Latest news with #organicgrowth
Globe and Mail
4 days ago
- Business
- Globe and Mail
PepsiCo's International Business Shines: Can It Reignite Performance?
PepsiCo, Inc. 's PEP international business is a cornerstone of its global strategy and long-term growth strategy. In first-quarter 2025, its international business delivered 5% organic revenue growth, marking the 16th consecutive quarter of at least mid-single-digit growth, despite ongoing geopolitical and macroeconomic challenges. Strong international demand for products like Tropicana juices and Cheetos helped to offset the slowdown in the U.S. market. This business is also central to PepsiCo's diversification efforts, contributing nearly 40% of the company's total 2024 net revenues and core operating profit, and representing a significant portion of its nearly $37 billion international portfolio. PepsiCo's international beverages business led the performance, achieving 11% organic growth in first-quarter 2025, driven by robust demand in key markets including China, India, Egypt, Turkey, Mexico, Brazil, the U.K. and Australia, alongside market share gains in Germany, France, Spain and South Korea. Meanwhile, the company's international convenient foods business grew 2% organically, driven by strength in markets like Brazil, Egypt, India and Turkey, and complemented by snack share gains in China, South Africa, Poland and Thailand. These results highlight the company's ability to tailor products to local preferences while strengthening market share across both beverages and snacks in a broad array of global regions. Looking ahead, PepsiCo plans to build its global momentum by scaling its international presence and deepening its localization efforts. This includes adapting its product offerings to suit regional tastes, modifying price-pack architectures to provide greater consumer value and expanding channel reach. The company also aims to elevate productivity through investments in automation, digitalization and standardization across global operations, freeing up capital to reinvest in commercial initiatives and innovation. PepsiCo's international growth strategy is focused on long-term profitability through sustained product innovation, market-specific customization and operational efficiency. Despite near-term headwinds from foreign exchange and supply chain inflation, particularly due to tariffs and input sourcing challenges, the company remains confident in the resilience and scalability of its global model. With a firm commitment to adaptability and efficiency, PepsiCo's international operations continue to play an essential role in supporting its broader strategic and financial goals. PEP's Competition in the International Market The Coca-Cola Company KO and Monster Beverage MNST are the key beverage companies competing with PepsiCo in the global arena. Coca-Cola, a leading beverage company, is PepsiCo's key competitor in the international market. Coca-Cola and PepsiCo compete directly in several international markets, including India, China, Brazil and Mexico. In these regions, both companies vie for market share in the non-alcoholic beverage sector, employing strategies tailored to local consumer preferences and leveraging their extensive distribution networks. Coca-Cola's international strategy focuses on being a "Total Beverage Company," expanding beyond carbonated drinks to include juices, dairy, plant-based beverages and energy drinks. Regionally, Coca-Cola's market share is particularly strong in Latin America (61.8%), Western Europe (51.8%) and the Asia-Pacific region (50.9%). This dominance is attributed to its strategic localization efforts, adapting products to suit regional tastes and preferences. Coca-Cola's international business remains a critical driver of its global performance, contributing approximately 61.3% of its total revenues in 2024. Monster Beverage's international business continues to be a key growth driver, contributing approximately 39.6% of its total revenues in the first quarter of 2025. Strategically, MNST is focused on expanding its international footprint through product launches in key markets such as China, India and the EMEA region. The development of a juice production facility in Ireland is part of its efforts to bolster growth and regional efficiencies. These initiatives aim to enhance Monster Beverage's global presence and adapt to regional consumer preferences. Monster Beverage's international operations overlap with PepsiCo's in several key markets, including China, India and Mexico. In these regions, both companies compete in the energy drink segment, with PepsiCo's Rockstar brand and MNST's diverse offerings like Reign, Bang and NOS vying for market share. This competition underscores the dynamic nature of the global energy drink market and the strategic importance of these regions for both companies. PEP's Price Performance, Valuation and Estimates Shares of PepsiCo have lost around 13.5% year to date against the industry's growth of 6.9%. From a valuation standpoint, PEP trades at a forward price-to-earnings ratio of 16.33X, significantly below the industry's average of 18.59X. The Zacks Consensus Estimate for PEP's 2025 earnings implies a year-over-year decline of 3.6%, whereas its 2026 earnings estimate suggests a year-over-year uptick of 5.4%. The estimates for 2025 and 2026 have been southbound in the past 30 days. PEP stock currently carries a Zacks Rank #4 (Sell). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Zacks Names #1 Semiconductor Stock It's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom. With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028. See This Stock Now for Free >> Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report CocaCola Company (The) (KO): Free Stock Analysis Report PepsiCo, Inc. (PEP): Free Stock Analysis Report Monster Beverage Corporation (MNST): Free Stock Analysis Report
Reuters
27-05-2025
- Business
- Reuters
Defence group Saab reiterates financial targets for 2023-2027
KARLSKOGA, Sweden, May 27 (Reuters) - Swedish defence material maker Saab ( opens new tab reiterated on Tuesday its 2023-2027 targets for organic sales growth of around 18% with operating income growth higher than organic sales growth. The defence company is riding the biggest demand boom since the end of the Cold War as Europe scrambles to re-arm in the wake of Russia's invasion of Ukraine and signs U.S. priorities may be shifting away from the region. "Saab remains committed to leading the way in an uncertain geopolitical security landscape," it said in a statement ahead of presentations to investors. "Going forward, we will continue to scale up our operations and will accelerate the development of future capabilities." Saab, which makes a wide range of military gear including fighter jets, surveillance systems, missiles and submarines, last updated the financial targets in February. Order intake last year set a new record while its shares have doubled since the turn of the year to record highs as Europe, home to roughly two thirds of Saab's sales, ramps up spending on long-neglected militaries. In many ways a product of Sweden's decades of armed neutrality, where self-sufficiency was a paramount concern, Saab is now embracing a new reality as the country embeds in NATO, opening up new business opportunities. Saab, which competes with giants such as U.S. Lockheed Martin (LMT.N), opens new tab, France's Dassault Aviation ( opens new tab and Britain's BAE Systems (BAES.L), opens new tab, said it was focused on the ramping up of capacity, and on market expansion. "Further partnerships and M&A will strengthen the company's strategic position and technological leadership," Saab said.
Yahoo
24-05-2025
- Business
- Yahoo
RBC Raises Price Target on Amentum Holdings (AMTM)
On Wednesday, May 21, RBC Capital Markets raised the price target for Amentum Holdings, Inc. (NYSE:AMTM) to $24 from $22 while keeping a 'Sector Perform' rating. This decision came after a series of investor meetings between the company's top executives and investors. Amentum Holdings, Inc.'s (NYSE:AMTM) CEO John Heller, CFO Travis Johnson, and Head of Investor Relations Nathan Rutledge discussed the company's financial strategies and future prospects with investors, focusing especially on the company's free cash flow (FCF) and plans for organic growth. A cybersecurity expert monitoring the security of the company's assets, emphasizing the importance of data protection. Long-term investors were interested in Amentum Holdings, Inc.'s (NYSE:AMTM) FCF prospects, which are supported by the company's plan to de-leverage. There is also an expectation that the company will see organic growth in the second half of 2025 and the full fiscal year 2026. However, some concerns regarding risks to the company's revenue were raised. These risks come from the timing of contract awards and the potential effects of the Department of Defense's budgetary decisions. Despite this, RBC Capital Markets believes that as confidence in Amentum Holdings, Inc.'s (NYSE:AMTM) FCF grows, the company's market value could rise. Amentum Holdings, Inc. (NYSE:AMTM) is an American government and commercial services contractor that specializes in advanced engineering and innovative technology solutions for the environment, space, intelligence, and defense markets. The company serves the US and allied government agencies. While we acknowledge the potential of AMTM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than AMTM and that has a 100x upside potential, check out our report about the cheapest AI stock. READ NEXT: 11 Stocks That Will Bounce Back According To Analysts and 11 Best Stocks Under $15 to Buy According to Hedge Funds. Disclosure: None. 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
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. 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Yahoo
22-05-2025
- Business
- Yahoo
Elior Group SA (ELROF) (H1 2025) Earnings Call Highlights: Strong Profitability and Debt ...
Organic Growth: 1.5% overall, with Contract Catering at 2.3%. EBITDA Increase: EUR32 million, improving margin from 3.2% to 4.1%. Net Result Group Share: Increased by EUR42 million to EUR43 million. Free Cash Flow: EUR205 million in the first semester. Net Debt Reduction: EUR146 million, with leverage ratio down to 3.3 times EBITDA. Revenue: EUR3.213 billion, a year-over-year increase of 2.9%. Contract Catering EBITDA Margin: Improved to 5.2%, up 120 basis points. Adjusted EBITDA Margin: Improved by 90 basis points to 4.1%. Synergies: EUR40 million annualized by end of March 2025. Refinancing: Completed in January 2025, reducing senior note by EUR50 million. CapEx: EUR61 million, representing 1.9% of revenues. Revenue Growth at Constant Currency: 2.4% in the first semester. Net Debt: EUR1.123 billion at the end of March 2025. Warning! GuruFocus has detected 5 Warning Signs with ELROF. Release Date: May 21, 2025 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Elior Group SA (ELROF) reported an organic growth of 1.5% in the first half of 2024/2025, with contract catering experiencing a 2.3% growth. The company achieved a significant improvement in profitability, with adjusted EBITDA increasing by EUR32 million, marking a 90 basis point improvement year-over-year. Elior Group SA (ELROF) successfully reduced its net debt by EUR146 million in the first half of the year. The company finalized its refinancing in January 2025, providing visibility over the next five years for continuous development. Elior Group SA (ELROF) is investing in commercial development and has registered a net positive business development of EUR112 million on a run rate basis. The company's organic growth in Multiservices was lower than expected, with a 0.6% decline due to reduced demand for temporary staff services in France. Elior Group SA (ELROF) faced challenges in Italy, where some contracts could not be renewed at the desired level of profitability. The net new business development was a drag on organic growth, with a negative impact of 130 basis points in the first half. The company anticipates a slightly lower contribution from price revisions and renegotiations in the second half of the fiscal year. Elior Group SA (ELROF) expects a negative impact on revenue growth for the full year due to ongoing challenges in the Multiservices segment. Q: Can you provide more details on the net new business development and the expected trends for the future? A: Daniel Derichebourg, Executive Chairman of the Board, CEO: The focus is on profitable growth with new contracts. We've decentralized commercial departments to better serve smaller clients, which were previously neglected. The net development balance of EUR112 million should be viewed on a 12-month basis, impacting next year's revenue. Didier Grandpre, CFO: We expect to continue benefiting from price increases and operational efficiencies in the second half, although at a lower level than in the first half. Q: What are the main margin drivers expected in the second half of the year? A: Didier Grandpre, CFO: We will continue to benefit from price increases and operational efficiencies. Although inflation will have a positive net balance, wage increases are expected. We aim to achieve further synergies, with a target of EUR56 million by the end of 2026, and we are confident in unlocking more opportunities in real estate optimization and commercial synergies. Q: How is the US market performing, especially with the current administration's policies? A: Daniel Derichebourg, CEO: We haven't encountered any significant issues with US customers. We have minimal state contracts and have signed new contracts in the healthcare segment in the US during the first half. Q: Can you elaborate on the reasons behind contract losses in the Contract Catering business and the current state of Multiservices organic growth? A: Didier Grandpre, CFO: Contract losses were mainly due to non-renewal of contracts in Italy, where we couldn't meet the expected profitability levels. In Multiservices, the demand for temporary staff services in France was lower, but we expect a progressive recovery in the second half, supported by a change in general management. Q: Could you explain the swing in provisions on the consolidated cash flow table? A: Didier Grandpre, CFO: The swing is due to the reversal of provisions related to social checks and bad debt reserves from last year. We are actively collecting overdue payments, and the situation with the Ministry of Defense contract in Italy has stabilized, with no additional provisions expected. For the complete transcript of the earnings call, please refer to the full earnings call transcript. This article first appeared on GuruFocus. 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
