Thermon(THR)2024-11-07 18:20Revenue 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]