Thermon(US:THR)2025-08-07 10:45Thermon Reports First Quarter Fiscal 2026 Results 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 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 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 quarters3 - Strategic initiatives and successful tariff mitigation efforts led to a 30 basis point increase in gross margin compared to the prior year3 - 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 outlook3 - 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 1.0x3 Detailed Financial Analysis This section provides a detailed analysis of Thermon's Q1 FY2026 financial performance, covering revenue, profitability, and liquidity Revenue and Orders Performance 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 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 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 dollars7 - 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 management9 - 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 initiatives8 Balance Sheet, Liquidity and Cash Flow 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, 202512 Fiscal 2026 Outlook This section outlines Thermon's financial projections and strategic expectations for the full fiscal year 2026 Full-Year Guidance 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 This appendix provides detailed financial statements, non-GAAP reconciliations, and important disclosures regarding forward-looking statements Non-GAAP Financial Measures and Forward-Looking Statements 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 performance1819 - 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 adjustments20 - 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 performance23 Condensed Consolidated Financial Statements This section presents unaudited condensed consolidated financial statements for Q1 FY2026, including Statements of Operations, Balance Sheets, and Cash Flows Statements of Operations 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 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 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 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 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 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 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 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% |