Thermon(US:THR)2023-05-26 14:25Financial Data and Key Metrics Changes - Record revenue of $440.6 million for fiscal year 2023, up approximately 24% year-over-year, driven by strong demand in North America and a rebound in Asia Pacific [33][35] - Adjusted EBITDA increased approximately 60% year-over-year to $93.3 million, with a margin of 21.2%, reflecting price, volume, and operational excellence initiatives [11][15] - Free cash flow doubled to $48.3 million in fiscal 2023, representing 18% of revenue [11][40] - Adjusted EPS reached a record of $1.56 per share, a year-over-year increase of approximately 90% [11][71] Business Line Data and Key Metrics Changes - Small projects and maintenance and repair revenues represented 79% of total revenue this quarter, with small projects up 31% and maintenance and repair up 24% [13][36] - Revenue from customer OpEx spending grew significantly compared to revenue from capital projects, indicating a shift towards recurring revenues [5][12] - Powerblanket contributed $5 million in revenue this quarter and $17 million since its acquisition in June 2022 [68] Market Data and Key Metrics Changes - Revenue from non-oil and gas end markets increased to 61% of total revenues, up from approximately 45% in fiscal 2017 [12][65] - In alternative energy, revenue from nuclear power was up 16%, biofuels and green diesel up 245%, and biotechnology up over 200% [32][64] - Incoming orders reached a record $132 million, up 17% year-over-year, with a trailing 12-month bookings growth of 15% [34][66] Company Strategy and Development Direction - The company focuses on three strategic pillars: diversification, digitization, and decarbonization, with disciplined capital allocation [9][31] - Plans to invest approximately 3.5% to 4% of revenues in CapEx for strategic growth initiatives and operational excellence [74][76] - The company aims to maintain a leverage target of 1.5 to 2 times under normal conditions while evaluating opportunities to return capital to shareholders [20][42] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in ongoing maintenance spending and robust growth trends across all regions despite macroeconomic uncertainties [17][48] - The company anticipates revenue guidance for FY24 to be between $455 million and $485 million, representing approximately 7% growth over fiscal 2023 [42][74] - Management highlighted the importance of the energy transition and decarbonization as key growth drivers for the future [21][75] Other Important Information - The exit from operations in Russia resulted in a GAAP EPS impact of $0.13 per share in Q4 '23 and $0.35 per share for the full year [39] - The company completed over 47 Kaizen events in the last year to improve operational efficiency [47] Q&A Session Summary Question: Reason for sequential gross margin decline in Q4 - Management noted that while volume was strong and pricing positive, higher cost inventories from previous periods were consumed, impacting margins [23][24] Question: EPS guidance in relation to strong revenue guidance - Management indicated that the environment for ongoing maintenance spending is robust, expecting levels to continue into the year [25][26]