Thermon(US:THR)2020-08-09 15:30Financial Data and Key Metrics Changes - Revenue for Q1 2021 was $56.8 million, down 35% on a constant currency basis compared to the previous year, while adjusted EBITDA decreased by 88% to $1.4 million [14][51] - Gross margins improved by 190 basis points to 42.4%, aided by Canadian Wage Subsidies [15][53] - GAAP EPS was negative $0.18, a decline from $0.04 in the prior year, while adjusted EPS was negative $0.11 compared to $0.15 [55][56] Business Line Data and Key Metrics Changes - The revenue mix shifted to 68% MRO/UE and 32% Greenfield, compared to 51% and 49% in Q1 of fiscal year 2020 [51] - Bookings for the quarter totaled $61 million, down 27% from the prior year, with a positive book-to-bill ratio of 1.07 [15][52] Market Data and Key Metrics Changes - The company’s exposure to oil and gas remains at approximately 55% to 60%, with upstream representing about 14% of fiscal year 2020 revenues [20][21] - Capital budgets are being cut by 20% to 30% due to the pandemic and oil market oversupply, particularly affecting upstream investments [22][23] Company Strategy and Development Direction - The company is focused on value preservation and cash management, having reduced SG&A by $16 million for the fiscal year, with over 75% of these reductions being structural [12][47] - Investments in research and development have more than doubled since 2015, with a focus on enhancing performance and reducing product costs [34][36] Management's Comments on Operating Environment and Future Outlook - Management noted that Q1 represents the low watermark for the year, with expectations for modest improvement in Q2 [41][42] - The company anticipates pent-up demand for products and services as restrictions ease, similar to recovery patterns observed after previous downturns [17][29] Other Important Information - The company generated $3.4 million in cash from operating activities, remaining flat compared to the prior year [19] - The balance sheet remains strong, with cash and investments improving to $48.2 million by the end of June [48][50] Q&A Session Summary Question: Why are July bookings down 33% year-over-year? - Management indicated that bookings are lumpy and affected by a second wave of COVID-19, limiting access to facilities and slowing recovery [63][65] Question: What is the trigger for bringing back SG&A expenses? - Management stated that stabilization in end markets and improved visibility would be necessary before considering reinstating temporary cost reductions [68] Question: Is the expectation for cash flow breakeven still at a 35% to 40% revenue reduction? - Management confirmed that this scenario remains conservative, accounting for depressed gross margins and working capital assumptions [75] Question: What are the expectations for revenue and gross margins moving forward? - Management expects sequential revenue improvement and believes the worst is behind them, with cost actions positively impacting gross margins [80]