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Yahoo
23-05-2025
- Business
- Yahoo
Thermon Group Holdings Inc (THR) Q4 2025 Earnings Call Highlights: Strong EBITDA Growth and ...
Revenue: $134.1 million in Q4, a 5% year-over-year increase. Organic Growth: 3% organic growth in Q4. EBITDA Margin: 22.7% in Q4, a 423 basis point improvement from last year. Adjusted EBITDA: $30.5 million in Q4, up 29% from last year. Net Leverage: Just under 1x at the end of fiscal 2025. Free Cash Flow: $53 million for fiscal 2025. Bookings: $536 million for fiscal 2025 with a book-to-bill ratio of 1.08 times. Backlog: Increased 29% year-over-year as of March 31. Share Repurchase: $14 million in Q4, with a total of over $20 million for fiscal 2025. Debt Repayment: $14.5 million in optional debt repayments in Q4. Fiscal 2025 Revenue: $498 million, up 1% from the prior year. Adjusted EBITDA Margin for Fiscal 2025: 22%, up 86 basis points from last year. Fiscal 2026 Revenue Guidance: $495 million to $535 million. Fiscal 2026 Adjusted EBITDA Guidance: $104 million to $114 million. Warning! GuruFocus has detected 5 Warning Signs with BOG:BOGOTA. Release Date: May 22, 2025 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Thermon Group Holdings Inc (NYSE:THR) achieved 3% organic growth in the fourth quarter, marking the first growth in over a year. The company reported a 29% increase in backlog as of March 31, with organic backlog up 20%, driven by momentum in diversified verticals and a rebound in certain oil and gas markets. Thermon Group Holdings Inc (NYSE:THR) improved its EBITDA margin to 22.7% in the fourth quarter, a 423 basis point improvement from the previous year. The company generated $53 million in free cash flow during fiscal 2025, reflecting strong earnings growth and gross margin expansion. Thermon Group Holdings Inc (NYSE:THR) successfully executed its capital allocation priorities, including strategic M&A, share repurchases, and debt repayments, while maintaining a strong balance sheet with net leverage under one times. Thermon Group Holdings Inc (NYSE:THR) faced weaker CapEx revenue trends in recent quarters, impacting overall revenue growth. The company anticipates margin headwinds in the first half of fiscal 2026 due to tariffs and elevated input costs, with mitigating actions expected to take effect later in the year. Revenue from large capital projects declined by 37% in fiscal 2025, posing a challenge to overall revenue growth. Thermon Group Holdings Inc (NYSE:THR) is experiencing broader macroeconomic uncertainty, which could impact customer capital deployment and demand in the second half of fiscal 2026. The company is exposed to potential second and third order effects from tariffs through its supplier and distributor networks, despite having low direct market exposure to China. Q: Can you elaborate on the resurgence in LNG and how it might translate for Thermon? A: Bruce Thames, President and Director, explained that since the lift of the LNG export moratorium, projects have progressed quickly, particularly along the US Gulf Coast and in the Middle East. Thermon is tracking around $80 million in LNG opportunities, indicating strong tailwinds in this sector. Q: What are the expectations for margin headwinds in FY26, and how will pricing impact this? A: Bruce Thames noted that inflationary impacts from tariffs will affect gross margins in the first half of the year. Pricing actions have been implemented to offset these costs, but there is a lag before they take effect. The expectation is that pricing will begin to positively impact margins by late Q2. Q: How is Thermon approaching capital allocation, especially with debt paydown and share buybacks? A: Jan Schott, CFO, stated that capital investments for growth remain a priority, with CapEx at 2%-3% of sales. The company is also focused on opportunistic share repurchases and has an active M&A pipeline, supported by $137 million in liquidity. Q: What is the expected net impact of tariffs for the upcoming year after mitigation efforts? A: Bruce Thames estimated the net impact of tariffs to be in the range of $4 million to $6 million for the fiscal year, primarily affecting the first half. Q: How is Thermon positioned competitively regarding tariffs and trade policies? A: Bruce Thames highlighted Thermon's diversified global footprint, with significant operations in the US, Canada, and Europe, which provides a strategic advantage. The company has minimized dependency on China, reducing exposure to tariff-related disruptions. For the complete transcript of the earnings call, please refer to the full earnings call transcript. This article first appeared on GuruFocus. Error while retrieving data Sign in to access your portfolio Error while retrieving data
Globe and Mail
22-05-2025
- Business
- Globe and Mail
Thermon (THR) Q4 2025 Earnings Call Transcript
DATE Thursday, May 22, 2025 at 11 a.m. ET CALL PARTICIPANTS Chief Executive Officer — Bruce Thames Chief Financial Officer — Jan Schott Vice President, Investor Relations and Global Communication — Ivonne Salem Need a quote from one of our analysts? Email pr@ RISKS CEO Thames disclosed, "Tariffs continue to present both direct and indirect challenges to our cost structure," noting an expected annualized gross impact of $16 million to $20 million before mitigation efforts in FY2026. CFO Schott confirmed, Free cash flow for FY2025 was $52.9 million, down from $55 million in FY2024. attributing the decline to investments in ERP technology. Management's guidance anticipates margin headwinds in the first half of FY2026, with price increases in the second half expected to offset these pressures as mitigation efforts take full effect. indicating temporary pressure on profitability. TAKEAWAYS Revenue: $134.1 million in revenue in the fourth quarter of fiscal 2025, a 5% year-over-year increase, primarily driven by recurring revenues and contributions from acquisitions. Organic Growth: 3% organic revenue growth, reversing a year-long trend of declines. OpEx Revenue: $111.8 million in OpEx revenue, up 7% year-over-year representing 83% of total revenues. Large Project Revenue: $22.3 million, down 5% year-over-year but up 20% quarter-over-quarter. Orders and Bookings: Orders increased 19% on a reported basis in the fourth quarter of fiscal 2025 and nearly 14% organically; book-to-bill reached 1.04x. Backlog: Total backlog rose 29% year-over-year as of March 31, 2025, with organic backlog increasing 20%. Adjusted EBITDA: Adjusted EBITDA was $30.5 million, up 29% year-over-year in the fourth quarter of fiscal 2025; the Adjusted EBITDA margin expanded to 22.7%, a 423 basis point improvement relative to Q4 of last year Free Cash Flow: $52.9 million in free cash flow for fiscal 2025, with a modest decline attributed to technology investments related to ERP implementation Share Repurchases: $14 million repurchased, over $20 million for fiscal 2025; repurchase authorization refreshed to $50 million. Net Debt and Leverage: Net debt reduced to $99 million at the end of fiscal 2025, with net leverage at 0.9x at year-end. LNG Market Activity: Five major LNG project awards secured since the US moratorium lift. Regional Results: US land sales up 6% in the fourth quarter of fiscal 2025; EMEA revenue up 51% reported (18% excluding Fati); Canada sales down 6% year-over-year in the fourth quarter of fiscal 2025; APAC revenue was $9.2 million. Diversification: Over 70% of revenue now comes from diversified end markets as of FY2025, meeting the strategic goal nearly two years ahead of plan. Genesys Control Offerings: Now comprise 12% of total heat tracing revenue in FY2025, with the installed circuit base growing nearly 90% in FY2025 and projected to grow another 50% in FY2026. Vapor Power and Fati Acquisitions: Vapor Power expanded the sales pipeline by 25% and accounts for 11% of current revenue; Fati backlog has doubled post-acquisition during FY2025. Capital Expenditures: $3.1 million in capital expenditures in the fourth quarter of fiscal 2025, flat compared to the fourth quarter of last year; planned annual CapEx at 2%-3% of sales for FY2026 with 1% for technology investments in FY2026. Tariff Exposure: Management estimates the net tariff impact after mitigation at $4 million to $6 million for FY2026, mainly in the first half. Fiscal 2026 Guidance: Revenue is expected at $495 million to $535 million (3.5% growth at midpoint) for FY2026; adjusted EBITDA is projected to range from $104 million to $114 million for FY2026, with a modest margin decline anticipated for FY2026 due to tariff timing. SUMMARY Thermon Group Holdings, Inc. delivered sequential and year-over-year revenue increases in the fourth quarter of fiscal 2025, with recurring revenues and recent acquisitions driving results. Management is proactively addressing tariff-related cost pressures using price increases, supply chain optimization, and global footprint shifts, but expects profitability headwinds primarily in the first half of the year. The company achieved strategic milestones in diversification and digitization, notably expanding backlog and order momentum in LNG, rail and transit, petrochemical, and general industrial sectors. CEO Thames emphasized, "The decarbonization opportunity remains a critical aspect of our strategy" highlighting both inorganic and organic initiatives to address electrification demand. Schott stated, "$137 million of liquidity," underlining balance sheet strength supporting ongoing capital allocation to M&A, share buybacks, and technology upgrades. Management outlined a clear capital allocation framework prioritizing organic growth investment, opportunistic share repurchases, and a robust M&A pipeline, enabled by flush liquidity. Backlog growth, particularly in LNG and diversified end markets, could benefit future revenue resiliency if macro or trade uncertainties subside. INDUSTRY GLOSSARY OpEx Revenue: Revenue derived from operations, maintenance, and recurring services, as opposed to large one-time capital projects. Book-to-Bill: The ratio of orders received to revenue billed in a given period; values above 1 indicate growing backlog. Genesys Control Offerings: Thermon's proprietary digital controls and monitoring system for heat tracing solutions, providing real-time operational insights. 3D Initiatives: Thermon's strategic pillars covering Decarbonization, Diversification, and Digitization efforts. ERP: Enterprise Resource Planning, a software system integrating core business processes. MRO Revenue: Maintenance, Repair, and Operations revenues tied to recurring customer support and product service work. Full Conference Call Transcript Ivonne Salem: Thank you. Good morning, and thank you for joining Thermon Group Holdings, Inc.'s fourth quarter and full year fiscal 2025 results conference call. Leading the call today are CEO, Bruce Thames, and Chief Financial Officer, Jan Schott. Earlier this morning, we issued an earnings press release which has been filed with the SEC on Form 8-K, and is also available on the investor relations section of our website. Additionally, the slides for this conference call can be found in our IR web under news and events IR calendar, earnings conference call Q4 2025. During the call, we will discuss some items that do not conform to generally accepted accounting principles. We have reconciled those items to the most comparable GAAP measures in the tables at the end of the earnings press release. These non-GAAP measures should be considered in addition to and not as a substitute for measures of financial performance reported in accordance with GAAP. I would like to remind you that during this call, we might make certain forward-looking statements regarding our company. Please refer to our annual report and most recently quarterly report filed with the SEC for more information regarding our forward-looking statements, including the risks and uncertainties that could impact our future results. Our actual results might differ materially from those contemplated by these forward-looking statements, and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments, or otherwise, except as might be required by law. Today's call will begin with remarks from our CEO, Bruce Thames, who will provide a review of our recent business performance, including an update on the progress we have made on our strategic initiatives, followed by a financial update and review from our CFO, Jan Schott. Bruce will then wrap up our prepared remarks with an update on our business outlook. At the conclusion of these prepared remarks, we will open the line for questions. With that, I'll turn the call over to Bruce. Bruce Thames: Thank you, Ivonne, and good morning to everyone joining us on the call today. I'll begin my commentary with the fourth quarter highlights, which we detail on slide three of our presentation. The fourth quarter was another period of solid execution by our team, which resulted in further strength in our OpEx recurring revenues, continued bookings momentum, and strong margin expansion. Over the past couple of quarters, we've detailed how our team has remained focused on our key strategic priorities despite the difficult market conditions. While CapEx revenue trends in recent quarters were weaker than we would have liked, we remain confident that the positive order momentum in our business would translate to an improved growth trajectory. During the fourth quarter, our hard work and dedication paid off, as we generated 3% organic growth during the quarter, the first in over a year. These order trends have improved across a range of verticals, most notably the LNG market. After the moratorium on LNG exports from the US was lifted earlier this year, activity has resumed, and we're seeing increased bidding and project awards. The activity around natural gas is broad-based with numerous projects underway in the Gulf Coast and the Middle East. We built a strong portfolio of products targeting the LNG market, have secured five major awards, and are well-positioned to capitalize on numerous other opportunities in our pipeline. This bookings momentum resulted in the fourth consecutive quarter with a positive book-to-bill. As a result, our backlog as of March 31st increased 29% from last year, with the organic backlog up 20%, driven by momentum in diversified verticals coupled with a rebound in certain oil and gas markets. We also made further progress on our operational excellence initiatives, which combined with our more favorable revenue mix translated to an EBITDA margin of 22.7% during the fourth quarter, a 423 basis point improvement relative to Q4 of last year. These results underscore the strength of the Thermon business system and resilience of our business operating model. And finally, our strict financial discipline and improved operating profitability enabled us to finish fiscal 2025 in a strong financial position, with net leverage of just under one times. Importantly, we were able to accomplish this while continuing to invest in our growth initiatives, while also making nearly $14.5 million in optional debt repayments and returning over $14 million in capital to shareholders through our share repurchase program, all in the fourth quarter. As a testament to our solid financial position, the board has approved refreshing our share repurchase authorization back to the initial $50 million, underscoring our optimism for the future. Turning now to reflect on fiscal 2025, I'm extremely pleased with our team's performance delivering another record year of revenue and adjusted EBITDA, despite what was a very challenging operating environment. On slide four, we provide a snapshot of our 2025 high. Our $498 million in revenue was up just 1% over the prior year, despite a 37% decline in large capital projects. Our diverse revenue base, making up over 72% of our end market mix, along with growth in recurring revenues and strategic M&A, were instrumental in delivering this year's results. We generated an adjusted EBITDA margin of 22% during fiscal 2025, which was up 86 basis points from last year, reflecting our more favorable revenue mix and productivity gains through the implementation of the Thermon business system. Our earnings growth and solid gross margin expansion of 196 basis points delivered $53 million in free cash flow during the year. More importantly, we generated $536 million in bookings during the year, with a book-to-bill of 1.08 times, demonstrating the favorable trends in our end markets, our strong competitive position, and the hard work and dedication of our team. Our 3D initiatives, which we'll are contributed $93 million in revenue during the year. The R&D team also announced 28 new product and software releases during fiscal 2025, advancing our solution set from digitization to diversification and decarbonization, as well as in the core business. The advancement of our strategy positions us well as we enter our fiscal year with solid momentum, which we illustrate on slide five. The addition of Vapor Power has expanded our addressable market, increasing our sales pipeline by 25%, even though the business represents just 11% of total revenue today. The favorable book-to-bill, underpinned by strong order trends in recent quarters, has resulted in backlog growth on a year-over-year basis. While there is broader macro uncertainty, we remain encouraged by the favorable trends in our key end markets, which is reflected in our strong bid pipeline, which is up 25% from the end of last year. As we anticipate the opportunities ahead in fiscal 2026, I would like to take a moment to reflect on the strides we made in advancing our strategic initiatives during fiscal 2025. Now turning to slide six, where we highlight our key strategic pillars. First, growing our installed base. Second, decarbonization, digitization, and diversification. And third, disciplined capital allocation. These pillars, underpinned by our dedication to operational excellence, form the basis of our long-term value creation framework. I will begin on slide seven with growing the installed base. Over the past seventy years, we've cultivated a loyal customer base that is the foundation of this business and continues to drive meaningful results even in challenging market conditions. During fiscal 2025, our organic revenues declined only 8% despite a decline in large preven new project revenues of nearly 40%. On a trailing twelve-month basis, our OpEx revenues represented 85% of our total revenues, up from the low seventy percent range just two years ago, providing a more stable and predictable base of revenues. As importantly, these OpEx revenues carry significantly gross margins, typically in the 40% to 65% range, well above the levels in our large project business. On slide eight, we underscore the critical components of our second strategic pillar, pursuing diversification, decarbonization, and digitization, otherwise known as our 3D initiatives. To achieve growth above and beyond GDP, by capitalizing on these transformative opportunities and expanding our presence in higher growth, diversified markets, we are positioning the company for sustained profitability and long-term competitive advantage. Diversification is shown here on slide nine. Has been an area where we've exceeded our expectations. The goal of 70% of revenue from diverse end markets was achieved at the end of fiscal 2025, almost two years early. One of the most significant insights from fiscal 2017 is the remarkable 220% revenue growth driven by diversification across multiple end markets, even as oil and gas revenues contracted. As we look forward, we remain committed to further diversifying our revenue base through new product introductions and expanding into new emerging markets such as data centers and nuclear power. That said, our long-standing oil and gas customers remain an important part of the Thermon business at roughly 30% of our total revenues. We've been encouraged by the recent LNG project activity, which we view as a bridge fuel for years to come. These pockets of strength we're seeing contributed to our Q4 bookings with oil and gas, up over 50% from last year. Based on the priorities of the new administration, we're optimistic this momentum can continue. Turning now to slide ten. The decarbonization opportunity remains a critical aspect of our strategy as we look to leverage existing solutions and new product development to meet our customers' decarbonization and electrification needs. The electrification of industrial heating is still in its early stages, and we built both the technical competencies and breadth of solutions to enable this transition. The acquisition of Vapor Power in fiscal year 2024 expanded our product portfolio while increasing our total addressable market for decarbonization and electrification opportunities, with the pipeline growing 70% and revenues increasing 85% over fiscal year 2024. During fiscal 2025, we took another important step to further advance our decarbonization strategy with the acquisition of Fati. This acquisition brought us a very well-respected brand of heating solutions that is highly complementary to our legacy portfolio while expanding our global manufacturing footprint. Since acquiring the business, the Fati backlog has essentially doubled due to strong demand from Thermon legacy customers. In addition to our inorganic growth, we have built advanced software analytic tools to validate designs and launch several new products that reduce the total cost of ownership for our customers. While the policy shift in the US has led to a slowdown in decarbonization conversion rates, Europe continues to invest in the energy transition. As outlined on slide eleven, we remain highly encouraged by the significant strides we made in advancing our digitization strategy. The continued investment in our Genesys control offerings reflects our unwavering commitment to delivering leading controls and monitoring solutions that empower our customers with real-time operational insights, enhancing safety, reliability, and efficiency. These solutions now constitute 12% of our total heat tracing revenue, a clear testament to its growing impact. Furthermore, fiscal 2025 saw remarkable growth in our Genesys network installed base, where circuit counts surged by nearly 90%, and we're projecting an additional 50% growth in fiscal 2026. This robust adoption underscores the differentiated value we bring to the market. By enabling our customers to digitize and optimize their maintenance operations, we are not only strengthening our competitive advantage but also driving success in new capital projects while capturing recurring MRO revenues. This strategic focus positions us well for sustained growth and leadership in the market. Turning now to slide twelve. I'm pleased to highlight the transformative impact of the Thermon business system. By streamlining our operations through initiatives such as rooftop consolidation and efficiency improvements, as well as the seamless integration of Vapor Power and Fati, we strengthened our operational foundation. This system not only accelerates our product progress towards achieving our profitability targets but also enhances our agility and positions us to deliver sustained competitive advantage in the marketplace. And finally, as it relates to our disciplined capital allocation strategy, we successfully executed on our balanced approach during fiscal 2025. As we continue to make important investments to advance our organic growth strategy, deployed capital for strategic M&A through the acquisition of Fati, recurring capital to shareholders through our share repurchase program, and made optional debt repayments throughout the year. As we move forward, our strategic focus remains on identifying and executing high-value acquisitions that align with our mission to expand and diversify our portfolio of industry-leading industrial heating solutions. With that, I'll turn it over to Jan, who will provide a more detailed review of our fourth quarter results before I wrap up with some remarks on our financial outlook. Jan? Jan Schott: Thank you, Bruce, and good morning, everyone. I will review the financial results for the quarter, give an update on working capital and free cash flow, and conclude with comments on the balance sheet and liquidity. Moving to slide fourteen, I will start with our fourth quarter highlights. Revenue in the fourth quarter was $134.1 million, a year-over-year increase of 5%, driven by continued momentum in OpEx revenues, including solid growth at Vapor Power and contribution from Fati. Please note that Vapor Power is now included in organic results. Our strategic focus of diversifying our revenue base and increasing our exposure to short-cycle projects and MRO-related recurring revenue continues to benefit our business. This was partially offset by softness in large project revenue. As Bruce mentioned earlier, we are beginning to see improved booking momentum in our large project business. Large project revenue was $22.3 million during the fourth quarter, down 5% from last year. Compared to the previous quarter, however, we saw revenue increase 20%, another indicator of improved momentum in CapEx spending. Our OpEx revenues were $111.8 million during the fourth quarter, an increase of 7% compared to last year, highlighting the benefit of our strong and loyal installed base of customers and the stability of maintenance and repair spending. Excluding the contributions from Fati, OpEx revenues increased 4% from the same period last year. OpEx revenues represented 83% of total revenues for the quarter. Orders increased 19% on a reported basis and were up nearly 14% organically, with balanced strength across our diversified end markets, including strength in chemical, petrochemical, and rail and transit markets. We also saw a rebound in oil and gas, particularly LNG, as Bruce mentioned earlier. As a result, our fourth quarter book-to-bill was 1.04 times, up from 1.03 times in the prior quarter. Looking at our results by geography, US land sales increased 6% due to continued strength in OpEx revenue and improved large project trends. Revenue in EMEA was up 51% on a reported basis to $15 million and up 18% excluding the contribution from Fati. Canada sales of $40 million were down 6% from last year due to the general macroeconomic conditions in the country. Revenues in APAC were $9.2 million. Adjusted EBITDA was $30.5 million during the fourth quarter, up from $23.6 million last year, an increase of 29%. Solid revenue growth and strong operating performance were partially offset by continued investments in growth initiatives. Adjusted EBITDA margin was 22.7% during the fourth quarter, up from 18.5% last year due to a more favorable revenue mix, disciplined cost management, and productivity gains. Moving to slide sixteen for an update on our balance sheet and liquidity. Working capital increased by 3% to $167.6 million at the end of the quarter due to timing of collections. CapEx was $3.1 million during the quarter, flat compared to last year. Free cash flow during fiscal 2025 was $52.9 million, down from $55 million last year. While we remained focused on working capital management and strong free cash flow conversion, the modest decline in free cash flow was driven by technology investments tied to our ERP implementation. We repurchased $14 million in shares during the fourth quarter, bringing our total share repurchases for 2025 to over $20 million. As Bruce mentioned earlier, after purchasing $24 million to date under our original share repurchase program, our board approved a refresh of the program back to $50 million. We paid down $14.5 million of net debt during the quarter, bringing our net debt balance to $99 million and reporting net leverage at the end of the year of 0.9 times. We are currently working with our bank group to extend the maturity of our existing credit facility, which becomes current in September 2025. In summary, the fourth quarter wrapped up a year of strong financial discipline for Thermon Group Holdings, Inc. We successfully executed our capital allocation priorities, including continued investments in organic growth, capital deployed for acquisition, and opportunistic return of capital through our share repurchase program. And we did all of this while still maintaining a strong balance sheet. Based on our total cash and available liquidity of $137 million, we remain well-capitalized and have ample flexibility to support our capital allocation needs, and we'll continue to balance investments in growth, debt pay down, and opportunistic share repurchases. With that, I will turn the call back over to Bruce. Bruce Thames: Thanks, Jan. Moving now to slide seventeen. As we enter fiscal year 2026, we remain focused on navigating a dynamic global trade environment with discipline and agility. Tariffs continue to present both direct and indirect challenges to our cost structure, particularly in the form of elevated input costs and near-term margin pressure. Our current assumptions include 25% tariffs on steel and aluminum, 30% on goods from China, 25% reciprocal tariffs from Canada and Mexico, and 10% for the rest of the world. Based upon these assumptions, we're expecting an annualized impact of roughly $16 to $20 million on a gross basis prior to mitigating actions, which are already underway. While our direct market exposure to China remains low, representing just 2% of total revenue, we're mindful of second and third-order effects through our supplier and distributor networks. These ripple effects are being closely monitored and addressed through proactive supply chain management. To mitigate these impacts, we're executing a multipronged strategy. First, pricing actions. We've implemented targeting price increases to offset rising input costs while maintaining competitiveness and customer value. Second, USMCA compliance. We're committed to preserving our USMCA qualifications, which continue to provide a strategic advantage in North America. Third, global footprint optimization. With manufacturing operations in the US, Canada, India, and Europe, we are leveraging our global footprint to shift production and sourcing in ways that reduce tariff exposure. Fourth, supply chain reconfiguration. We are actively evaluating and reconfiguring our supply chain to minimize tariff-related disruptions and enhance resilience. Despite these headwinds, we're entering fiscal year 2026 with strong order momentum and a healthy backlog, which reinforces our confidence in the underlying demand for our products and the strength of our customer relationships. We remain calm, focused, and confident in our ability to manage through these challenges while continuing to deliver long-term value for our shareholders. And now if you'll turn to slide eighteen, I will discuss our outlook for fiscal 2026. Looking forward, the uncertainty created by the volatile and rapidly changing trade environment makes it very challenging to ascertain the second and third-order impacts from tariffs, particularly as it relates to customer behaviors and the demand environment. Our guidance assumes the current tariff levels remain in place, resulting in margin headwinds in the first half of the year, offset by price increases in the back half of the year as mitigating actions take full effect. Given the uncertainty with tariffs and the overall global economy, the current guidance contemplates slowing growth in the second half of the fiscal year. Based upon these factors, we're providing fiscal 2026 financial guidance that calls for revenue in a range of $495 million to $535 million, representing 3.5% growth at the midpoint of the range. Adjusted EBITDA is in a range of $104 million to $114 million, essentially flat at the midpoint of the range. Our guidance assumes a modest decline in adjusted EBITDA margin, largely as a result of the expected lag before our tariff mitigation efforts in the first half will flow through to positively impact results in the second half. Given the dynamic nature of tariffs, global trade, and policy changes, we'll provide updates on the business and our mitigating actions throughout the year. Finally, as we conclude on slide nineteen, I want to express my deep appreciation for the efforts of the Thermon team throughout fiscal 2025. Their dedication and innovation have positioned us as a leader in industrial process heating with a resilient business model and efficient operational framework. While the ongoing tariff dynamics present challenges, we remain acutely focused on the things within our control. With a strong financial foundation and clear strategic priorities, we are confident in our ability to capitalize on opportunities, mitigate risks, and deliver sustained value for our shareholders. That completes our prepared remarks. We are now ready for the question and answer portion of our call. Operator: Thank you. You can press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, to ask a question, press star one on your telephone keypad. We'll pause for a moment while we pull for questions. And our first question comes from Chip Moore with Roth Capital Partners. Please state your question. Chip Moore: Hey, good morning. Thanks for taking the question. Hey. I wonder if you could elaborate on you talked about LNG seeing a bit of a resurgence. Can you elaborate a bit on that? What you're seeing, how that might translate? Bruce Thames: Yeah, Chip. We've, you know, since the lift of the moratorium, in the January time frame, there was always a really a number of projects that were in the queue in our pipeline, and we've seen those move forward pretty quickly. And as I noted in the prepared remarks, the areas of strength we've seen have been along the US Gulf Coast, as well as in the Middle East. And some of those are field developments, as well as export facilities. As we look at our pipeline ahead, there's a number of opportunities that are still out there we're tracking. Around $80 million in LNG opportunities that for our content. So we see some really nice tailwinds there in that sector. Chip Moore: Great. Appreciate that. And maybe just on FY 2026, you talked about I think, some margin headwinds maybe here in the first half. Before the pricing kicks in. Just and then you know, maybe growth being a little more challenging in the back half. Maybe just any more detail there on what you're thinking and directionally in Cadence. Thanks. Bruce Thames: Yeah. Great question. So we've put together a task force. We're looking very closely at the inflationary impact of tariffs to our input costs and while it's a moving target, we see there'll be a near-term impact to gross margins in the first half of the year. We've already moved on pricing in a number of areas to be able to offset that. As usual, our pricing, we have about a sixty-day window or lag before that is effective through our channel partners and with customers. There's a lag effect there. There's also work that's in backlog, particularly around project activity. Some of which we don't have the opportunity to go and renegotiate. So we anticipate that will be a margin. Those will create some margin headwinds in the first half. However, you know, we have pricing power. We've been able to pass price increases in the past, but, you know, I look back at COVID and the inflationary impact there. We're able to pass those on. My expectation's we moved fairly quickly here, and so we've should be see begin to see that flow through late in the second quarter and see that fully offset by any inflationary input cost we see in the first half. Looking more at the demand environment, certainly, when you look at the leading indicators as we come into this fiscal year, there's nothing that would indicate that there's a big slowdown in the back half. It's just a more cautious approach given the uncertainty. It's difficult, I think, for customers to parse through the data, particularly as it relates to deploying capital. And so it's our general belief that this could create a headwind in the back half of the year. Although, the leading indicators we track have not indicated that to be true yet. Chip Moore: Fantastic. Appreciate it. I'll hop back in queue. Thanks. Operator: And your next question comes from Brian Drab with William Blair. Please state your question. Brian Drab: Morning. Thanks for taking the questions. I just wanted to maybe first build on that last question. And Bruce, how are you thinking about the overtime category in your forecast for fiscal 2026? Is it, you know, obviously, is it, you know, down a lot in fiscal 2025? Are you forecasting that to be about the same, I guess, given the overall guidance? Bruce Thames: Yes. Roughly. What the way we're thinking about this right now is that we actually saw really nice backlog build in overtime projects. In fact, our engineering workload is really at an all-time high. And that's related to these the return of capital projects that we've seen really building. We anticipated that coming into this year, and it really began to manifest in the fourth quarter. But, you know, we've had four consecutive quarters of positive book-to-bill. So this has been building. Our assumption at this point is that the order in the incoming order rates for these larger capital projects will be muted until we get more clarity on the trade policy going forward. And we'll begin to burn through those through the second half of the year. So that's essentially the assumptions we have at the midpoint of our guide. If we look at our guide overall, the upper end of the range would be really what we would have maybe anticipated had we not had some of the trade disruptions and given the momentum we have seen in the market leading into our fiscal 2026. The lower end of the range would assume an erosion in the overall trade negotiations and escalation in the trade conflicts. Brian Drab: Okay. Thanks. And I ask you to comment on, you know, how are you thinking about group at the midpoint of the range, how are you thinking about the OpEx spending or the, you know, the point in time segment. Bruce Thames: The mix should be fairly consistent to what we saw in 2025. It should be fairly consistent. Brian Drab: Yeah. Okay. When you look at our guide at the midpoint. Okay. Can you talk at all about, you know, other categories or, you know, other end markets where you're seeing some of the improvement in the CapEx spending? You talked about the LNG being a standout, but are there other areas in can you update us at all on if you're seeing any incremental demand from the data center opportunity that you mentioned last quarter. Bruce Thames: Yes. So I'll start with just the overall demand environment. General industrial remains strong. It's one of our largest, it's one of our largest booking segments in the fourth quarter. It represented almost 32% of the bookings in the quarter. Petrochemical, we saw it almost the 17.5% in the quarter, so we've seen some strong demand there. As I noted earlier, oil and gas, which has been weak for quite some time, we've seen an up there, particularly as it relates to LNG. And when we look overall, renewables, we still see opportunities, and that was actually up although it's a fairly small percent of revenue, but that was up fairly sharply in the fourth quarter as well. Rail and transit, we've seen some really strong bookings. Our backlog there has grown to about $36 million, of which we anticipate executing about $17 million of that in the coming year. The one thing to note here around data centers, we've done more work there, and that is a real opportunity around load banks, and we've got some work underway. We'll provide some more updates on that in upcoming calls. But that is a real opportunity in the market, and we're working very actively in trying to develop and execute on that opportunity we see. Brian Drab: Okay. I'm gonna save my questions for later. I just want to make sure I have one high-level idea correct. Here. It seems like what I'm hearing from you today is that, you know, backlog's up 20% organically. You've got some momentum in some different end markets. The CapEx environment at the moment looks like it's improved materially. But, you know, just, you know, instead of, like, a lot of companies are doing pulling guidance, you're just saying, we're gonna give a broad kind of a broad range. There's a lot of, you know, the consensus view is that there's gonna be a slowdown later this year, you know, overall macro. So you're taking all this into account and just saying, let's be cautious. But it seems like the high end of the range, you know, it could be in play. Here. Is this a fair way to interpret everything that I'm hearing today? Bruce Thames: Yeah. I think that's a really good way of summarizing, Brian. I think the high end of the range, as I said, if we see some real progress on some of these trade agreements, we get more clarity on the tariff environment going forward. I think customers can become more comfortable with deploying capital, which we've seen that momentum building quite frankly for at least the last three quarters. And we began to see it manifest in our Q4 with expectations that would come through in fiscal 2026. So we're being more cautious in really the demand side of the equation just given the uncertainty that we see and our customers are seeing in the trade environment. Brian Drab: Got it. Okay. Thanks for all the detail. Talk to you later. Bruce Thames: Yes. Operator: Thank you. And a reminder to ask a question, please state your question. Your next question comes from Justin Ages with CJS Securities. Justin Ages: Hi. Thanks for taking the questions. Bruce Thames: Hey, Justin. Justin Ages: With the debt pay down and the share buyback and then refresh, can you just give us a little more detail on your capital allocation priorities? Jan Schott: Yes. Hi, Justin. I'll take that one. You know, I guess, first and foremost, you know, we have our capital investments for growth, and that's in the same range that we've, you know, done in prior years with 2% to 3% CapEx, 2% to 3% of sales. And then probably with all of the technology investments that we have going in, that's about 1% for next year. So that's first and foremost. You know, second, I would say, we do obviously, with the refresh of the share repurchase program, we'll look for opportunistic, you know, opportunities to buy shares. We bought $14 million shares this last quarter, really, you know, taking advantage of some dips due to other macroeconomic things that were happening. But we, you know, we think that's really a path forward, and we'll continue on that plan. And then the other aspect is also that we do have an active M&A pipeline. And in this environment, really, you know, just looking for buying opportunities, to be honest. But I think that's something that we're very focused on, and with $137 million of liquidity, we have a lot of, you know, tailwinds that are back really looking, you know, hoping to execute something in the near term on M&A. Justin Ages: Okay. Appreciate that. And then my you just mentioned that, you know, guidance includes this $5 million one-time tech investment. Can you just give us a little more color on what that entails? Jan Schott: That's mostly associated with our ERP implementation. That we have ongoing. We'll be implementing kind of in stages across the globe really over the next year and a half or so. And so we're actually looking forward to, you know, having more color on that, I guess, in future calls. But that's underway right now. Justin Ages: Okay. Thank you. And then last question. On Thermon, you know, long-term initiatives and particularly on the EBITDA margin target. Just wanted to know, you know, what steps are you taking to get there? Do they include some of these mitigation efforts that are now part of, you know, offsetting some of the tariff impact? Just any color on that. Bruce Thames: Yeah. So certainly, the higher input cost creates some headwinds in the near term, but I still feel confident that the same levers that we have to pull in the business exist on a go-forward basis to continue to drive EBITDA margin expansion. We saw some very nice gross margin expansion in the year, about half of that was related to mix. And, you know, we had about 196 basis points, and so half of that was mixed. The other half a Thermon business system and the rooftop consolidation we did earlier in the year with consolidating operations into San Marcos, as well as the continuous improvement efforts that we've made going forward. So we continue to see that as a lever to be able to drive gross margin expansion. And then, certainly, as we look forward, price is always an opportunity, and we tend to be able to get price in the marketplace. New product introductions create opportunities. As we work and implement the Thermon business system in our new acquisitions, those were a headwind to our gross margin profile this year. But we're confident there's a path to get those more in line with the averages of the overall enterprise. And so those are opportunities for margin expansion. And then last but not least, as we drive growth and volume, we get operating leverage on a fixed cost basis. So those are the, really, the levers we see pulling on a go-forward basis. We were able to improve 86 basis points this past year, I believe we can continue to drive those changes, although I do see just a setback this year given the impact of tariffs on input cost and a lag of being able to push that through to the market. Justin Ages: Sure. I appreciate the answers. Thank you. Bruce Thames: Thank you. Thank you. Operator: And your next question comes from Jonathan Braatz with Kansas City Capital. Please state your question. Jonathan Braatz: Good morning, Bruce. Jan? Bruce, maybe a little more clarity on tariffs. You said the gross impact is $16 million to $18 million. Obviously, you have some mitigation efforts, but you think about the upcoming year, what might be the net impact for the full year, you know, considering the mitigation efforts. Bruce Thames: Yeah. So on a gross basis, we gave a range of $16 to $20 million. Jonathan Braatz: Yeah. Sounds right. And we believe on a net impact, it's somewhere in the $4 to $6 million range within the current fiscal year. Jonathan Braatz: And that'll be mostly in the first half. Correct? Bruce Thames: Correct. Jonathan Braatz: Correct. Okay. Okay. Alright. Good. Okay. And then secondly, when you look at the competitive landscape, are any of your competitors in a better position regarding tariffs and trade policy, you know, all this other stuff, in a better position or worse position? Any thoughts on the competitive landscape given the new tariff trade policies? Bruce Thames: That's a difficult question. Especially just given the complexity and interconnectedness of global supply chains today. But what I can say is about our position. And given our operating footprint in the US, about 50% of our production from the US, we have a significant presence in Canada as well. We do a lot of for country in country, for country production. The acquisition of Fati increased our operating presence in Europe, a really a bright spot when we look at just the overall demand environment, therefore, for decarbonization and electrification solutions. And you know, that business, we acquired it with about a $15 million backlog. It's almost doubled since that time, and our ability to serve that on the European continent is a real advantage. And then we do have operations in India that will begin to leverage to serve more of the Asian continent, and we certainly as we look at our M&A opportunities, we're looking for potential acquisitions that would mirror Fati that would give us a larger operating footprint in Asia. Just for these types of situations just to diversify our risk base. So we made a lot of progress since COVID. We've done a lot to build more resiliency into our supply chains. I think that really exposes, not only in us, but with others. We've never been heavily dependent upon China, so I think that's a real advantage that we have over some others. The one thing I would note is that while we're not dependent, we do we are exposed in second and third-order effects with our supplier. And their supply chains, although, again, people have diversified from China and have multiple sources. So we'll just have to see how a lot of this flows through. But we factored all of that into our guide. Jonathan Braatz: Yep. Okay. Alright, Bruce. Thank you very much. Appreciate it. Thank you. Operator: Thank you. And the next question comes from Brian Drab with William Blair. Please state your question. Brian Drab: Hi. I'm back with just one clarification. On the one-time technology investment, I $5 million, you this is not being adjusted out of obviously, is what you're indicating. It's not being adjusted out of your guidance or EPS calculation, and seems like it's a you know, that would be about a hundred basis point headwind to operating margin and EBITDA margin. Is that right way to think about it? Jan Schott: No. This would be adjusted out of or on the adjusted EBITDA calculation. In EPS. Brian Drab: Okay. So you are okay. So I'm glad I clarified. So you're okay. So you're just calling it out that it is an adjustment. Okay. Now I just missed it. I just want to make sure. Okay. Okay. So there is a you are expecting a margin headwind, you know, excluding this situation. Okay. Alright. Thank you very much. It's not it's obviously not something that we do every year and don't plan to. Jan Schott: Right. Right. And well, that was my other question. If this goes away then, and you're expecting the $5 million to be the entire investment and for that to be a fiscal 2026 event. And fiscal 2027, it's the plan is for this not to be an expense line. Is that right? Or Yes. I mean, we will have some I think some very marginal investments going into 2027 for just some of the, you know, acquired entities that will roll into the new ERP system. But the majority will be in fiscal 2026. Yes. Brian Drab: Okay. Okay. Perfect. Thank you very much. Thank you. Operator: Ladies and gentlemen, that's all the questions we have for today. I'll now hand the floor back to Bruce Thames for closing remarks. Bruce Thames: Yeah. Thank you, Diego. And, you know, I'd like to again thank our Thermon employees around the globe for their contributions to a successful 2025. And thank you all for your interest in Thermon Group Holdings, Inc. If we don't speak to you in the next coming quarter, we look forward to you joining us on our next earnings call. Thank you, and have a good day. Operator: Thank you. All parties may now disconnect. Where to invest $1,000 right now When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor's total average return is 962%* — a market-crushing outperformance compared to 169% for the S&P 500. They just revealed what they believe are the 10 best stocks for investors to buy right now, available when you join Stock Advisor. *Stock Advisor returns as of May 19, 2025 This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.
Yahoo
22-05-2025
- Business
- Yahoo
Thermon Reports Fourth Quarter And Full-Year Fiscal 2025 Results
AUSTIN, TX / / May 22, 2025 / Thermon Group Holdings, Inc. (NYSE:THR) ("Thermon" or the "Company"), a global leader in industrial process heating solutions, today announced consolidated results for the fourth quarter ("Q42025") and full fiscal year ended March 31, 2025 ("Fiscal 2025"). FOURTH QUARTER FISCAL 2025 HIGHLIGHTS (all comparisons versus the prior year period unless otherwise noted) Revenue of $134.1 million, an increase of 5% Gross profit of $59.4 million, an increase of 13%, Gross Margin of 44.3% Net income of $17.0 million, an increase of 68%, $0.50 EPS Adjusted Net Income (non-GAAP) of $18.9 million, an increase of 62%, $0.56 Adjusted EPS (non-GAAP) Adjusted EBITDA (non-GAAP) of $30.5 million, an increase of 29%; Adjusted EBITDA margin (non-GAAP) of 22.7% New orders of $138.8 million, an increase of 19%; book-to-bill ratio of 1.04x Net leverage ratio of 0.9x as of March 31, 2025 FULL YEAR 2025 HIGHLIGHTS (all comparisons versus the prior year period unless otherwise noted) Revenue of $498.2 million, an increase of 1% Gross profit of $222.9 million, an increase of 5%; Gross Margin of 44.7% Net income of $53.5 million, an increase of 4%, $1.57 EPS Adjusted Net Income (non-GAAP) of $63.8 million, an increase of 3%, $1.87 Adjusted EPS (non-GAAP) Adjusted EBITDA (non-GAAP) of $109.2 million, an increase of 5% ; Adjusted EBITDA margin (non-GAAP) of 21.9% New orders of $535.7 million, an increase of 14%; book-to-bill ratio of 1.08x Invested $20 million in our share repurchase program. Increased authorization back to $50 million. MANAGEMENT COMMENTARY "I am delighted to report another year of outstanding performance in fiscal 2025, as our global team achieved record revenue and Adjusted EBITDA," stated Bruce Thames, President and CEO of Thermon. "We successfully integrated the Vapor Power and F.A.T.I. acquisitions, advanced our strategic priorities despite a challenging market environment, and concluded the year with strong fourth quarter results. Notably, we returned to organic growth, expanded our Adjusted EBITDA margins, and saw accelerating order momentum which positions us well for sustained success in fiscal 2026." Thames continued, "Though the broader macroeconomic environment remains uncertain, we are witnessing favorable demand in several areas, including electrification, on-shoring, decarbonization, power and select areas within energy. These positive dynamics, combined with our strong customer relationships and differentiated market position, led to a 19% increase in bookings during the fourth quarter, ending with a backlog 29% higher than the previous year. This marks our fourth consecutive quarter with a positive book-to-bill ratio driven by ongoing strength in diversified end markets and by recent momentum in large capex project awards." "Our unwavering focus on our strategic pillars and value creation framework was paramount during fiscal 2025, enabling us to navigate uneven market conditions while achieving strong performance," noted Thames. "Throughout the year, we enhanced revenue stability via our loyal installed customer base and diversified end-market strategy. We improved margins through operational efficiencies and disciplined cost management, and introduced new products to support our decarbonization and digitization strategies. As we enter fiscal 2026, our strategic priorities include continuing our Decarbonization, Digitization and Diversification growth strategy, expanding into emerging markets such as data centers and nuclear, and maintaining prudent capital allocation." "We successfully executed on our balanced capital allocation framework during fiscal 2025, including ongoing investments in organic growth, the acquisition of F.A.T.I., and the return of capital through our authorized $50 million share repurchase program, while still maintaining a leverage profile well below our 1.5-2.0x targeted range," stated Jan Schott, Senior Vice President and CFO of Thermon. "We invested $14 million in our share repurchase program during the fourth quarter, bringing the total amount repurchased during the year to $20 million. In support of our strategy, our Board of Directors increased our remaining share repurchase authorization back to $50 million. As a result of our strong free cash flow generation, we were also able to repay $15 million in net debt during the quarter, resulting in a quarter end net leverage ratio of 0.9x, down from 1.2x at the end of the prior year. Based on our conservative net leverage, combined with total cash and available liquidity of $137 million on March 31, 2025, we have ample financial flexibility to execute on our capital allocation strategy." "We enter fiscal 2026 with bookings momentum, a strong backlog, favorable trends in several key growth verticals, and a lean and efficient operating platform. That said, the broader macro backdrop and volatile trade environment create some uncertainty as we look forward. Our manufacturing footprint and diversified supply chain position us to manage through these challenges, as we have successfully done in the past. However, predicting the outcome of the tariff and trade situation and the potential impact on input costs and demand is challenging. Based on these factors, we are providing fiscal 2026 financial guidance that calls for revenue in a range of $495 million to $535 million and Adjusted EBITDA in a range of $104 million to $114 million. Given the heightened level of macroeconomic uncertainty, our guidance is based on a broad range of potential outcomes, with the mid-point of our guidance assuming the current tariff levels remain in place, resulting in margin headwinds in the first half and slowing growth in the back half of the year. While the near-term outlook may be uncertain, we are encouraged by the strong momentum going into fiscal 2026 and believe we are well positioned for long-term success. We are confident we have the right strategy and an extremely dedicated and focused team capable of executing our plans to drive continued value creation for our shareholders," concluded Thames. Financial Highlights Three Months Ended March 31, Twelve Months Ended March 31, Unaudited, in millions, except per share data 2025 2024 % Change 2025 2024 % Change Sales $ 134.1 $ 127.7 5.0 % $ 498.2 $ 494.6 0.7 % OPEX Sales1 111.8 104.3 7.2 % 422.3 375.1 12.6 % Over Time - Large Projects 22.3 23.4 (4.7) % 75.9 119.6 (36.5) % Net Income 17.0 10.1 68.3 % 53.5 51.6 3.7 % GAAP EPS 0.50 0.29 72.4 % 1.57 1.51 3.8 % Adjusted Net Income 2 18.9 11.6 62.9 % 63.8 61.9 3.0 % Adjusted EPS 2 0.56 0.34 64.7 % 1.87 1.82 3.1 % Adjusted EBITDA3 30.5 23.6 29.2 % 109.2 104.2 4.8 % % of Sales: OPEX Sales1 83.4 % 81.7 % 170 bps 84.8 % 75.8 % 900 bps Over Time - Large Projects 16.6 % 18.3 % -170 bps 15.2 % 24.2 % -900 bps Net Income 12.7 % 7.9 % 480 bps 10.7 % 10.4 % 30 bps Adjusted Net Income2 14.1 % 9.1 % 500 bps 12.8 % 12.5 % 30 bps Adjusted EBITDA 3 22.7 % 18.5 % 420 bps 21.9 % 21.1 % 80 bps 1 "OPEX Sales" (non-GAAP) represents Point-in-Time Sales plus Over Time - Small Projects. See table "Reconciliation of Point-in-Time and Over-Time Sales to OPEX Sales." 2 Represents Net income after the impact of acquisition costs, restructuring, costs associated with impairments and other charges, amortization of intangible assets, ERP implementation related costs, tax benefit from the release of uncertain tax position reserve and the tax expense/(benefit) for impact of foreign rate increases (see table, "Reconciliation of Net income to Adjusted Net Income and Adjusted EPS"). 3 See table, "Reconciliation of Net income to Adjusted EBITDA." FOURTH QUARTER FISCAL 2025 PERFORMANCE Fourth quarter revenue was $134.1 million, an increase of 5% compared to same period last year, driven by continued momentum in OPEX revenues and contribution from F.A.T.I., partially offset by softness in large project revenue. Excluding revenue contributed from F.A.T.I., fourth quarter organic revenue increased 3%. Gross profit was $59.4 million during the fourth quarter of fiscal 2025, an increase of 13% compared to the fourth quarter of last year resulting from organic revenue growth, more favorable revenue mix, and the contribution from F.A.T.I. Gross margin was 44.3% during the fourth quarter, up from 41.0% last year owing to a more favorable revenue mix, pricing, and productivity enhancements. Fourth quarter selling, general and administrative expenses were $32.8 million, flat from $32.8 million, last year owing to the ongoing benefits from efficiency initiatives and effective cost management, partially offset by incremental operating expenses from the F.A.T.I. acquisition and continued investments in growth initiatives. Adjusted EBITDA was $30.5 million during the fourth quarter, up from $23.6 million last year due to the revenue growth, more favorable mix, productivity improvements, and the contribution from F.A.T.I., partially offset by large project weakness. Adjusted EBITDA margin was 22.7% during the fourth quarter of fiscal 2025, up from 18.5% in the same period last year owing to the gross margin improvement and tight operating expense management. Backlog was $240.3 million as of March 31, 2025, representing a $54.2 million increase, or 29%, as compared to backlog of $186.1 million at March 31, 2024. Excluding backlog attributable to F.A.T.I., backlog increased 20% on an organic basis. Orders during the fourth quarter of fiscal 2025 were $138.8 million compared to $117.0 million in the fourth quarter of fiscal 2024, an increase of $21.8 million or 19%, with a book-to-bill of 1.04x. Organic orders were up 14%. Balance Sheet, Liquidity and Cash Flow As of March 31, 2025, total debt was $138.9 million, cash and cash equivalents were $39.5 million, resulting in net debt of $99.4 million, down from $114.7 million on December 31, 2024. Net leverage was 0.9x at the end of the fourth quarter of fiscal 2025, down relative to 1.1x at the end of the prior quarter. Working capital increased by 3% to $167.6 million at the end of the fourth quarter of fiscal 2025. During the fourth quarter, Free Cash Flow was $29.0 million, a decline from Free Cash Flow of $34.3 million in the same period last year. Free Cash Flow was $52.9 million for fiscal 2025, a decrease from $55.0 million for fiscal 2024. The Company repurchased $14 million in common shares under its existing share repurchase authorization during the fourth quarter and in aggregate has repurchased $20 million for the full-year fiscal 2025. In May 2025, the Board of Directors increased the share repurchase authorization back to $50 million. Balance Sheet Highlights Three Months Ended March 31, Unaudited, in millions, except ratio 2025 2024 % Change Cash and Cash Equivalents $ 39.5 $ 48.6 (18.7 ) % Total Debt 138.9 172.5 (19.5 ) % Net Debt1 / TTM Adjusted EBITDA 0.9 x 1.2 x (0.3 ) x Working Capital 2 167.6 162.2 3.3 % Capital Expenditures (3.1 ) (3.1 ) - % Free Cash Flow 3 29.0 34.3 (15.5 ) % 1 Total Company debt, net of cash and cash equivalents. 2Working Capital equals Accounts Receivable plus Inventory less Accounts Payable. 3 See table, Reconciliation of Cash Provided by Operating Activities to Free Cash Flow. FISCAL 2026 OUTLOOK The following forward-looking guidance reflects the Company's current expectations and beliefs for fiscal 2026 as of May 22, 2025, and is subject to change. Full Fiscal Year (Ending March 31) Unaudited, in millions, except per share data 2025 Actual 2026 Guidance Revenue $ 498.2 $ 495 to $535 Adjusted EBITDA (non-GAAP) $ 109.2 $ 104 to $114 GAAP EPS $ 1.57 $ 1.35 to $1.57 Adjusted EPS (non-GAAP) $ 1.87 $ 1.77 to $1.99 Conference Call and Webcast Information Thermon's senior management team, including Bruce Thames, President and Chief Executive Officer, and Jan Schott, Senior Vice President and Chief Financial Officer will discuss Q4 2025 results during a conference call today, May 22, 2025 at 10:00 a.m. (Central Time). The call will be simultaneously webcast and the accompanying slide presentation containing financial information can be accessed on Thermon's investor relations website located at Investment community professionals interested in participating in the question-and-answer session may access the call by dialing (877) 407-5976 from within the United States/Canada and +1 (412) 902-0031 from outside of the United States/Canada. A replay of the webcast will be available on Thermon's investor relations website after the conclusion of the call. About Thermon Through its global network, Thermon provides safe, reliable and mission critical industrial process heating solutions. Thermon specializes in providing complete flow assurance, process heating, temperature maintenance, freeze protection and environmental monitoring solutions. Thermon is headquartered in Austin, Texas. For more information, please visit Non-GAAP Financial Measures Disclosure in this release of "Adjusted EPS," "Adjusted EBITDA," "Adjusted EBITDA margin," "Adjusted Net Income/(loss)," "Free Cash Flow," "Organic Sales," "OPEX Sales" and "Net Debt," 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/(loss)" and "Adjusted EPS" (or "Adjusted fully diluted EPS") represent net income/(loss) before the impact of restructuring and other charges/(income), Enterprise Resource Planning ("ERP") system implementation related cost, costs associated with impairments and other charges, acquisition costs, amortization of intangible assets, tax expense for impact of foreign rate increases, and any tax effect of such adjustments. "Adjusted EBITDA" represents net income before interest expense (net of interest income), income tax expense, depreciation and amortization expense, stock-based compensation expense, acquisition costs, costs associated with restructuring and other income/(charges), ERP implementation related cost, and costs associated with impairments and other charges. "Adjusted EBITDA margin" represents Adjusted EBITDA as a percentage of total revenue. "Free Cash Flow" represents cash provided by operating activities less cash used for the purchase of property, plant, and equipment and net sales of rental equipment. "Organic Sales" represent revenue excluding the impact of the Company's October 2024 acquisition of F.A.T.I. "OPEX Sales" represents Point-in-Time Sales plus Over-Time Small projects. "Net Debt" represents total outstanding principal debt less cash and cash equivalents. 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, Adjusted EBITDA margin or Adjusted Net Income. Adjusted EPS, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, Organic Sales, OPEX Sales and Free Cash Flow should be considered in addition to, and not as substitutes for, revenue, 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 a measure of liquidity. Our calculation of Adjusted EPS, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, OPEX Sales and Free Cash Flow may not be comparable to similarly titled measures reported by other companies. For a description of how Adjusted EPS, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, OPEX Sales and Free Cash Flow are calculated and reconciliations to the corresponding GAAP measures, see the sections of this release titled "Reconciliation of Net income to Adjusted EBITDA," "Reconciliation of Net income to Adjusted Net Income and Adjusted EPS," "Reconciliation of Point-in-Time and Over-Time Sales to OPEX Sales" and "Reconciliation of Cash Provided by Operating Activities to Free Cash Flow." We are unable to reconcile projected fiscal 2026 Adjusted EBITDA and Adjusted EPS to the most directly comparable projected GAAP financial measure because certain information necessary to calculate such measures on a GAAP basis is unavailable or dependent on the timing of future events outside of our control. Therefore, because of the uncertainty and variability of the nature of and the amount of any potential applicable future adjustments, which could be significant, we are unable to provide a reconciliation for projected fiscal 2026 Adjusted EBITDA and Adjusted EPS without unreasonable effort. Forward-Looking Statements This release includes forward-looking statements within the meaning of the U.S. federal securities laws in addition to historical information. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements regarding our industry, business strategy, plans, goals and expectations concerning our market position, future operations, margins, profitability, capital expenditures, liquidity and capital resources and other financial and operating information, our fiscal 2026 full-year guidance and our ability to achieve our strategic initiatives. When used in this discussion, the words "anticipate," "assume," "believe," "budget," "continue," "contemplate," "could," "should," "estimate," "expect," "intend," "may," "plan," "possible," "potential," "predict," "project," "will," "would," "future," and similar terms and phrases are intended to identify forward-looking statements in this release. Forward-looking statements reflect our current expectations regarding future events, results or outcomes. These expectations may or may not be realized. Some of these expectations may be based upon assumptions, data or judgments that prove to be incorrect. In addition, our business and operations involve numerous risks and uncertainties, many of which are beyond our control, which could result in our expectations not being realized or otherwise materially affect our financial condition, results of operations and cash flows. These forward-looking statements include, but are not limited to, statements regarding: (i) our plans to strategically pursue emerging growth opportunities, including strategic acquisitions, in diverse regions and across industry sectors; (ii) our plans to secure more new facility project bids; (iii) our ability to generate more facility maintenance, repair and operations or upgrades or expansions revenue, from our existing and future installed base; (iv) our ability to timely deliver backlog; (v) our ability to respond to new market developments and technological advances; (vi) our expectations regarding energy consumption and demand in the future and its impact on our future results of operations; (vii) our plans to develop strategic alliances with major customers and suppliers; (viii) our expectations that our revenues will increase; (ix) our belief in the sufficiency of our cash flows to meet our needs for the next year; (x) our ability to integrate acquired companies and successfully divest certain businesses; (xi) our ability to successfully achieve synergies from acquisitions; and (xii) our ability to make required debt repayments. Actual events, results and outcomes may differ materially from our expectations due to a variety of factors. Although it is not possible to identify all of these factors, they include, among others, (i) general economic conditions and cyclicality in the markets we serve; (ii) future growth of our key end markets and related capital investments; (iii) our ability to operate successfully in foreign countries; (iv) the outbreak of a global pandemic; (v) our ability to successfully develop and improve our products and successfully implement new technologies; (vi) competition from various other sources providing similar heat tracing and process heating products and services, or alternative technologies, to customers; (vii) our ability to deliver existing orders within our backlog; (viii) our ability to bid and win new contracts; (ix) the imposition of certain operating and financial restrictions contained in our debt agreements; (x) our revenue mix; (xi) our ability to grow through strategic acquisitions; (xii) our ability to manage risk through insurance against potential liabilities (xiii) changes in relevant currency exchange rates; (xiv) tax liabilities and changes to tax policy; (xv) impairment of goodwill and other intangible assets; (xvi) our ability to attract and retain qualified management and employees, particularly in our overseas markets; (xvii) our ability to protect our trade secrets; (xviii) our ability to protect our intellectual property; (xix) our ability to protect data and thwart potential cyber-attacks and incidents; (xx) a material disruption at any of our manufacturing facilities; (xxi) our dependence on subcontractors and third-party suppliers; (xxii) our ability to profit on fixed-price contracts; (xxiii) the credit risk associated to our extension of credit to customers; (xxiv) our ability to achieve our operational initiatives; (xxv) unforeseen difficulties with expansions, relocations, or consolidations of existing facilities; (xxvi) potential liability related to our products as well as the delivery of products and services; (xxvii) our ability to comply with foreign anti-corruption laws; (xxviii) export control regulations or sanctions; (xxix) changes in government administrative policy and government sanctions, including the recently enacted tariffs on trade between the U.S. and Canada; (xxx) environmental and health and safety laws and regulations as well as environmental liabilities; (xxxi) climate change and related regulation of greenhouse gases; and (xxxii) those factors listed under Item 1A, "Risk Factors" included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2025, which we anticipate filing with the Securities and Exchange Commission (the "SEC") on May 22, 2025, and in any subsequent Quarterly Reports on Form 10-Q, Current Reports on Form 8-K or other filings that we have filed or may file with the SEC. Any one of these factors or a combination of these factors could materially affect our future results of operations and could influence whether any forward-looking statements contained or incorporated by reference in this release ultimately prove to be accurate. Our forward-looking statements are not guarantees of future performance, and actual results and future performance may differ materially from those suggested in any forward-looking statements. We do not intend to update these statements unless we are required to do so under applicable securities laws. CONTACT: Jan Schott, Senior Vice President and Chief Financial OfficerIvonne Salem, Vice President, FP&A and Investor Relations(512) Thermon Group Holdings, Inc. Consolidated Statements of Operations (Unaudited, in thousands except per share data) Three Months Ended March 31, Twelve Months Ended March 31, 2025 2024 2025 2024 Sales $ 134,080 $ 127,654 $ 498,207 $ 494,629 Cost of sales 74,649 75,267 275,311 283,065 Gross profit 59,431 52,387 222,896 211,564 Operating expenses: Selling, general and administrative expenses 32,837 32,823 129,307 123,820 Deferred compensation plan expense/(income) 37 554 452 1,231 Amortization of intangible assets 3,419 3,423 13,681 10,158 Restructuring and other charges/(income) 5 (1,237 ) (301 ) 984 Income from operations 23,133 16,824 79,757 75,371 Other income/(expenses): Interest expense, net (2,153 ) (3,582 ) (10,325 ) (8,845 ) Other income/(expense) 107 421 687 1,148 Income before provision for taxes 21,087 13,663 70,119 67,674 Income tax expense 4,116 3,580 16,604 16,086 Net income $ 16,971 $ 10,083 $ 53,515 $ 51,588 Net income per common share: Basic income per share $ 0.51 $ 0.30 $ 1.59 $ 1.53 Diluted income per share $ 0.50 $ 0.29 $ 1.57 $ 1.51 Weighted-average shares used in computing net income per common share: Basic common shares 33,569 33,723 33,708 33,671 Fully-diluted common shares 33,986 34,239 34,058 34,067 Thermon Group Holdings, Inc. Consolidated Balance Sheets (Unaudited, in thousands, except share and per share data) March 31, 2025 March 31, 2024 Assets Current assets: Cash and cash equivalents $ 39,537 $ 48,631 Accounts receivable, net of allowances of $1,230 and $1,428 as of March 31, 2025 and 2024, respectively 109,830 107,318 Inventories, net 88,980 86,321 Contract assets 19,188 16,690 Prepaid expenses and other current assets 16,526 14,010 Income tax receivable 231 1,630 Total current assets 274,292 274,600 Property, plant and equipment, net of depreciation and amortization of $75,773 and $73,422 as of March 31, 2025 and 2024, respectively 72,824 68,335 Goodwill 264,331 270,786 Intangible assets, net 115,283 127,092 Operating lease right-of-use assets 11,192 13,613 Deferred income taxes 895 1,074 Other non-current assets 16,635 12,240 Total assets $ 755,452 $ 767,740 Liabilities and equity Current liabilities: Accounts payable 31,185 31,396 Accrued liabilities 35,788 31,624 Current portion of long-term debt 18,000 14,625 Borrowings under revolving credit facility - 5,000 Contract liabilities 19,604 20,531 Lease liabilities 4,023 3,273 Income taxes payable 4,063 2,820 Total current liabilities $ 112,663 $ 109,269 Long-term debt, net of current maturities and deferred debt issuance costs of $508 and $918 as of March 31, 2025 and 2024, respectively 120,366 151,957 Deferred income taxes 9,756 9,439 Non-current lease liabilities 9,299 12,635 Other non-current liabilities 8,053 9,553 Total liabilities $ 260,137 $ 292,853 Equity Common stock: $.001 par value; 150,000,000 authorized; 33,945,413 issued and 33,243,370 outstanding, and 33,730,243 shares issued and 33,722,225 outstanding at March 31, 2025 and 2024, respectively $ 33 $ 34 Preferred stock: $.001 par value; 10,000,000 authorized; no shares issued and outstanding - - Additional paid in capital 246,201 243,555 Treasury stock, common stock, at cost; 702,043 and 8,018 shares at March 31, 2025 and 2024, respectively (20,388 ) (250 ) Accumulated other comprehensive loss (72,829 ) (57,235 ) Retained earnings 342,298 288,783 Total equity $ 495,315 $ 474,887 Total liabilities and equity $ 755,452 $ 767,740 Thermon Group Holdings, Inc. Consolidated Statements of Cash Flows (Unaudited, in thousands) Twelve Months Ended March 31, 2025 2024 Operating activities Net income $ 53,515 $ 51,588 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 22,339 18,837 Amortization of debt costs 486 489 Stock compensation expense 5,244 5,754 Deferred income taxes (1,081 ) (2,079 ) Reserve release for uncertain tax positions (1,046 ) 84 Remeasurement (gain)/loss on intercompany balances 36 (784 ) Changes in operating assets and liabilities: Accounts receivable (4,220 ) (540 ) Inventories (698 ) 3,778 Contract assets and liabilities (6,655 ) (101 ) Other current and non-current assets (9,402 ) (4,935 ) Accounts payable (1,156 ) 2,707 Accrued liabilities and non-current liabilities 3,410 (6,355 ) Income taxes payable and receivable 2,346 (2,488 ) Net cash provided by operating activities $ 63,118 $ 65,955 Investing activities Purchases of property, plant and equipment (10,249 ) (11,016 ) Sale of rental equipment 65 99 Proceeds from sale of property, plant and equipment 5,759 840 Proceeds from disposal of business - 1,027 Cash paid for acquisitions, net of cash acquired (10,545 ) (100,472 ) Net cash used in investing activities $ (14,970 ) $ (109,522 ) Financing activities Proceeds from Term Loan A - 100,000 Payments on Term Loan A (28,625 ) (30,872 ) Proceeds from revolving credit facility 12,000 18,000 Payments on revolving credit facility (17,000 ) (27,500 ) Issuance costs associated with debt financing - (759 ) Lease financing (58 ) (28 ) Issuance of common stock including exercise of stock options 632 - Repurchase of treasury shares under authorized program (20,138 ) (250 ) Repurchase of employee stock units on vesting (3,230 ) (2,058 ) Net cash provided by/(used in) financing activities $ (56,419 ) $ 56,533 Less: Net change in cash balances classified as assets held-for-sale - - Effect of exchange rate changes on cash and cash equivalents (738 ) (1,055 ) Change in cash and cash equivalents $ (9,009 ) $ 11,911 Cash, cash equivalents and restricted cash at beginning of period 50,431 38,520 Cash, cash equivalents and restricted cash at end of period $ 41,422 $ 50,431 Thermon Group Holdings, Inc. Reconciliation of Net Income/(Loss) to Adjusted EBITDA (Unaudited, in thousands) Three Months Ended March 31, Twelve Months Ended March 31, 2025 2024 2025 2024 GAAP Net income/(loss) $ 16,971 $ 10,083 $ 53,515 $ 51,588 Interest expense, net 2,153 3,582 10,325 8,845 Income tax expense/(benefit) 4,116 3,580 16,604 16,086 Depreciation and amortization expense 5,578 5,762 22,339 18,837 EBITDA (non-GAAP) $ 28,818 $ 23,007 $ 102,783 $ 95,356 Stock compensation expense 1,197 1,622 5,244 5,754 Transaction-related costs1 - 248 355 2,107 Restructuring and other charges/(income)2 456 (1,237 ) 292 984 ERP implementation-related costs 19 - 557 - Adjusted EBITDA (non-GAAP) $ 30,490 $ 23,640 $ 109,231 $ 104,201 Adjusted EBITDA % 22.7 % 18.5 % 21.9 % 21.1 % 1 Fiscal 2025 charges relate to the Vapor Power and F.A.T.I. acquisition costs and Fiscal 2024 charges were incurred in connection with the Russia Exit. 2 Net gain associated with cost-cutting measures including reduction-in-force and the facility consolidation, more than offset by the related gain on sale of our Denver manufacturing facility, of which $0.6 million are in cost of sales for the twelve months ended March 31, 2025. Thermon Group Holdings, Inc. Reconciliation of Net Income/(Loss) to Adjusted Net Income/(Loss) and Adjusted EPS (Unaudited, in thousands except per share amounts) Three Months Ended March 31, Twelve Months Ended March 31, 2025 2024 2025 2024 GAAP Net Income/(loss) $ 16,971 $ 10,083 $ 53,515 $ 51,588Transaction-related costs1 - 248 355 2,107 Operating expense Amortization of intangible assets 3,419 3,423 13,681 10,158 Intangible amortization Restructuring and other charges/(income)2 456 (1,237 ) 292 984 Cost of Sales and Operating expense ERP implementation-related costs 19 - 557 - Operating expense Tax benefit from the release of uncertain tax position reserve (1,046 ) - (1,046 ) - Income tax expense Tax effect of adjustments (940 ) (881 ) (3,582 ) (2,947 ) Adjusted Net Income/(Loss) (non-GAAP) $ 18,879 $ 11,636 $ 63,772 $ 61,890 Adjusted Fully Diluted Earnings per Common Share (Adjusted EPS) (non-GAAP) $ 0.56 $ 0.34 $ 1.87 $ 1.82 Fully-diluted common shares 33,986 34,239 34,058 34,067 1 Fiscal 2025 charges relate to the Vapor Power and F.A.T.I. acquisition costs and Fiscal 2024 charges were incurred in connection with the Russia Exit. 2 Net gain associated with cost-cutting measures including reduction-in-force and the facility consolidation, more than offset by the related gain on sale of our Denver manufacturing facility, of which $0.6 million are in cost of sales for the twelve months ended March 31, 2025. Thermon Group Holdings, Inc. Reconciliation of Cash Provided by Operating Activities to Free Cash Flow (Unaudited, in thousands) Three Months Ended March 31, Twelve Months Ended March 31, 2025 2024 2025 2024 Cash provided by/(used in) by operating activities $ 32,058 $ 37,367 $ 63,118 $ 65,955 Cash provided by/(used in) by investing activities (3,651 ) (1,243 ) (14,970 ) (109,522 ) Cash provided by/(used in) by financing activities (28,597 ) (41,005 ) (56,419 ) 56,533 Cash provided by operating activities $ 32,058 $ 37,367 $ 63,118 $ 65,955 Less: Cash used for purchases of property, plant and equipment (3,071 ) (3,134 ) (10,249 ) (11,016 ) Plus: Sales of rental equipment 2 24 65 99 Free cash flow provided (non-GAAP) $ 28,989 $ 34,257 $ 52,934 $ 55,038 Thermon Group Holdings, Inc. Reconciliation of Point-in-Time and Over-Time Sales to OPEX Sales (Unaudited, in thousands) Three Months Ended March 31, Twelve Months Ended March 31, 2025 2024 2025 2024 Point-in-Time Sales $ 94,466 $ 85,989 $ 353,072 $ 300,606 Over Time - Small Projects 17,337 18,287 69,198 74,471 Over Time - Large Projects 22,277 23,378 75,937 119,552 Total Over-Time Sales1 $ 39,614 $ 41,665 $ 145,135 $ 194,023 Total Sales $ 134,080 $ 127,654 $ 498,207 $ 494,629 Point-in-Time Sales 94,466 85,989 353,072 300,606 Over Time - Small Projects 17,337 18,287 69,198 74,471 OPEX Sales $ 111,803 $ 104,276 $ 422,270 $ 375,077 OPEX Sales % 83.4 % 81.7 % 84.8 % 75.8 % 1 Over Time Sales were previously reported as a single figure and are now presented as Over Time - Small Projects and Over Time - Large Projects. Over Time - Small Projects are each less than $0.5 million in total revenue and Over Time - Large Projects are each equal to or greater than $0.5 million in total revenue. SOURCE: Thermon Group Holdings Inc. View the original press release on ACCESS Newswire Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
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07-02-2025
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Thermon Group Holdings Inc (THR) Q3 2025 Earnings Call Highlights: Navigating Challenges with ...
Revenue: $134.4 million, a year-over-year decrease of 1.5%. Adjusted EBITDA: $31.8 million, up 3% from last year. Adjusted EBITDA Margin: 23.7%, up from 22.5% last year. Free Cash Flow: $8.5 million for the quarter, $24 million year-to-date. Net Leverage: 1.1 times at the end of the third quarter. Orders: $139 million, an increase of 11.4% from last year. Backlog: $235.6 million, up 48% compared to last year. OpEx Revenues: $115.8 million, an increase of 12.6% compared to last year. Large Project Revenue: $18.6 million, down 45% from last year. Debt Reduction: Paid down $12 million in debt during the quarter. Warning! GuruFocus has detected 9 Warning Sign with AVB. Release Date: February 06, 2025 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Thermon Group Holdings Inc (NYSE:THR) reported strong margin capture with an adjusted EBITDA margin of nearly 24% during the third quarter. The company experienced a significant increase in backlog, up nearly 38% on a reported basis and 9% organically. Thermon Group Holdings Inc (NYSE:THR) generated $24 million in free cash flow in the first nine months of fiscal 2025, up $3 million from the previous year. The company successfully integrated recent acquisitions, contributing to its revenue and backlog growth. Thermon Group Holdings Inc (NYSE:THR) maintained a strong balance sheet, reducing net leverage to just over 1 times by the end of the third quarter. Reported revenues declined by 2% during the quarter, driven by ongoing pressure in large CapEx projects. The company faced challenges with extended decision cycles on larger capital projects, impacting near-term revenue growth. Thermon Group Holdings Inc (NYSE:THR) experienced a modest margin drag from recent acquisitions. The aggressive and broad approach to tariffs has created additional uncertainty in the business environment. Revenues from acquisitions were below expectations, particularly with Vapor Power falling short due to project delays. Q: Can you discuss the record point-in-time revenue of $99 million and whether this represents a new baseline level? A: Bruce Thames, CEO: The record revenue was driven by a more normalized heating season and our focus on recurring revenues from the installed base. Contributions from recent acquisitions also played a role. We believe this represents a step change in our business, and we aim to maintain this level going forward. Q: With the current backlog and bookings momentum, when do you expect large CapEx spending to resume? A: Bruce Thames, CEO: We anticipate a return to capital spending in the coming quarters, driven by backlog growth and increased quoting activity. We expect the mix of OpEx-related spending to shift back to 75%-80% as CapEx spending resumes. Q: What types of large projects might we expect to see in the next year, particularly in LNG and other sectors? A: Bruce Thames, CEO: We see significant activity in LNG projects, especially along the Gulf Coast, due to lifted export permit bans. We also expect growth in combined cycle natural gas plants, nuclear refurbishments, and petrochemical projects. Q: How do you expect gross margins to trend in the fourth quarter and beyond? A: Bruce Thames, CEO: We anticipate a stronger mix of projects in Q4, which could impact gross margins. However, productivity improvements and pricing initiatives should maintain strong margins. We expect to bring acquisition margins up to our standard over the next 18-24 months. Q: Can you provide more detail on the impact of tariffs and how they might affect your business? A: Bruce Thames, CEO: Our manufacturing strategy of producing in-country helps insulate us from tariffs. The main concern is the potential impact on customer sentiment, which remains uncertain. We are monitoring the situation closely. For the complete transcript of the earnings call, please refer to the full earnings call transcript. This article first appeared on GuruFocus. Sign in to access your portfolio
