 million are in cost of sales.
(3) Debt issuance costs related to the July 2025 refinancing of the Company's credit facility.
