Thermon(THR) - 2024 Q4 - Annual Results

Performance Overview Q4 & Fiscal 2024 Highlights Thermon reported record financial results for Fiscal 2024, including revenue of $494.6 million (up 12% YoY), Adjusted EBITDA of $104.2 million (up 12% YoY), and Adjusted EPS of $1.82 (up 17% YoY) | Metric | Q4 2024 | Q4 YoY Change | Fiscal 2024 | FY YoY Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $127.7M | +4% | $494.6M | +12% | | Net Income | $10.1M | +31% | $51.6M | +53% | | GAAP EPS | $0.29 | +26% | $1.51 | +52% | | Adjusted EBITDA | $23.6M | -6% | $104.2M | +12% | | Adjusted EPS | $0.34 | -17% | $1.82 | +17% | - The company achieved record revenue, Adjusted EBITDA, and Adjusted EPS for the full Fiscal Year 2024[1][2] CEO Commentary & Strategic Progress The CEO highlighted the successful execution of the company's strategy, leading to record results and significant progress in diversification and decarbonization initiatives - Acquired Vapor Power in Q4, an innovative company specializing in electric- and gas-fired boilers, as part of a disciplined capital allocation strategy[2] - Revenue from diversified, non-oil and gas end markets grew to 68% of total revenue in Fiscal 2024, approaching the 70% target two years ahead of schedule[2] - Revenue associated with decarbonization more than doubled in Fiscal 2024, and the company accelerated the expansion of its Genesis Network digital solution[2] Financial Performance Analysis Q4 & Fiscal 2024 Financial Results In Q4 2024, total sales increased 4.2% to $127.7 million, including a $10.9 million contribution from Vapor Power, while organic sales declined by 5% due to a slowdown in Oil and Gas end markets | Revenue Breakdown (in millions) | Q4 2024 | Q4 2023 | % Change | FY 2024 | FY 2023 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Sales | $127.7 | $122.5 | 4.2% | $494.6 | $440.6 | 12.3% | | Point-in-Time | $86.0 | $77.8 | 10.5% | $300.6 | $277.3 | 8.4% | | Over Time - Small Projects | $18.3 | $18.8 | (2.7)% | $74.5 | $65.4 | 13.9% | | Over Time - Large Projects | $23.4 | $25.9 | (9.7)% | $119.6 | $97.9 | 22.2% | - The recent acquisition of Vapor Power contributed $10.9 million in sales during Q4 2024[4] - Organic sales (excluding Vapor Power) were $116.8 million in Q4 2024, a 5% decrease from Q4 2023, driven by a slowdown in Oil and Gas end markets[4] - The company completed its withdrawal from operations in the Russian Federation during Q4 2024[8] Orders and Backlog The company's backlog grew significantly to $186.1 million by Fiscal 2024 end, a 14% increase, despite Q4 2024 orders decreasing by 12% to $117.0 million, resulting in a book-to-bill ratio of 0.92x - Backlog as of March 31, 2024, was $186.1 million, a 14% increase from $163.3 million in the prior year[5] - Q4 2024 orders were $117.0 million, a 12% decrease from $133.2 million in Q4 2023[5] - The book-to-bill ratio was 0.92x for Q4 2024 and 0.95x for the full Fiscal 2024[2][5] Balance Sheet and Cash Flow Thermon maintained a strong balance sheet with $141.3 million in available liquidity, while total debt increased to $172.5 million due to the Vapor Power acquisition, raising the Net Debt-to-Adjusted EBITDA ratio to 1.2x | Balance Sheet & Cash Flow (in millions) | March 31, 2024 | March 31, 2023 | % Change | | :--- | :--- | :--- | :--- | | Cash and Cash Equivalents | $48.6 | $35.6 | 36.5% | | Total Debt | $172.5 | $112.9 | 52.8% | | Working Capital | $162.2 | $152.4 | 6.4% | | Q4 Free Cash Flow | $35.1 | $21.9 | 60.3% | - The Net Debt-to-Adjusted EBITDA ratio increased to 1.2x from 0.8x in the prior year, primarily due to debt taken on for the Vapor Power acquisition[6][9] - Available liquidity at quarter-end was $141.3 million, comprising $48.6 million in cash and $92.7 million available under credit agreements[6] Fiscal 2025 Outlook Full Year Guidance For Fiscal 2025, Thermon anticipates continued revenue and earnings growth, projecting revenue between $527 million and $553 million and Adjusted EBITDA between $112 million and $120 million | Fiscal 2025 Guidance | Range | | :--- | :--- | | Revenue | $527M - $553M | | Adjusted EBITDA | $112M - $120M | | GAAP EPS | $1.57 - $1.73 | | Adjusted EPS | $1.90 - $2.06 | - The guidance represents year-over-year growth of 9% for revenue and 11% for Adjusted EBITDA at the midpoints of the ranges[11] - The company expects customers to remain cautious regarding large capital projects but is optimistic about its ability to deliver growth through strategic execution and operational efficiency[11] Consolidated Financial Statements Consolidated Statements of Operations For the twelve months ended March 31, 2024, Thermon's sales increased to $494.6 million, gross profit rose to $211.6 million, and net income significantly increased to $51.6 million, or $1.51 per diluted share | (in thousands) | Twelve Months Ended March 31, 2024 | Twelve Months Ended March 31, 2023 | | :--- | :--- | :--- | | Sales | $494,629 | $440,590 | | Gross Profit | $211,564 | $185,125 | | Income from Operations | $75,371 | $55,190 | | Net Income | $51,588 | $33,666 | | Diluted EPS | $1.51 | $1.00 | Consolidated Balance Sheets As of March 31, 2024, Thermon's total assets grew to $767.7 million, largely due to acquisitions, while total liabilities increased to $292.9 million, primarily from higher long-term debt, and total equity rose to $474.9 million | (in thousands) | March 31, 2024 | March 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $274,600 | $250,942 | | Total Assets | $767,740 | $649,629 | | Total Current Liabilities | $109,269 | $110,072 | | Total Liabilities | $292,853 | $230,641 | | Total Equity | $474,887 | $418,988 | Consolidated Statements of Cash Flows For the twelve months ended March 31, 2024, net cash provided by operating activities was $66.0 million, net cash used in investing activities was $109.5 million due to acquisitions, and net cash provided by financing activities was $56.5 million | (in thousands) | Twelve Months Ended March 31, 2024 | Twelve Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $65,955 | $57,714 | | Net cash used in investing activities | ($109,522) | ($44,555) | | Net cash provided by/(used in) financing activities | $56,533 | ($13,465) | | Change in cash and cash equivalents | $11,911 | ($5,411) | Reconciliation of Non-GAAP Financial Measures Reconciliation to Adjusted EBITDA For Fiscal 2024, Adjusted EBITDA was reconciled from a GAAP Net Income of $51.6 million to $104.2 million, primarily by adding back interest, taxes, depreciation & amortization, stock compensation, and transaction-related costs | Reconciliation to Adjusted EBITDA (FY 2024, in thousands) | Amount | | :--- | :--- | | GAAP Net income | $51,588 | | Interest expense, net | $8,845 | | Income tax expense | $16,086 | | Depreciation and amortization expense | $18,837 | | Stock compensation expense | $5,754 | | Transaction-related costs | $2,107 | | Restructuring and other charges | $984 | | Adjusted EBITDA (non-GAAP) | $104,201 | Reconciliation to Adjusted Net Income and Adjusted EPS For Fiscal 2024, GAAP Net Income of $51.6 million was adjusted to a non-GAAP Adjusted Net Income of $61.9 million, resulting in an Adjusted EPS of $1.82, after accounting for amortization of intangible assets and transaction-related costs | Reconciliation to Adjusted Net Income (FY 2024, in thousands) | Amount | | :--- | :--- | | GAAP Net income | $51,588 | | Transaction-related costs | $2,107 | | Amortization of intangible assets | $10,158 | | Restructuring and other charges | $984 | | Tax effect of adjustments | ($2,947) | | Adjusted Net Income (non-GAAP) | $61,890 | Reconciliation to Free Cash Flow For the twelve months ended March 31, 2024, Free Cash Flow was $55.9 million, derived from $66.0 million in cash from operating activities, minus capital expenditures, and minor proceeds from equipment sales | Reconciliation to Free Cash Flow (FY 2024, in thousands) | Amount | | :--- | :--- | | Cash provided by operating activities | $65,955 | | Less: Cash used for purchases of property, plant and equipment | ($11,016) | | Plus: Sales of rental equipment | $99 | | Free cash flow provided (non-GAAP) | $55,878 | Disclosures Non-GAAP Financial Measures Definitions This section defines the non-GAAP financial measures used in the report, such as Adjusted EPS, Adjusted EBITDA, Adjusted Net Income, Free Cash Flow, Organic Sales, and Net Debt, emphasizing their supplemental nature - Defines non-GAAP measures including Adjusted EPS, Adjusted EBITDA, Adjusted Net Income, Free Cash Flow, Organic Sales, and Net Debt[14][15] - The company is unable to reconcile projected Fiscal 2025 Adjusted EPS to the comparable GAAP measure without unreasonable effort due to the uncertainty of future adjustments[16] Forward-Looking Statements This section contains the standard safe harbor statement, cautioning that forward-looking statements, including Fiscal 2025 guidance, are subject to numerous risks and uncertainties that could cause actual results to differ materially - The release contains forward-looking statements regarding business strategy, future operations, and financial guidance for Fiscal 2025[17] - Actual results may differ materially due to various factors, including economic conditions, market cyclicality, competition, and ability to integrate acquisitions[18] - Investors are directed to the company's Form 10-K for a more detailed discussion of risk factors[19]