Thermon Group Holdings Inc (THR) Q1 2026 Earnings Call Highlights: Strategic Growth Amid ...
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Thermon Group Holdings Inc (NYSE:THR) achieved gross margin improvement over the prior year, demonstrating effective operational framework and agility.
The company's backlog increased by 27% from last year, positioning it well for future revenue recognition.
Thermon Group Holdings Inc (NYSE:THR) launched new products, Pontus and Poseidon load banks, targeting the growing data center market.
The company reported strong order momentum in the rail and transit market, with the backlog doubling over the last 12 months.
Thermon Group Holdings Inc (NYSE:THR) maintained a strong balance sheet with a leverage ratio of just one time, providing flexibility for growth strategies.
Negative Points
Thermon Group Holdings Inc (NYSE:THR) experienced a 5% year-over-year decline in revenues due to temporary delays in backlog conversion and project execution timing.
The company faced softness in incoming order rates following liberation day, impacting overall bookings.
Revenue in the first quarter decreased by 5%, with organic revenue down 11% excluding contributions from acquisitions.
Adjusted EBITDA decreased by 9% due to revenue decline and continued investments in growth initiatives.
Thermon Group Holdings Inc (NYSE:THR) anticipates margin headwinds in the upcoming quarters due to tariff impacts.
Q & A Highlights
Warning! GuruFocus has detected 2 Warning Sign with BOM:543526.
Q: Can you provide an update on the capital improvement project that led to production delays and when the delayed orders are expected to ship? A: Yes, the capital improvement project took longer than anticipated, but it is now fully operational and running at historical throughput levels. We expect the delayed revenues to convert in Q2 and throughout the year. Supply chain disruptions have also been resolved. (Bruce Dames, CEO)
Q: Could you elaborate on the liquid load bank opportunity in data centers and the expected revenue potential? A: Liquid load banks are used to test cooling and electrical systems in liquid-cooled data centers. We recently launched these products and are building a pipeline of opportunities. We aim to capture a 20-25% market share in this growing segment. (Bruce Dames, CEO)
Q: What are your gross margin expectations for the next quarter and the rest of the year? A: We anticipate some margin headwinds in Q2 due to tariffs, but expect pricing adjustments to offset these costs in the latter half of the year. We aim to maintain gross margins around 44.8% by year-end. (Bruce Dames, CEO)
Q: Can you discuss the strong demand at FATI and what has changed since the last fiscal quarter? A: FATI has seen strong demand, particularly in electrification opportunities in Europe and the Middle East. The backlog has doubled since the acquisition, driven by regulations and investments in electrification to reduce emissions. (Bruce Dames, CEO)
Q: Could you provide more details on your capital allocation priorities, including M&A and share buybacks? A: Our M&A pipeline is active, and we are looking for opportunities to complement our strategy. We will continue share repurchases if there are no attractive M&A opportunities. We have flexibility in capital allocation, focusing on growth and debt reduction. (John Schott, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
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