Thermon Group Holdings, Inc. Q1 FY2025 earnings call

• Bruce highlighted 8% revenue growth, Vapor Power integration on track with identified synergies, organic revenue decline despite large project drop, Canadian business growth 9%, OpEx revenue growth 20% y/y, diversified end markets now 70% of trailing 12-month revenue, decarbonization pipeline over $320 million, $9M orders in Q1 for decarbonization.
• Greg discussed revenue details, organic sales decline, large project revenue, OpEx revenue, geographic sales, adjusted EBITDA, manufacturing consolidation charge of $2.3 million with expected further charges, backlog $198.5 million, working capital improvement, free cash flow $8.8 million, net debt paydown, and strong liquidity with $141.8 million in cash and available liquidity

In the first quarter, Thermon generated $115 million in revenue, a year-over-year increase of 8%, primarily driven by the Vapor Power acquisition which contributed $13.9 million. Excluding Vapor Power, organic sales decreased 5% due to softness in large CapEx projects. OpEx revenues were $98 million, up over 20% y/y, representing nearly 85% of total revenues. Large project revenue was $18 million, down 34% y/y. Geographically, Canadian sales grew 9% y/y, APAC 7%, while U.S.-LAM and EMEA declined. Adjusted EBITDA was $23.2 million, up from $22.1 million, with a margin of 20.2%

Thermon maintains full-year 2025 guidance: revenue in the range of $527 million to $553 million (includes expected Vapor Power revenue of $55 million to $59 million), adjusted EBITDA in the range of $112 million to $120 million, and adjusted EPS in the range of $1.90 to $2.06 per share. Revenue is expected to be more heavily back-end weighted at around 57% to 59% in fiscal 2025

• Macro uncertainty causing delay in large project spending decisions
• Market volatility impacting revenue and margins
• Execution risks in integrating acquisitions and implementing operational initiatives
• Supply chain challenges affecting production and lead times

Q: Could you give more detail around visibility to project revenue recovering later this year and line of sight to certain projects?

A: Pipeline of sales and project opportunities over $1 billion, quoting activity up 12%-13%, positive book-to-bill, backlog up sequentially despite year-over-year decline. Backlog for large projects, with OpEx revenues being more flow-based.

Q: Could you unpack diversified end markets, trends in food, beverage, transport?

A: Activity in petrochemical power, infrastructure, rail and transit, decarbonization and electrification opportunities, with significant pipeline in LNG liquefaction facilities in North America.

Q: On CapEx vs OpEx, maintenance spending, and Vapor Power integration?

A: Operating expenditures are stable, not closely related to CapEx. Vapor Power integration is going well, with opportunities in electrification, but challenge is scaling capacity. Current CapEx includes capital to debottleneck Vapor Power operations, with potential for additional CapEx if demand ramps faster