Core Viewpoint - The article emphasizes the importance of value investing and highlights Thermon (THR) as a strong value stock based on various financial metrics [2][8]. Group 1: Value Investing Trends - Value investing is a preferred strategy for identifying strong stocks in any market condition, relying on fundamental analysis to find undervalued companies [2]. - Zacks has developed a Style Scores system to identify stocks with specific traits, particularly focusing on the "Value" category for value investors [3]. Group 2: Thermon (THR) Financial Metrics - Thermon (THR) has a Zacks Rank of 2 (Buy) and a Value grade of A, indicating strong potential as a value stock [4]. - The stock's P/E ratio is 12.85, significantly lower than the industry average of 17.32, suggesting it may be undervalued [4]. - THR's P/B ratio stands at 1.82, compared to the industry's average of 3.36, further indicating attractive valuation [5]. - The P/S ratio for THR is 1.89, while the industry average is 2.63, reinforcing the perception of THR as undervalued [6]. - THR has a P/CF ratio of 13.79, which is lower than the industry's average of 14.79, suggesting solid cash flow outlook [7]. - Overall, these metrics contribute to THR's strong Value grade and indicate it is likely undervalued at present [8].

THERMON GROUP HOLDINGS, INC. EARNINGS PRESENTATION THIRD QUARTER FISCAL YEAR 2025 FEBRUARY 6, 2025 Q3 FY2025 Earnings | 1 Cautionary Note Regarding Forward-looking Statements This presentation includes forward-looking statements within the meaning of the U.S. federal securities laws in addition to historical information. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without l ...

Financial Data and Key Metrics Changes - Reported revenues for Q3 2025 were $134.4 million, a year-over-year decrease of 1.5% [24] - Adjusted EBITDA was $31.8 million, up from $30.7 million last year, reflecting a 3% increase [30] - Adjusted EBITDA margin improved to 23.7%, up from 22.5% last year [30] Business Line Data and Key Metrics Changes - OpEx revenues increased by 12.6% year-over-year to $115.8 million, while large project revenue decreased by 45% to $18.6 million [26][27] - OpEx revenues represented 84% of total revenues on a trailing twelve-month basis, up from the low 70% range a few years ago [17] - The backlog increased by 48% year-over-year to $235.6 million, with a 9% organic increase excluding acquisitions [32] Market Data and Key Metrics Changes - EMEA sales were $13.8 million, up 11%, while APAC sales declined by 3% to $9.8 million [27] - US Latin America sales decreased by 8% to $67.2 million, primarily due to the contraction in large project sales [27] - Canadian sales increased by 6% year-over-year to $43.5 million, indicating favorable demand in that region [27] Company Strategy and Development Direction - The company aims to reduce exposure in the oil and gas sector while diversifying its revenue base [19] - The acquisition of ThoughtView is part of the strategy to enhance competitive positioning and mitigate risks from tariffs [15] - The company is focused on disciplined capital allocation, balancing investments in organic growth, strategic M&A, and opportunistic share repurchases [21] Management's Comments on Operating Environment and Future Outlook - Management noted improving customer confidence and order momentum, particularly in the oil and gas sector [39] - The company expects a rebound in large capital expenditures, which will positively impact revenue mix [17] - The potential impacts of tariffs remain uncertain, but the company is monitoring trade negotiations closely [14][29] Other Important Information - Free cash flow for the first nine months of fiscal 2025 was $23 million, up $3 million from the previous year [11] - The company paid down $12 million in debt during the quarter, reducing net leverage to just over one times [11] - The company has a robust M&A pipeline and remains well-capitalized with total cash and available liquidity of $136 million [35] Q&A Session Summary Question: Can you discuss the point-in-time revenue of $99 million? - Management noted that a normalized heating season contributed to the strong revenue, along with efforts to drive recurring revenues from the installed base and contributions from new acquisitions [56] Question: What is the outlook for large CapEx spending? - Management highlighted a surge in LNG project activity and noted that they are well-positioned to benefit from this trend, along with other energy projects [63][65] Question: Can you comment on gross margin expectations? - Management indicated that while gross margins are expected to remain strong, they may see some downside if customer sentiment does not shift positively [70] Question: What is the current bid pipeline since the new administration took over? - Management expressed cautious optimism about growth in FY26, citing increased quoting activity and improved customer sentiment [78] Question: How is the company addressing SG&A spending? - Management expects SG&A spending to remain relatively flat in the near term due to recent acquisitions [92] Question: Can you provide details on the performance of Vapor Power and ThoughtView? - Management noted that ThoughtView performed exceptionally well, while Vapor Power fell short of expectations due to capacity constraints [100][101]

Financial Performance - Sales for the three months ended December 31, 2024, were $134.4 million, a decrease of 2% compared to $136.4 million in 2023[116] - Gross profit increased by 8% to $62.1 million, with a gross profit margin of 46.2%, up from 42.1% in the previous year[116] - Net income for the three months ended December 31, 2024, was $18.5 million, representing a 17% increase from $15.8 million in 2023[116] - Revenues decreased by 11% excluding acquisitions, primarily due to softness in Over time revenue associated with large projects[117] - Free Cash Flow for YTD 2025 was $23.9 million, up from $20.8 million in YTD 2024, driven by higher operating cash flows[159] - Operating cash flows increased by $2.5 million in YTD 2025, primarily due to higher non-cash operating items and lower cash use in operating assets[151] Revenue Composition - Revenue recognized at a point in time accounted for 74% of total revenue for the three months ended December 31, 2024, compared to 63% for the same period in 2023[107] - Over time sales decreased by 32%, primarily due to reduced activity from large customer projects in the US-LAM segment[119] - Point in time sales increased by 16%, with $99.6 million representing 74% of total sales, compared to 63% in the previous year[118] Backlog and Future Prospects - The company's backlog as of December 31, 2024, was $235.6 million, up from $186.1 million at March 31, 2024, indicating a strong pipeline for future revenue[101] - The company expects to secure more new facility project bids and generate additional revenue from facility maintenance and upgrades[94] Acquisitions and Integration - The company executed an acquisition strategy to grow by acquiring businesses in the process heating solutions industry[114] - The company initiated the integration of its recent acquisition, F.A.T.I., into its EMEA operations during the three months ended December 31, 2024[111] Costs and Expenses - Selling, general and administrative expenses rose to 25.4% of sales in Interim 2025, up from 23.3% in Interim 2024, driven by acquisitions and strategic investments[122] - Amortization of intangible assets increased due to recent acquisitions, with interest expense rising to $163 million in YTD 2025 from $122 million in YTD 2024[140] Taxation - The effective tax rate increased to 25.9% in Interim 2025 from 22.2% in Interim 2024, attributed to anticipated withholding tax on repatriated earnings[128] - The effective tax rate increased to 25.5% in YTD 2025 from 23.2% in YTD 2024, influenced by discrete tax items and anticipated withholding tax from Canadian earnings[142] Foreign Exchange and Commodities - Foreign exchange rates negatively impacted revenues by approximately $1.9 million in Interim 2025 as the U.S. dollar strengthened[120] - Sales were negatively impacted by $3.7 million in YTD 2025 due to foreign exchange translation rates compared to YTD 2024[168] - The company is subject to commodity price risks due to reliance on market prices for raw materials without long-term purchase commitments[170] - Recent periods have seen shortages in certain raw materials and increased costs due to various factors including higher freight costs and increased lead times[170] - The company cannot assure continued mitigation of raw material shortages or passing cost increases to customers, which may adversely affect operations[170] Cash and Liquidity - Cash and cash equivalents totaled $38.7 million as of December 31, 2024, with $97.6 million available under the revolving line of credit[146] - Capital expenditures are expected to be approximately 2.5% of revenue in fiscal 2025, with $18.0 million in principal payments on long-term debt anticipated[149] Interest Rate Sensitivity - A 1% change in interest rates would result in a $1.5 million increase or decrease in annual interest expense[169] Workforce and Operations - The company enacted a reduction in force and closed its Denver manufacturing facility, resulting in a gain of $3.0 million from the sale of the facility, offsetting related costs[139] - The company continues to manage working capital effectively through inventory optimization and extending payment terms with suppliers[147] Currency Management - The company had approximately $12.9 million in notional forward contracts to mitigate foreign currency exchange rate fluctuations as of December 31, 2024[167] - Unrealized foreign currency translation losses were $18.3 million in YTD 2025, while gains were $4.7 million in YTD 2024[168]

Core Viewpoint - Thermon Group reported quarterly earnings of $0.56 per share, exceeding the Zacks Consensus Estimate of $0.54 per share, but down from $0.59 per share a year ago, indicating a 3.70% earnings surprise [1][2] Financial Performance - The company posted revenues of $134.35 million for the quarter ended December 2024, missing the Zacks Consensus Estimate by 1.10% and down from $136.43 million year-over-year [2] - Over the last four quarters, Thermon Group has surpassed consensus EPS estimates four times and topped consensus revenue estimates two times [2] Stock Performance - Thermon Group shares have declined approximately 6.3% since the beginning of the year, contrasting with the S&P 500's gain of 3.1% [3] - The current consensus EPS estimate for the upcoming quarter is $0.51 on revenues of $133.46 million, and for the current fiscal year, it is $1.80 on revenues of $499.08 million [7] Industry Outlook - The Instruments - Control industry, to which Thermon Group belongs, is currently ranked in the bottom 35% of over 250 Zacks industries, suggesting potential challenges ahead [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Thermon Group's stock performance [5][6]

Revenue and Profitability - Revenue for Q3 2025 was $134.4 million, a decrease of 1.5% compared to the same period last year[4] - Gross profit increased by 8.2% to $62.1 million, with a gross margin of 46.2%, up from 42.1% last year[7] - Adjusted EBITDA for Q3 2025 was $31.8 million, reflecting a 3.3% increase, with an adjusted EBITDA margin of 23.7%[9] - Net income for Q3 2025 was $18.5 million, a 17.1% increase, translating to $0.54 earnings per diluted share[4] - For the three months ended December 31, 2024, sales were $134.353 million, a decrease of 1.6% compared to $136.427 million for the same period in 2023[29] - Gross profit for the three months ended December 31, 2024, was $62.121 million, representing a gross margin of 46.2%, compared to $57.410 million and a margin of 42.1% in the prior year[29] - Net income for the three months ended December 31, 2024, was $18.539 million, an increase of 17.1% from $15.837 million in the same period of 2023[29] - Basic income per share for the three months ended December 31, 2024, was $0.55, up from $0.47 in the prior year, reflecting a 17.0% increase[29] - Adjusted EBITDA for the nine months ended December 31, 2024, was $78,741,000, representing a decrease of 2.3% from $80,561,000 in 2023[35] - Total sales for the nine months ended December 31, 2024, were $364,127,000, slightly down from $366,975,000 in 2023[41] - Adjusted fully diluted earnings per share (EPS) for the nine months ended December 31, 2024, was $1.32, down from $1.47 in 2023[37] Orders and Backlog - New orders totaled $138.6 million, an increase of 11.4%, resulting in a book-to-bill ratio of 1.03x[10] - The backlog reached a record high of $236 million, up 48% from the previous year, with a 9% organic increase[3] Cash Flow and Financial Position - Free cash flow for Q3 2025 was $8.5 million, bringing the year-to-date total to $23.9 million, up $3.2 million from the prior year[13] - Total current assets as of December 31, 2024, were $280.227 million, an increase from $274.600 million as of March 31, 2024[31] - Total liabilities decreased to $274.706 million as of December 31, 2024, from $292.853 million as of March 31, 2024[31] - Free cash flow for the nine months ended December 31, 2024, was $23,945,000, an increase of 15.5% compared to $20,781,000 in 2023[39] - Cash provided by operating activities for the nine months ended December 31, 2024, was $31,060,000, up from $28,588,000 in 2023, marking an increase of 5.2%[39] - The company incurred $9,963,000 in cash paid for acquisitions during the nine months ended December 31, 2024, compared to $100,472,000 in 2023[33] - The company experienced a net cash used in financing activities of $27,822,000 for the nine months ended December 31, 2024, compared to a net cash provided of $97,538,000 in 2023[33] Guidance and Strategic Plans - Full-year 2025 revenue guidance is set between $495 million and $515 million, with adjusted EBITDA guidance of $105 million to $110 million[16] - The company anticipates an increase in revenues and plans to pursue strategic acquisitions to enhance growth opportunities[24] - The company expects to integrate acquired companies successfully and achieve synergies from these acquisitions[24] Risks and Challenges - The company has identified risks including competition and economic conditions that may impact future performance[25] - Net income for the nine months ended December 31, 2024, was $36,544,000, a decrease of 12.4% compared to $41,505,000 for the same period in 2023[33] - OPEX sales for the nine months ended December 31, 2024, were $310,467,000, up from $270,817,000 in 2023, reflecting a growth of 14.7%[41]

Financial Data and Key Metrics Changes - Revenue for Q2 2025 was $115 million, a year-over-year decrease of 7.4%, primarily due to headwinds in large project business, partially offset by contributions from Vapor Power and stable OpEx revenues [20][21] - Adjusted EBITDA was $23.8 million, down from $27.7 million last year, with an adjusted EBITDA margin of 20.8%, down from 22.4% [21][22] - Free cash flow improved to $6.7 million, up $6.1 million from the previous year, with a total of over $15 million generated in the first half of the fiscal year [24][31] Business Line Data and Key Metrics Changes - Large project revenue was $17.5 million, down 51% year-over-year, while OpEx revenues were $97.2 million, an increase of 10% compared to last year [20][21] - OpEx revenues represented over 80% of total revenues on a trailing 12-month basis, with a nearly 11% growth in OpEx revenues [13][20] - The company achieved a 13% increase in orders during Q2, with a backlog of $214.9 million, up 29% year-over-year [23] Market Data and Key Metrics Changes - Sales declined across the US, LAM, EMEA, and APAC, with a 2% increase in Canada [21] - The decarbonization opportunities pipeline grew to approximately $320 million, representing about 4% of the total $1.2 billion pipeline [15][43] Company Strategy and Development Direction - The company aims to reduce exposure to the oil and gas sector, achieving a goal of generating at least 70% of revenues from diversified end markets [14] - Recent acquisitions, including Vapor Power and F.A.T.I., are part of the strategy to enhance market presence and support growth initiatives [10][17] - The company is focused on operational excellence and maintaining financial discipline while investing in strategic initiatives [9][31] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about improved order trends and a growing opportunities pipeline, despite ongoing weakness in large project markets [27][29] - The company adjusted its full-year 2025 guidance, expecting revenue between $495 million and $515 million, with adjusted EBITDA ranging from $105 million to $110 million [27] - Management noted that recent spending delays could create pent-up demand as customer confidence improves [29] Other Important Information - The company completed the consolidation of its rail and transit production lines, targeting $5.7 million in annualized savings [23] - The acquisition of F.A.T.I. is expected to enhance the company's ability to serve growing markets for electrification and decarbonization in Europe [17] Q&A Session Summary Question: Sales guidance and Vapor Power contribution - Management confirmed that Vapor Power is still tracking in the $55 million to $57 million range for the year, with strong backlog [34] Question: Large project activity post-election - Management indicated that clarity from the elections could positively impact project activity, with a growing pipeline of opportunities [38] Question: Weather impact on sales - Management noted improved material sales and a more normalized winter is expected, with Canadian business showing year-over-year improvement [40][42] Question: Decarbonization pipeline details - The decarbonization opportunities pipeline is approximately $320 million, part of a larger $1.2 billion pipeline [43] Question: Large project delays and market sectors - Management stated that delays are broad-based, affecting both oil and gas and renewable projects, with expectations for improved activity in 2026 [44][47]

Revenue and Growth - Revenue for YTD 2025 was approximately $214.9 million, up from $186.1 million at the end of YTD 2024, indicating a growth of about 15%[67] - The backlog at September 30, 2024, was $214.9 million, compared to $186.1 million at March 31, 2024, reflecting an increase of approximately 15.5%[67] - The company expects revenues to increase, supported by a strong pipeline of planned projects and a healthy backlog[66] - Approximately 50% of revenues in YTD 2025 were generated from outside the United States, slightly down from 52% in YTD 2024[67] Revenue Composition - Point in time revenue represented 72% of total revenue for the three months ended September 30, 2024, compared to 59% for the same period in 2023[69] - Over time revenue accounted for 28% of total revenue for the three months ended September 30, 2024, down from 41% in the same period in 2023[69] - Small projects contributed 13% to total revenue for both the three months ended September 30, 2024, and 2023, while large projects accounted for 15% in both periods[69] Financial Performance - For the three months ended September 30, 2024, sales decreased to $114.6 million, down 7% from $123.7 million in the same period of 2023[74] - Gross profit for the same period was $50.9 million, a decrease of 7% compared to $54.5 million in 2023, resulting in a gross margin of 44.4%[75] - Operating income fell to $15.2 million, down 30% from $21.7 million in the prior year, with an operating margin of 13.3%[75] - Net income for the three months was $9.5 million, a decline of 36% from $14.7 million in 2023, reflecting a net margin of 8.3%[75] - Revenue for the six months ended September 30, 2024, was $229.8 million, a slight decrease from $230.5 million in 2023[79] Acquisitions and Strategic Plans - The company acquired Fabbrica Apparecchiature Termoelettriche Industriali S.r.L. ("F.A.T.I."), an Italian manufacturer of electric heaters, on October 2, 2024[71] - The company plans to pursue strategic acquisitions to enhance growth opportunities across diverse regions and industry sectors[66] Costs and Expenses - Selling, general and administrative expenses increased by $3.2 million in YTD 2025 compared to YTD 2024, with SG&A as a percent of sales rising by 140 basis points[84] - Interest expense increased due to a higher average debt balance of $169 million in YTD 2025 versus $112 million in YTD 2024, and higher average interest rates of 6.95% compared to 6.48%[84] - Restructuring and other charges amounted to $0.6 million in the three months ended September 30, 2024, compared to $0.3 million in the same period of 2023[76] - Restructuring and other charges increased to $2.7 million in YTD 2025 from $0.9 million in YTD 2024, related to a reduction in force and consolidation of production lines[84] Cash Flow and Capital Expenditures - Operating cash flows increased to approximately $21.4 million in YTD 2025, primarily due to changes in operating assets and liabilities[90] - Free Cash Flow totaled $15.5 million for YTD 2025, a significant increase from $(1.3) million for YTD 2024[93] - The company expects capital expenditures to be approximately 2.5% to 3.0% of revenue in fiscal 2025[88] Foreign Currency and Interest Rate Risks - Approximately 50% of the year-to-date 2025 consolidated revenue was generated from non-U.S. subsidiaries, exposing the company to foreign currency risks[96] - A 10% appreciation of the U.S. dollar relative to the Canadian dollar would decrease net income by $1.3 million, while a 10% depreciation would increase it by $1.5 million for year-to-date 2025[96] - The company estimates a negative impact of $1.9 million on sales in year-to-date 2025 due to foreign exchange translation rates compared to year-to-date 2024[96] - A 1% change in interest rates would result in a $1.6 million increase or decrease in annual interest expense[97] Supply Chain and Material Costs - The company is experiencing shortages and increased costs of raw materials due to various factors, including higher freight costs and supply chain challenges[97] - The company does not typically enter into long-term purchase commitments or hedging instruments to mitigate commodity price risk, exposing it to market fluctuations[97] - Foreign currency transaction gains and losses are included in net income or loss as part of other income and expense in the consolidated statements of operations[96]

Core Insights - Thermon Group (THR) reported quarterly earnings of $0.38 per share, exceeding the Zacks Consensus Estimate of $0.35 per share, but down from $0.49 per share a year ago, indicating an earnings surprise of 8.57% [1] - The company posted revenues of $114.65 million for the quarter ended September 2024, missing the Zacks Consensus Estimate by 1.23% and down from $123.66 million year-over-year [2] - Thermon Group has surpassed consensus EPS estimates in all four of the last quarters, while it has topped revenue estimates three times during the same period [2] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.66 on revenues of $155.41 million, and for the current fiscal year, it is $1.98 on revenues of $537.58 million [7] - The company's earnings outlook will be influenced by management's commentary during the earnings call, which is crucial for understanding future stock performance [3][4] Industry Context - The Instruments - Control industry, to which Thermon Group belongs, is currently ranked in the bottom 8% of over 250 Zacks industries, suggesting potential challenges ahead [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact investor sentiment and stock performance [5][6]

The Zacks Instruments – Control industry is likely to benefit from the diligent focus on energy-efficient production processes and integrated software systems. Rising demand for state-of-the-art technology to replace legacy industrial control systems with automated products is expected to aid growth.However, elevated customer inventory levels amid a challenging geopolitical environment might hurt the process automation and instrumentation market. Nevertheless, Woodward, Inc. (WWD) , Watts Water Technologies ...