AUSTIN, TX / ACCESS Newswire / October 30, 2025 / Thermon Group Holdings, Inc. (NYSE:THR) ("Thermon") will issue a press release reporting its consolidated financial results for the second quarter of the fiscal year ending March 31, 2026, before the market opens on Thursday, November 6, 2025. Following the earnings release, Bruce Thames, President and Chief Executive Officer, Jan Schott, Senior Vice President and Chief Financial Officer, and Thomas Cerovski, Senior Vice President and Chief Operating Officer ...

Core Insights - The Zacks Instruments – Control industry is poised for growth driven by a focus on energy-efficient production processes and the integration of advanced software systems, alongside a rising demand for modern technology to replace outdated industrial controls with automated solutions [1][4]. Industry Overview - The industry includes manufacturers of precision and specialty motion-control components and systems, providing sophisticated flow measurement, control, and communication solutions for various gases and liquids used in commercial and residential applications [3]. - Key products include those for fuel, combustion, fluid actuation, electronic applications, and energy control, with some companies also offering HVAC products and water reuse solutions [3]. Growth Drivers - Increased adoption of industrial automation and higher investments in new technologies are expected to drive growth, particularly in North America, supported by rising infrastructural investments in energy and power sectors, and favorable government policies [4]. - The pharmaceutical industry's process automation market is also expanding due to cost factors and evolving regulations, indicating a mature buyer base willing to partner with process control industry players [4]. Challenges - Elevated customer inventory levels, high capital expenditures for infrastructure upgrades, and inflationary pressures are potential hindrances to the process automation and instrumentation market [2]. - Material cost inflation and rising transportation costs, exacerbated by geopolitical tensions and economic sanctions, are negatively impacting industry margins, with companies struggling to pass on costs to customers due to competitive pressures [5]. Technological Trends - The industry's growth is significantly influenced by the emphasis on digitized technologies, such as the Industrial Internet of Things, which enhances manufacturing processes and compliance with regulations [6]. - The demand for process automation and instrumentation products is expected to grow, driven by the need for improved product quality and emission reductions [6]. Market Performance - The Zacks Instruments – Control industry currently holds a Zacks Industry Rank of 12, placing it in the top 5% of over 250 Zacks industries, indicating positive near-term prospects [7][8]. - However, the industry has underperformed compared to the S&P 500 and the broader Zacks Computer and Technology sector over the past year, with a gain of only 3.3% compared to 18.8% and 28.7% for the S&P 500 and sector, respectively [9]. Valuation Metrics - The industry has a trailing 12-month EV/EBITDA ratio of 14.1X, which is lower than the S&P 500's 18.59X and the sector's 19.48X, suggesting potential undervaluation [12]. Notable Companies - **Watts Water Technologies, Inc. (WTS)**: Focuses on water safety and flow control products, benefiting from cost-reduction actions and a strong balance sheet, with a long-term earnings growth expectation of 8.5% and a stock gain of 39% over the past year [15]. - **Badger Meter, Inc. (BMI)**: Provides flow measurement and control solutions, emphasizing digital solutions and operationalizing real-time data, with a long-term earnings growth expectation of 12% [18][19]. - **Thermon Group Holdings, Inc. (THR)**: Offers engineered industrial process heating solutions, expanding its market reach through strategic acquisitions, with a consistent earnings surprise of 5.4% [22].

[PART I — FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) This part presents the unaudited condensed consolidated financial statements and management's discussion and analysis for the periods ended June 30, 2025, and March 31, 2025 [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, equity, and cash flows, along with detailed notes [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time | Metric (in thousands) | June 30, 2025 | March 31, 2025 | | :-------------------- | :------------ | :------------- | | Total Assets | $765,342 | $755,452 | | Total Liabilities | $256,032 | $260,137 | | Total Equity | $509,310 | $495,315 | | Cash and cash equivalents | $36,530 | $39,537 | | Inventories, net | $104,924 | $88,980 | [Condensed Consolidated Statements of Operations and Comprehensive Income/(Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%2F(Loss)) This statement outlines the company's financial performance over a period, showing revenues, expenses, net income, and comprehensive income | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Sales | $108,898 | $115,126 | $(6,228) | (5)% | | Cost of sales | $60,853 | $64,694 | $(3,841) | (6)% | | Gross profit | $48,045 | $50,432 | $(2,387) | (5)% | | Income from operations | $11,726 | $13,735 | $(2,009) | (15)% | | Net income | $8,581 | $8,511 | $70 | 1% | | Comprehensive income/(loss) | $25,615 | $4,601 | $21,014 | 457% | | Basic EPS | $0.26 | $0.25 | $0.01 | 4% | | Diluted EPS | $0.26 | $0.25 | $0.01 | 4% | [Condensed Consolidated Statements of Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity) This statement details changes in the company's equity accounts, including retained earnings, treasury stock, and accumulated other comprehensive loss | Metric (in thousands) | June 30, 2025 | March 31, 2025 | | :-------------------- | :------------ | :------------- | | Total Equity | $509,310 | $495,315 | | Retained Earnings | $350,879 | $342,298 | | Treasury Stock | $(30,155) | $(20,388) | | Accumulated Other Comprehensive Loss | $(55,795) | $(72,829) | - Foreign currency translation adjustment resulted in a **gain of $17,034k** for the three months ended June 30, 2025, compared to a **loss of $(3,879)k** for the same period in 2024[15](index=15&type=chunk) - Repurchase of shares under authorized program increased significantly to **$(9,767)k** for the three months ended June 30, 2025, from **$(1,579)k** in the prior year[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes the cash inflows and outflows from operating, investing, and financing activities over a specific period | Cash Flow Activity (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | | :-------------------------------- | :------------------------------- | :------------------------------- | :--------- | | Net cash provided by operating activities | $10,742 | $12,659 | $(1,917) | | Net cash used in investing activities | $(2,352) | $(3,904) | $1,552 | | Net cash used in financing activities | $(12,640) | $(8,002) | $(4,638) | | Change in cash, cash equivalents and restricted cash | $(2,701) | $210 | $(2,911) | [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements [Note 1. Basis of Presentation](index=9&type=section&id=Note%201.%20Basis%20of%20Presentation) This note describes the company's business, the basis of financial statement preparation, and significant accounting policies - The Company is a leading provider of highly engineered industrial process heating solutions, offering products, services, and software for comprehensive solutions[19](index=19&type=chunk) - Condensed consolidated financial statements are prepared in conformity with GAAP and SEC requirements for interim financial information[20](index=20&type=chunk) | Metric (in thousands) | June 30, 2025 | March 31, 2025 | | :-------------------- | :------------ | :------------- | | Restricted cash balance | $2,191 | $1,885 | [Note 2. Acquisition](index=9&type=section&id=Note%202.%20Acquisition) This note details the acquisition of F.A.T.I., including the purchase price allocation and pro forma financial information - On October 2, 2024, the Company acquired Fabbrica Apparecchiature Termoelettriche Industriali – F.A.T.I. – S.r.l. ('F.A.T.I.'), an Italian designer and manufacturer of electrical heaters[26](index=26&type=chunk) - The initial purchase price was approximately **$14,733k**, funded with cash on hand, and is expected to strengthen the Company's market position and global production capabilities[28](index=28&type=chunk) Preliminary Purchase Price Allocation - F.A.T.I. (in thousands) | Asset/Liability Category | Fair Value | | :----------------------- | :--------- | | Cash | $2,278 | | Accounts receivable | $2,088 | | Inventories | $3,702 | | Property, plant and equipment | $7,580 | | Intangibles (Customer relationships, Trademarks, Developed technology) | $4,187 | | Goodwill | $2,179 | | Total fair value of assets acquired | $23,127 | | Current and non-current liabilities | $(8,394) | | Total purchase price | $14,733 | Unaudited Pro Forma Financial Information (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :---------- | :------------------------------- | :------------------------------- | | Sales | $108,898 | $118,276 | | Net income | $8,581 | $8,771 | [Note 3. Fair Value Measurements](index=11&type=section&id=Note%203.%20Fair%20Value%20Measurements) This note explains the company's fair value hierarchy and provides a breakdown of financial assets and liabilities measured at fair value - The Company categorizes fair value inputs into a three-level hierarchy: Level 1 (active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[39](index=39&type=chunk) Financial Assets and Liabilities (in thousands) | Item | June 30, 2025 (Carrying Value) | March 31, 2025 (Carrying Value) | Valuation Technique | | :---------------------------------- | :----------------------------- | :------------------------------ | :------------------ | | Deferred compensation plan assets | $9,043 | $8,206 | Level 1 | | Foreign currency contract forwards assets | $17 | $1 | Level 2 | | Outstanding borrowings from revolving line of credit | $5,000 | $0 | Level 2 | | Outstanding principal amount of senior secured credit facility | $134,375 | $138,874 | Level 2 | | Deferred compensation plan liabilities | $8,840 | $8,030 | Level 1 | | Foreign currency contract forwards liabilities | $279 | $491 | Level 2 | Notional Amount of Foreign Currency Forward Contracts by Currency (in thousands) | Currency | June 30, 2025 | March 31, 2025 | | :-------------- | :------------ | :------------- | | Euro | $10,568 | $10,280 | | Canadian Dollar | $0 | $2,000 | | South Korean Won | $500 | $2,500 | | Mexican Peso | $2,000 | $2,000 | | **Total** | **$13,068** | **$16,780** | [Note 4. Restructuring and Other Charges/(Income)](index=12&type=section&id=Note%204.%20Restructuring%20and%20Other%20Charges%2F(Income)) This note outlines restructuring charges incurred, primarily due to a reduction-in-force plan and facility consolidation in prior periods | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | | United States and Latin America | $0 | $715 | | Canada | $0 | $1,394 | | Europe, Middle East and Africa | $0 | $0 | | Asia-Pacific | $0 | $0 | | **Total Charges/(Income)** | **$0** | **$2,109** | - Restructuring charges in Q2 2024 were due to a reduction-in-force plan and facility consolidation affecting **68 employees** across US-LAM and Canada segments[43](index=43&type=chunk) [Note 5. Net Income per Common Share](index=13&type=section&id=Note%205.%20Net%20Income%20per%20Common%20Share) This note presents the basic and diluted net income per common share, along with the weighted-average shares outstanding | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | | Basic net income per common share | $0.26 | $0.25 | | Diluted net income per common share | $0.26 | $0.25 | | Weighted-average common shares outstanding (Basic) | 33,138,914 | 33,756,172 | | Weighted-average shares outstanding (Diluted) | 33,307,644 | 34,075,020 | [Note 6. Inventories](index=13&type=section&id=Note%206.%20Inventories) This note provides a detailed breakdown of inventory categories, including raw materials, work in process, and finished goods | Inventory Category (in thousands) | June 30, 2025 | March 31, 2025 | | :-------------------------------- | :------------ | :------------- | | Raw materials | $65,222 | $56,281 | | Work in process | $16,052 | $12,424 | | Finished goods | $27,286 | $23,562 | | Inventories, gross | $108,560 | $92,267 | | Valuation reserves | $(3,636) | $(3,287) | | **Inventories, net** | **$104,924** | **$88,980** | [Note 7. Goodwill and Other Intangible Assets](index=13&type=section&id=Note%207.%20Goodwill%20and%20Other%20Intangible%20Assets) This note details the company's goodwill by operating segment and the net carrying amount of various intangible assets Goodwill by Operating Segment (in thousands) | Segment | March 31, 2025 | Foreign Currency Translation Impact | June 30, 2025 | | :-------------------------- | :------------- | :---------------------------------- | :------------ | | United States and Latin America | $131,030 | $0 | $131,030 | | Canada | $106,477 | $5,467 | $111,944 | | Europe, Middle East and Africa | $20,717 | $1,765 | $22,482 | | Asia-Pacific | $6,107 | $227 | $6,334 | | **Total Goodwill** | **$264,331** | **$7,459** | **$271,790** | Total Intangible Assets, Net (in thousands) | Category | June 30, 2025 (Net Carrying Amount) | March 31, 2025 (Net Carrying Amount) | | :------------------- | :---------------------------------- | :----------------------------------- | | Products | $14,237 | $14,992 | | Trademarks | $51,134 | $50,044 | | Developed technology | $20,741 | $20,972 | | Customer relationships | $27,581 | $28,299 | | Certifications | $435 | $421 | | Other | $491 | $555 | | **Total** | **$114,619** | **$115,283** | - The Company performs annual goodwill impairment tests and has found no indicators of impairment to date[49](index=49&type=chunk) [Note 8. Accrued Liabilities](index=14&type=section&id=Note%208.%20Accrued%20Liabilities) This note itemizes the company's accrued current liabilities, including employee compensation, interest, and warranty reserves | Accrued Current Liabilities (in thousands) | June 30, 2025 | March 31, 2025 | | :----------------------------------------- | :------------ | :------------- | | Accrued employee compensation and related expenses | $16,365 | $20,611 | | Accrued interest | $482 | $613 | | Warranty reserves | $2,736 | $2,766 | | Professional fees | $2,456 | $3,067 | | Sales taxes payable | $3,240 | $3,201 | | Accrued litigation payable | $1,021 | $1,006 | | Other | $4,717 | $4,524 | | **Total accrued current liabilities** | **$31,017** | **$35,788** | [Note 9. Debt](index=14&type=section&id=Note%209.%20Debt) This note provides details on the company's long-term debt facilities, including term loans and revolving credit, and compliance with covenants Long-term Debt (in thousands) | Debt Facility | June 30, 2025 | March 31, 2025 | | :------------------------------------------ | :------------ | :------------- | | U.S. Term Loan Facility due September 2026 | $58,896 | $60,873 | | Incremental Term Loan A due September 2026 | $75,063 | $77,493 | | **Total term debt** | **$133,959** | **$138,366** | | Less current portion | $(18,000) | $(18,000) | | **Total long-term debt** | **$115,959** | **$120,366** | - The Company entered into Amendment No. 3 to its Credit Agreement on December 29, 2023, providing for a new incremental term loan facility and other changes[57](index=57&type=chunk)[58](index=58&type=chunk) - As of June 30, 2025, the Company had **$5,000k** outstanding under the Revolving Credit Facility and **$94,337k** of available borrowing capacity[73](index=73&type=chunk) - The Company was in compliance with all financial covenants of the Credit Agreement as of June 30, 2025, including a consolidated leverage ratio not exceeding **3.50:1.00** and a consolidated fixed charge coverage ratio of not less than **1.25:1.00**[69](index=69&type=chunk) [Note 10. Commitments and Contingencies](index=17&type=section&id=Note%2010.%20Commitments%20and%20Contingencies) This note outlines the company's involvement in legal proceedings and details outstanding letter of credit guarantees and performance bonds - The Company is involved in various legal and administrative proceedings in the ordinary course of business, for which an estimated liability has been established[74](index=74&type=chunk) - Letter of credit guarantees and performance bonds totaled **$12,724k** as of June 30, 2025, with **$932k** secured by cash deposits[75](index=75&type=chunk) - The Indian subsidiary has an additional **$4,236k** in non-collateralized customs bonds outstanding[75](index=75&type=chunk) [Note 11. Revenue](index=17&type=section&id=Note%2011.%20Revenue) This note disaggregates revenues by segment and timing of recognition, and presents contract assets and liabilities Disaggregation of Revenues (in thousands) | Segment | Q2 2025 Point in Time | Q2 2025 Over Time | Q2 2025 Total | Q2 2024 Point in Time | Q2 2024 Over Time | Q2 2024 Total | | :-------------------------- | :-------------------- | :---------------- | :------------ | :-------------------- | :---------------- | :------------ | | United States and Latin America | $37,793 | $12,251 | $50,044 | $44,408 | $15,576 | $59,984 | | Canada | $23,388 | $11,766 | $35,154 | $21,608 | $16,737 | $38,345 | | Europe, Middle East and Africa | $12,734 | $4,352 | $17,086 | $4,613 | $3,229 | $7,842 | | Asia-Pacific | $4,383 | $2,231 | $6,614 | $6,137 | $2,818 | $8,955 | | **Total revenues** | **$78,298** | **$30,600** | **$108,898** | **$76,766** | **$38,360** | **$115,126** | - Revenues recognized at a point-in-time **increased to 72%** of total sales in Q2 2025 (from **67%** in Q2 2024), while over-time sales **decreased to 28%** (from **33%**)[110](index=110&type=chunk) Contract Assets and Liabilities (in thousands) | Metric | June 30, 2025 | March 31, 2025 | | :----------------- | :------------ | :------------- | | Contract assets | $16,440 | $19,188 | | Contract liabilities | $19,331 | $19,604 | [Note 12. Income Taxes](index=18&type=section&id=Note%2012.%20Income%20Taxes) This note discusses the effective income tax rate and factors influencing it, including discrete tax items | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------ | :------------------------------- | :------------------------------- | | Effective income tax rate | 22.0% | 22.8% | - The lower effective tax rate in Q2 2025 was due to discrete tax items, including the release of a valuation reserve on foreign tax credits and benefits from realized stock compensation[81](index=81&type=chunk) - The Company is currently evaluating the impact of the 'One Big Beautiful Bill Act' enacted on July 4, 2025[83](index=83&type=chunk) [Note 13. Segment Information](index=18&type=section&id=Note%2013.%20Segment%20Information) This note provides financial information by reportable geographic segment, including segment profit and capital expenditures - The Company operates through four reportable geographic segments: United States and Latin America (US-LAM), Canada, Europe, Middle East and Africa (EMEA), and Asia-Pacific (APAC)[84](index=84&type=chunk) Segment Profit (in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | | US-LAM | $11,087 | $14,724 | | Canada | $8,692 | $8,786 | | EMEA | $1,804 | $(692) | | APAC | $(204) | $676 | | **Total Segment Profit** | **$21,379** | **$23,494** | Capital Expenditures by Reportable Segment (in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | | United States and Latin America | $1,302 | $1,447 | | Canada | $981 | $2,436 | | Europe, Middle East and Africa | $74 | $16 | | Asia-Pacific | $64 | $24 | | **Total** | **$2,421** | **$3,923** | [Note 14. Subsequent Event](index=21&type=section&id=Note%2014.%20Subsequent%20Event) This note describes a new credit agreement entered into after the reporting period, refinancing existing debt and providing new facilities - On July 24, 2025, the Company entered into a Second Amended and Restated Credit Agreement, replacing the prior agreement[95](index=95&type=chunk) - The new agreement provides for a five-year **$115,000k** secured revolving credit facility and a **$125,000k** secured term loan[95](index=95&type=chunk) - Proceeds from the new facilities will be used to refinance existing debt and support working capital and general corporate purposes[95](index=95&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for the three months ended June 30, 2025, and 2024 [Introduction and Special Note Regarding Forward-Looking Statements](index=21&type=section&id=Introduction%20and%20Special%20Note%20Regarding%20Forward-Looking%20Statements) This introduction clarifies reporting periods and highlights that forward-looking statements are subject to various risks and uncertainties - The three-month periods ended June 30, 2025, and 2024, are referred to as 'YTD 2026' and 'YTD 2025,' respectively[96](index=96&type=chunk) - Forward-looking statements are subject to various risks and uncertainties, including market growth, foreign operations, economic conditions, product development, competition, and acquisitions, which could cause actual results to differ materially[98](index=98&type=chunk)[99](index=99&type=chunk) [Business Overview and Company History](index=22&type=section&id=Business%20Overview%20and%20Company%20History) This section describes the company as a global provider of industrial process heating solutions, operating through four geographic segments - Thermon Group Holdings, Inc. is a leading global provider of highly engineered industrial process heating solutions, serving diverse markets for 70 years[102](index=102&type=chunk) - The Company offers a full suite of products, services, and software, operating through four reportable geographic segments: US-LAM, Canada, EMEA, and APAC[102](index=102&type=chunk)[104](index=104&type=chunk) Revenue Generation from Outside the United States | Period | Percentage of Total Revenues | | :------ | :--------------------------- | | YTD 2026 | 54% | | YTD 2025 | 50% | Backlog (in millions) | Date | Amount | | :------------ | :----------- | | June 30, 2025 | $252.2 | | March 31, 2025 | $240.3 | [Results of Operations - Three-month periods ended June 30, 2025 and 2024](index=25&type=section&id=Results%20of%20Operations%20-%20Three-month%20periods%20ended%20June%2030%2C%202025%20and%202024) This section analyzes key financial highlights, including sales, gross profit, operating expenses, and net income for the specified periods Key Financial Highlights (in thousands, except percentages) | Metric | YTD 2026 (Q2 2025) | YTD 2025 (Q2 2024) | Change ($) | Change (%) | | :-------------------------- | :----------------- | :----------------- | :--------- | :--------- | | Sales | $108,898 | $115,126 | $(6,228) | (5)% | | Gross profit | $48,045 | $50,432 | $(2,387) | (5)% | | Gross profit margin | 44.1% | 43.8% | 30 bps | | | Selling, general and administrative expenses | $32,175 | $31,088 | $1,087 | 3% | | Income from operations | $11,726 | $13,735 | $(2,009) | (15)% | | Net income | $8,581 | $8,511 | $70 | 1% | | Effective tax rate | 22.0% | 22.8% | -80 bps | | - Sales decreased due to delayed backlog conversion and reduced customer demand (market uncertainty, tariffs), partly offset by a **$6.8 million** contribution from the F.A.T.I. acquisition[120](index=120&type=chunk) - EMEA segment sales grew significantly by **$9.2 million (118%)**, bolstered by the F.A.T.I. Acquisition, while US-LAM, Canada, and APAC segments contracted[123](index=123&type=chunk) - Interest expense, net **decreased by $886k (31%)** due to a lower average debt balance (**$136.6 million** in YTD 2026 vs. **$170.8 million** in YTD 2025)[128](index=128&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's primary liquidity sources, cash flow activities, and available borrowing capacity - Primary liquidity sources are cash flows from operations and funds available under the Revolving Credit Facility[132](index=132&type=chunk) Liquidity Position (in thousands) | Metric | June 30, 2025 | | :-------------------------------------- | :------------ | | Cash and cash equivalents | $36,530 | | Available borrowing capacity (Revolving Credit Facility) | $94,337 | | Outstanding on Revolving Credit Facility | $5,000 | Cash Flow Summary (in thousands) | Activity | YTD 2026 (Q2 2025) | YTD 2025 (Q2 2024) | Change ($) | | :------------------------ | :----------------- | :----------------- | :--------- | | Operating activities | $10,742 | $12,659 | $(1,917) | | Investing activities | $(2,352) | $(3,904) | $1,552 | | Financing activities | $(12,640) | $(8,002) | $(4,638) | | Free Cash Flow (Non-GAAP) | $8,321 | $8,736 | $(415) | - Operating cash flows decreased primarily due to greater investments in working capital, including shoring up safety stock and building inventory for the heating season[138](index=138&type=chunk) - Financing cash outflows increased due to comparatively higher share repurchases in YTD 2026[141](index=141&type=chunk) - Expected principal payments on long-term debt in the next 12 months are approximately **$6.0 million**, following the July 24, 2025, Credit Agreement amendment[136](index=136&type=chunk) [Contractual Obligations and Off-Balance Sheet Arrangements](index=28&type=section&id=Contractual%20Obligations%20and%20Off-Balance%20Sheet%20Arrangements) This section confirms no material changes to contractual obligations and the absence of significant off-balance sheet arrangements - There have been no material changes to the Company's contractual obligations outside the ordinary course of business during fiscal 2026[147](index=147&type=chunk) - The Company does not have any off-balance sheet arrangements or interests in variable interest entities, except as disclosed[147](index=147&type=chunk) [Critical Accounting Policies](index=28&type=section&id=Critical%20Accounting%20Polices) This section highlights that financial statement preparation involves management estimates and judgments, referring to the annual report for detailed policies - The preparation of financial statements requires management to make estimates and judgments that affect reported amounts of assets, liabilities, revenues, and expenses[149](index=149&type=chunk) - For a detailed discussion of critical accounting policies and estimates, refer to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2025[149](index=149&type=chunk) [Recent Accounting Pronouncements](index=29&type=section&id=Recent%20Accounting%20Pronouncements) This section refers to the annual report for recent accounting pronouncements and notes no material impact from those not yet effective - Refer to Note 1, 'Summary of Significant Accounting Policies,' in the Annual Report on Form 10-K for discussion of recent accounting pronouncements[150](index=150&type=chunk) - Issued but not yet effective accounting pronouncements are not expected to have a material impact on the Company's financial position or results of operations[150](index=150&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the company's exposure to market risks, primarily foreign exchange rates, interest rates, and commodity prices - Primary market risk exposures include fluctuations in foreign exchange rates, interest rates, and commodity prices[151](index=151&type=chunk) - Approximately **54%** of YTD 2026 consolidated revenue was generated by non-U.S. subsidiaries, with largest foreign exchange exposures in Canadian Dollar and Euro[152](index=152&type=chunk)[153](index=153&type=chunk) Estimated Impact of 10% USD Fluctuation on Net Income (YTD 2026, in millions) | Currency | USD Appreciation | USD Depreciation | | :-------------- | :--------------- | :--------------- | | Canadian Dollar | $(0.7) | $0.8 | | Euro | $(0.2) | $0.2 | - The Company had **$13.1 million** in notional foreign currency forward contracts as of June 30, 2025, to reduce exposure to exchange rate fluctuations[155](index=155&type=chunk) - A **1% change** in interest rates would result in a **$1.4 million** increase or decrease in annual interest expense, based on **$139.4 million** in outstanding variable-rate debt as of June 30, 2025[157](index=157&type=chunk) - The Company uses various commodity-based raw materials but does not typically enter into long-term purchase commitments or hedging instruments to mitigate commodity price risk[158](index=158&type=chunk) [Item 4. Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025[159](index=159&type=chunk) - No material changes in internal control over financial reporting occurred during the most recently completed fiscal quarter[160](index=160&type=chunk) [PART II — OTHER INFORMATION](index=31&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) This part contains additional information not covered in the financial statements, including legal proceedings, risk factors, and equity security purchases [Item 1. Legal Proceedings](index=31&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 10, 'Commitments and Contingencies,' in Part I, Item 1 for information regarding legal proceedings - Refer to Note 10, 'Commitments and Contingencies,' for information on legal proceedings[162](index=162&type=chunk) [Item 1A. Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) The company states that there have been no material changes from the risk factors previously disclosed in its Annual Report on Form 10-K - No material changes from the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended March 31, 2025[163](index=163&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities](index=31&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This section reports no unregistered sales of equity securities and details the company's share repurchase activities and remaining authorization - No unregistered sales of equity securities occurred during the three months ended June 30, 2025[164](index=164&type=chunk) Issuer Purchases of Equity Securities (Three Months Ended June 30, 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--------- | :------------------------------- | :--------------------------- | | April 2025 | 140,924 | $25.46 | | May 2025 | 34,797 | $28.50 | | June 2025 | 188,977 | $27.13 | | **Total** | **364,698** | **$26.75** | - An additional **$24.4 million** was authorized for share repurchases on May 22, 2025, leaving **$44.5 million** remaining under the Repurchase Program as of June 30, 2025[165](index=165&type=chunk)[166](index=166&type=chunk) [Item 3. Defaults Upon Senior Securities](index=31&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - No defaults upon senior securities were reported[167](index=167&type=chunk) [Item 4. Mine Safety Disclosures](index=31&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable[168](index=168&type=chunk) [Item 5. Other Information](index=31&type=section&id=Item%205.%20Other%20Information) The company reported that none of its directors or executive officers adopted or terminated any Rule 10b5-1 trading plans during the three months ended June 30, 2025 - No directors or executive officers adopted or terminated any Rule 10b5-1 trading plans during the three months ended June 30, 2025[169](index=169&type=chunk) [Item 6. Exhibits](index=32&type=section&id=Item%206.%20Exhibits) This section provides an index of all exhibits filed as part of the quarterly report, including corporate governance documents and certifications - The Exhibit Index lists various documents filed, including the Third Amended and Restated Certificate of Incorporation, forms of Restricted Stock Unit and Performance Unit Award Agreements, and certifications under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[172](index=172&type=chunk) - Interactive Data Files (iXBRL) are included for the cover page, condensed consolidated financial statements, and notes[172](index=172&type=chunk) [SIGNATURES](index=34&type=section&id=SIGNATURES) The report is duly signed on behalf of Thermon Group Holdings, Inc. by its Senior Vice President, Chief Financial Officer, and Vice President, Chief Accounting Officer - The report was signed by Jan L. Schott, Senior Vice President, Chief Financial Officer, and Greg Lucas, Vice President, Chief Accounting Officer[177](index=177&type=chunk)[178](index=178&type=chunk) - The signing date of the report was August 7, 2025[177](index=177&type=chunk)

Financial Data and Key Metrics Changes - The company's first quarter revenue was $108.9 million, representing a year-over-year decrease of 5% [17] - Organic revenue, excluding contributions from the Fati acquisition, decreased by 11% [17] - Gross profit was $48 million, down 5% year-over-year, with a gross margin of 44.1%, up from 43.8% last year [19] - Adjusted EBITDA was $21.2 million, down 9% from the previous year, with an adjusted EBITDA margin of 19.5% [19] - GAAP earnings per share increased by 4% to $0.26, while adjusted earnings per share decreased by 5% to $0.36 [20] Business Line Data and Key Metrics Changes - OpEx revenues were $93.3 million, a decrease of 4% compared to last year, representing 86% of total revenues [18] - Large project revenue was $15.6 million, down 11% from last year, with many projects still in the engineering phase [18] - The backlog increased by 13% organically, supported by a positive book-to-bill ratio of 1.11 times [21] Market Data and Key Metrics Changes - Revenue in the U.S. and Canada declined by 17% due to delayed backlog conversion and reduced customer demand [22] - EMEA region saw strong growth, with revenue more than doubling, driven by organic business performance and contributions from the Fati acquisition [22] - APAC revenue decreased to $6.6 million from $9 million in the prior year, reflecting softer demand [22] Company Strategy and Development Direction - The company is focused on driving a higher quality, more profitable revenue mix and has implemented proactive tariff mitigation efforts [6] - Strategic initiatives include targeting growth in the data center market, rail and transit, and leveraging the Fati acquisition to capitalize on electrification opportunities in Europe [11][15] - The company aims to maintain a strong balance sheet while balancing capital allocation between share repurchases and growth investments [10] Management's Comments on Operating Environment and Future Outlook - Management noted that revenue declines were primarily due to temporary delays in backlog conversion and project execution timing, which are expected to translate into realized revenue in upcoming quarters [6] - The company remains confident in its strategic positioning to benefit from long-term growth drivers despite near-term unpredictability in the market [7] - Fiscal 2026 guidance remains unchanged, with expected revenue between $495 million and $535 million and adjusted EBITDA between $104 million and $114 million [29] Other Important Information - The company returned nearly $10 million in capital through its share repurchase program during the quarter [10] - The M&A pipeline remains active, with ongoing searches for opportunities to augment strategic growth initiatives [10][48] - The company ended the quarter with a net leverage ratio of 1.0 times and total cash and available liquidity of $130.8 million [25] Q&A Session Summary Question: What is the status of the capital improvement project that caused production delays? - The capital improvement project has been resolved and is now fully operational, with expected revenue conversion in Q2 and the balance of the year [32] Question: Can you elaborate on the liquid load bank opportunity in the data center market? - Liquid load banks are used to test cooling systems in liquid-cooled data centers, and the company expects to build a 20% to 25% market share in this growing opportunity [35][37] Question: What are the gross margin expectations for the next quarter? - There may be margin headwinds in Q2, but pricing adjustments are expected to offset tariff impacts in the latter half of the year [38] Question: What is the demand environment for the Fati acquisition? - The backlog for Fati has doubled since the acquisition, driven by strong demand in electrification opportunities in Europe and the Middle East [44] Question: What are the capital allocation priorities moving forward? - The M&A pipeline is active, and the company will continue share repurchases if no attractive growth opportunities arise [48]

Financial Performance - Revenue decreased by 5.4% year-over-year, from $115.1 million to $108.9 million[32] - Organic revenue declined by 11% due to tariff-driven booking softness and delayed backlog conversion[15,34] - Adjusted EBITDA decreased by 8.6%, from $23.2 million to $21.2 million[32,34] - Adjusted EPS decreased by 5.3%, from $0.38 to $0.36[32] - Free cash flow was $8.3 million, a decrease of 4.6% year-over-year[36] Orders and Backlog - Orders decreased by 5.1%, from $127.2 million to $120.7 million[32,34] - Backlog increased by 27.1%, from $198.5 million to $252.2 million[32,34] - Book-to-bill ratio was 1.11x, compared to 1.10x in the previous year[32,34] Strategic Initiatives and Market Opportunities - OPEX sales accounted for 85% of total revenue[9,51] - CAPEX sales accounted for 15% of total revenue[9] - The company is targeting a net debt to adjusted EBITDA leverage ratio of 1.5x - 2.0x under normal conditions[18] - The company sees a significant opportunity in the data center market, with liquid load bank market projected to grow at a CAGR of approximately 21%[20]

Financial Performance - Thermon Group reported quarterly earnings of $0.36 per share, missing the Zacks Consensus Estimate of $0.37 per share, and down from $0.38 per share a year ago, representing an earnings surprise of -2.70% [1] - The company posted revenues of $108.9 million for the quarter ended June 2025, missing the Zacks Consensus Estimate by 11.84%, compared to year-ago revenues of $115.13 million [2] Earnings Outlook - The current consensus EPS estimate for the coming quarter is $0.38 on revenues of $123.45 million, and for the current fiscal year, it is $1.85 on revenues of $520.39 million [7] - The estimate revisions trend for Thermon Group was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Market Performance - Thermon Group shares have lost about 1.9% since the beginning of the year, while the S&P 500 has gained 7.9% [3] - The outlook for the industry, specifically the Instruments - Control sector, is currently in the top 12% of over 250 Zacks industries, suggesting a favorable environment for stock performance [8]

[Thermon Reports First Quarter Fiscal 2026 Results](index=1&type=section&id=Thermon%20Reports%20First%20Quarter%20Fiscal%202026%20Results) Thermon reported a **5.4% revenue decrease** in Q1 FY2026, yet net income grew **1.2%**, supported by strategic initiatives and a strong bid pipeline [Q1 Fiscal 2026 Key Highlights](index=1&type=section&id=FIRST%20QUARTER%202026%20HIGHLIGHTS) Thermon reported Q1 2026 revenue of **$108.9 million**, a **5.4% decrease**, yet net income grew **1.2%** to **$8.6 million**, with a strong **1.11x book-to-bill ratio** and confirmed full-year guidance Q1 Fiscal 2026 Financial Highlights | Metric | Value | YoY Change | | :--- | :--- | :--- | | Revenue | $108.9 million | (5.4)% | | Gross Profit | $48.0 million | (4.7)% | | Gross Margin | 44.1% | +30 bps | | Net Income | $8.6 million | +1.2% | | Diluted EPS | $0.26 | +4.0% | | Adjusted EBITDA | $21.2 million | (8.6)% | | Adjusted EBITDA Margin | 19.5% | -60 bps | | New Orders | $120.7 million | (5.1)% | | Book-to-Bill Ratio | 1.11x | N/A | | Net Leverage Ratio | 1.0x | N/A | [Management Commentary](index=1&type=section&id=MANAGEMENT%20COMMENTARY) Management attributed Q1 revenue shortfall to delayed backlog conversion, but highlighted improved gross margin, a **43% increase in bid pipeline**, and disciplined capital allocation - Delayed backlog conversion due to supply chain and production issues pushed approximately **$10 million** of revenue out of Q1, but this is expected to be recognized in coming quarters[3](index=3&type=chunk) - Strategic initiatives and successful tariff mitigation efforts led to a **30 basis point increase in gross margin** compared to the prior year[3](index=3&type=chunk) - The total bid pipeline grew **43% year-over-year**, driven by strong demand in key end markets like chemical/petrochemical, power/nuclear, LNG, and renewables, supporting a confident long-term outlook[3](index=3&type=chunk) - The company executed **$9.8 million in share repurchases** in Q1, bringing the program total to **$30 million** since March 2024, while maintaining a low **net leverage ratio of 1.0x**[3](index=3&type=chunk) [Detailed Financial Analysis](index=2&type=section&id=FIRST%20QUARTER%20FISCAL%202026%20PERFORMANCE) This section provides a detailed analysis of Thermon's Q1 FY2026 financial performance, covering revenue, profitability, and liquidity [Revenue and Orders Performance](index=2&type=section&id=Revenue%20and%20Orders%20Performance) Q1 revenue declined **5.4%** to **$108.9 million** due to delayed backlog, but new orders of **$120.7 million** resulted in a **1.11x book-to-bill ratio** and **27.1% backlog growth** - Q1 revenue was **$108.9 million**, a **5.4% decrease YoY**, impacted by delayed backlog conversion of approximately **$10 million** and market uncertainty. Organic revenue declined **11.3%**[6](index=6&type=chunk) Orders and Backlog (Q1 FY2026) | Metric | Q1 FY2026 | YoY Change | | :--- | :--- | :--- | | New Orders | $120.7M | (5.1)% | | Organic Orders | N/A | (18.9)% | | Book-to-Bill Ratio | 1.11x | N/A | | Ending Backlog | $252.2M | +27.1% | | Organic Backlog | N/A | +12.6% | [Profitability Analysis](index=2&type=section&id=Profitability%20Analysis) Gross margin improved to **44.1%** due to favorable mix and cost control, despite a **4.7% decline in gross profit** and an **8.6% drop in Adjusted EBITDA** - Gross margin increased to **44.1%** from **43.8% YoY**, driven by a favorable revenue mix, cost control, and tariff mitigation measures, despite a **4.7% decline in gross profit dollars**[7](index=7&type=chunk) - Adjusted EBITDA margin decreased to **19.5%** from **20.1% YoY**, as lower revenue volumes offset the benefits from improved gross margins and disciplined cost management[9](index=9&type=chunk) - Selling, general and administrative (SG&A) expenses increased to **$32.2 million** from **$31.1 million**, primarily due to incremental expenses from the F.A.T.I. acquisition and investments in growth initiatives[8](index=8&type=chunk) [Balance Sheet, Liquidity and Cash Flow](index=2&type=section&id=Balance%20Sheet%2C%20Liquidity%20and%20Cash%20Flow) Thermon maintained a strong balance sheet with a **1.0x net leverage ratio**, **$8.3 million in free cash flow**, and continued share repurchases Balance Sheet and Cash Flow Highlights (as of June 30, 2025) | Metric | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Cash | $36.5 M | $49.1 M | | Total Debt | $139.4 M | $169.1 M | | Net Debt / TTM Adj. EBITDA | 1.0x | 1.1x | | Working Capital | $172.3 M | $158.0 M | | Q1 Free Cash Flow | $8.3 M | $8.7 M | - The company repurchased **$9.8 million** of its common shares during Q1, with **$44.5 million** remaining available under its share repurchase authorization as of June 30, 2025[12](index=12&type=chunk) [Fiscal 2026 Outlook](index=3&type=section&id=FISCAL%202026%20OUTLOOK) This section outlines Thermon's financial projections and strategic expectations for the full fiscal year 2026 [Full-Year Guidance](index=3&type=section&id=Full-Year%20Guidance) Thermon reiterated its full-year Fiscal 2026 guidance, projecting revenue between **$495 million and $535 million** and Adjusted EBITDA of **$104 million to $114 million** Fiscal 2026 Full-Year Guidance | Metric | 2025 Actual | 2026 Guidance | | :--- | :--- | :--- | | Revenue | $498.2 M | $495 M to $535 M | | Adjusted EBITDA (non-GAAP) | $109.2 M | $104 M to $114 M | | EPS | $1.57 | $1.35 to $1.57 | | Adjusted EPS (non-GAAP) | $1.87 | $1.77 to $1.99 | [Appendix: Financial Statements and Reconciliations](index=4&type=section&id=Appendix) This appendix provides detailed financial statements, non-GAAP reconciliations, and important disclosures regarding forward-looking statements [Non-GAAP Financial Measures and Forward-Looking Statements](index=4&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Forward-Looking%20Statements) This section defines non-GAAP financial measures and provides a safe harbor statement on forward-looking information, outlining potential risks - The report uses non-GAAP measures like Adjusted Net Income, Adjusted EPS, Adjusted EBITDA, Free Cash Flow, and Organic Sales to provide supplemental information on financial performance[18](index=18&type=chunk)[19](index=19&type=chunk) - The company is unable to reconcile projected fiscal 2026 Adjusted EBITDA and Adjusted EPS to GAAP measures without unreasonable effort due to the uncertainty of future adjustments[20](index=20&type=chunk) - The forward-looking statements section lists numerous risks and uncertainties, including economic conditions, competition, currency exchange rates, and geopolitical factors like tariffs, that could impact future performance[23](index=23&type=chunk) [Condensed Consolidated Financial Statements](index=6&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section presents unaudited condensed consolidated financial statements for Q1 FY2026, including Statements of Operations, Balance Sheets, and Cash Flows [Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 FY2026 sales were **$108.9 million**, a decrease from prior year, yet net income slightly increased to **$8.58 million**, with diluted EPS at **$0.26** Q1 FY2026 Statement of Operations (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Sales | $108,898 | $115,126 | | Gross profit | $48,045 | $50,432 | | Income from operations | $11,726 | $13,735 | | Net income | $8,581 | $8,511 | | Diluted EPS | $0.26 | $0.25 | [Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets increased to **$765.3 million**, total liabilities decreased, and total equity grew to **$509.3 million** Balance Sheet Summary (in thousands) | Account | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Cash and cash equivalents | $36,530 | $39,537 | | Total current assets | $272,866 | $274,292 | | Total assets | $765,342 | $755,452 | | Total current liabilities | $112,498 | $112,663 | | Total liabilities | $256,032 | $260,137 | | Total equity | $509,310 | $495,315 | [Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 net cash from operations was **$10.7 million**, with **$2.4 million** used in investing and **$12.6 million** in financing, including **$9.8 million** in share repurchases Q1 FY2026 Cash Flow Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $10,742 | $12,659 | | Net cash used in investing activities | $(2,352) | $(3,904) | | Net cash used in financing activities | $(12,640) | $(8,002) | | Change in cash | $(2,701) | $210 | [Reconciliation of Non-GAAP Measures](index=9&type=section&id=Reconciliation%20of%20Non-GAAP%20Measures) This section provides detailed reconciliations of GAAP to non-GAAP financial measures, including Adjusted EBITDA, Adjusted Net Income, Free Cash Flow, and OPEX Sales [Reconciliation to Adjusted EBITDA](index=9&type=section&id=Reconciliation%20of%20Net%20income%20to%20Adjusted%20EBITDA) Q1 2026 net income of **$8.6 million** was reconciled to Adjusted EBITDA of **$21.2 million**, with key adjustments for non-operating expenses Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net income | $8,581 | $8,511 | | Interest, Taxes, D&A | $10,049 | $10,930 | | EBITDA (non-GAAP) | $18,630 | $19,441 | | Adjustments (Stock comp, restructuring, etc.) | $2,608 | $3,712 | | **Adjusted EBITDA (non-GAAP)** | **$21,238** | **$23,153** | [Reconciliation to Adjusted Net Income and Adjusted EPS](index=10&type=section&id=Reconciliation%20of%20Net%20income%20to%20Adjusted%20Net%20Income%20and%20Adjusted%20EPS) Q1 2026 GAAP Net Income of **$8.6 million** was adjusted to non-GAAP Adjusted Net Income of **$12.1 million**, resulting in an Adjusted EPS of **$0.36** Reconciliation to Adjusted Net Income (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net income | $8,581 | $8,511 | | Adjustments (Amortization, restructuring, etc.) | $4,615 | $6,044 | | Tax effect of adjustments | $(1,130) | $(1,449) | | **Adjusted Net Income (non-GAAP)** | **$12,066** | **$13,106** | | **Adjusted EPS (non-GAAP)** | **$0.36** | **$0.38** | [Reconciliation to Free Cash Flow](index=10&type=section&id=Reconciliation%20of%20Cash%20Provided%20by%20Operating%20Activities%20to%20Free%20Cash%20Flow) Q1 2026 Free Cash Flow was **$8.3 million**, derived from **$10.7 million** in operating cash flow less **$2.4 million** in capital expenditures Reconciliation to Free Cash Flow (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Cash provided by operating activities | $10,742 | $12,659 | | Less: Cash used for purchases of PP&E | $(2,421) | $(3,923) | | **Free cash flow (non-GAAP)** | **$8,321** | **$8,736** | [Reconciliation to OPEX Sales](index=11&type=section&id=Reconciliation%20of%20Point-in-Time%20and%20Over-Time%20Sales%20to%20OPEX%20Sales) Q1 2026 non-GAAP OPEX Sales, defined as Point-in-Time plus Over Time - Small Projects, totaled **$93.3 million**, representing **85.7% of total sales** Reconciliation to OPEX Sales (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Point-in-Time Sales | $78,298 | $76,766 | | Over Time - Small Projects | $14,996 | $20,737 | | **OPEX Sales (non-GAAP)** | **$93,294** | **$97,503** | | OPEX Sales % | 85.7% | 84.6% |

Industry Overview - The Zacks Instruments – Control industry is positioned to benefit from a focus on energy-efficient production processes and integrated software systems, with rising demand for advanced technology to replace legacy industrial controls driving growth [1] - The industry comprises manufacturers of precision and specialty motion-control components and systems used across various sectors, providing solutions for flow measurement, control, and communication for air, water, and other gases and liquids [3] Growth Drivers - The industry's growth is primarily driven by the emphasis on digitized technologies in manufacturing, such as the Industrial Internet of Things, and the demand for process automation and safety automation systems [4] - Increased adoption of automation and higher investments in new technologies are expected to drive growth, particularly in North America, supported by rising infrastructural investments in the energy sector and favorable government policies [6] Challenges - Elevated customer inventory levels, high capital expenditures for infrastructure upgrades, and intense market volatility may hinder the process automation and instrumentation market [2] - Material cost inflation and rising transportation costs, along with high raw material prices due to geopolitical tensions, are affecting industry players' margins and profitability [5] Market Performance - The Zacks Instruments – Control industry has lagged behind the S&P 500 and the broader Zacks Computer and Technology sector over the past year, gaining only 2.2% compared to the S&P 500's 18.2% and the sector's 23.3% [9] - The industry has a trailing 12-month Enterprise Value-to-EBITDA (EV/EBITDA) ratio of 13.89X, which is below the S&P 500's 17.98X and the sector's 18.29X [12] Notable Companies - **Watts Water Technologies, Inc. (WTS)**: Focuses on water safety and flow control products, benefiting from cost-reduction actions and a strong balance sheet, with a long-term earnings growth expectation of 7.4% and a stock gain of 24.8% in the past year [15] - **Sensata Technologies Holding plc (ST)**: A global industrial technology company specializing in sensor-based solutions, with a long-term earnings growth expectation of 7.3% and a focus on electrification for hybrid and electric vehicles [18][19] - **Thermon Group Holdings, Inc. (THR)**: Provides engineered industrial process heating solutions, with a recent acquisition enhancing its market exposure and a long-term earnings surprise of 12.7% on average in the trailing four quarters [22]

Core Insights - Ascletis Pharma Inc. is conducting a randomized, double-blind, placebo-controlled study (ASC47-103) to evaluate the safety, tolerability, and preliminary efficacy of ASC47 in combination with semaglutide for obesity treatment [2][5] - The study has successfully enrolled 28 participants in less than two months, indicating strong interest in new obesity treatment options [3][8] - Topline data from the study is expected to be released in the fourth quarter of 2025 [4][8] Company Overview - Ascletis Pharma Inc. is a biotechnology company focused on developing and commercializing therapeutics for metabolic diseases, utilizing proprietary platforms for drug discovery [6] - The company is listed on the Hong Kong Stock Exchange under the ticker 1672.HK [6] Study Details - The ASC47-103 study includes three cohorts receiving single doses of ASC47 (10 mg, 30 mg, and 60 mg) or placebo, along with four doses of semaglutide (0.5 mg, once weekly) [5] - ASC47 is characterized as an ultra-long-acting subcutaneously administered thyroid hormone receptor beta selective small molecule agonist, with a half-life of up to 40 days [3][5] - In preclinical studies, ASC47 demonstrated superior fat mass reduction compared to semaglutide and tirzepatide in diet-induced obese mouse models [3]

Group 1 - The article promotes a premium service called "Value in Corporate Events" that focuses on major earnings events, M&A, IPOs, and other significant corporate events with actionable investment ideas [1] - The service aims to provide members with opportunities to capitalize on various corporate events, covering 10 major events a month to identify the best investment opportunities [1] Group 2 - The article includes a disclosure stating that the author has no stock or derivative positions in any mentioned companies and does not plan to initiate any positions within the next 72 hours [2] - It emphasizes that past performance is not indicative of future results and that no specific investment recommendations are provided [2]