Thermon Group Holdings, Inc. Q2 FY2025 earnings call

• Strategic priorities included improved bookings momentum, operational excellence initiatives, financial discipline, and capital allocation with acquisitions like Vapor Power and F.A.T.I.
• Acquired Vapor Power earlier in the year, which increased exposure to diverse end markets and electrification, with integration going well.
• Completed acquisition of F.A.T.I. on October 2nd, a 79-year-old industrial heater business in Italy with $13M trailing 12-month revenues, over $15M backlog, and a $12.5M Euro purchase price.
• Highlighted nuclear market opportunities, including delivering an 8.2 megawatt precision electrode boiler for nuclear power plants and opportunities in refurbishment and small modular reactors.

In the second quarter, revenue was $115 million, a year-over-year decrease of 7.4%. Vapor Power contributed $12.1 million to revenue. Excluding Vapor Power, organic sales decreased 17%. Large project revenue was $17.5 million, down 51% year-over-year. OpEx revenues were $97.2 million, an increase of 10% compared to the previous year. On a trailing 12-month basis, materials and small project revenues represent over 80% of revenues, while large project revenues are 20%. The OpEx revenues have grown nearly 11% on a TTM basis and increased over 1% organically, while large project revenue has declined 20%.

• Adjusted full-year 2025 guidance: revenue range $495M-$515M, adjusted EBITDA range $105M-$110M, adjusted EPS range $1.77-$1.89 per share.
• Vapor Power is still tracking in the $55M-$57M range for the balance of the year.
• The long-term secular trends in end markets remain favorable, and the company is well-positioned to benefit from energy transition, decarbonization, onshoring, and infrastructure spending.

Q: Could you give indication if Vapor Power is still tracking towards 55 million?

A: Yes, the Vapor business is still tracking in the $55 million to $57 million range for the balance of the year, with strong backlog but challenge in growing capacity to ship.

Q: Can you give more color on the nuclear end market size to the business?

A: The pipeline of opportunities is roughly $1.2 billion, with current nuclear opportunities about 4% of that, and other large opportunities like a large expansion of an existing facility and small modular reactors around $100 million.

Q: Does the past election affect the probability of large projects starting to get released?

A: With elections behind us, there should be more clarity moving forward, likely positively impacting overall activity, and the company is seeing growing pipeline of opportunities in large projects.

Q: What's the outlook for large project activity coming back?

A: The company continues to see a growing pipeline of opportunities, with some projects beginning to move forward during the quarter, and expects customers to begin moving forward on projects as clarity improves.

Q: What are the large projects being pushed out in terms of sectors?

A: Large projects being pushed out are broad based, including some in renewables due to permitting issues, semiconductors, pharmaceutical projects, and a large petrochemical project with carbon capture storage in engineering for the back half of the year with revenues starting early in 2026.

Q: Do alternative energy projects or decarbonization projects might be put on back burner with new oil and gas favoring administration?

A: Policy will drive pace, and the company stands to benefit from both oil and gas spending improvements and decarbonization opportunities, with policy evolution over the next 6 to 12 months expected to impact.