Thermon(THR)2025-02-06 21:24Financial Data and Key Metrics Changes - Reported revenues for Q3 2025 were $134.4 million, a year-over-year decrease of 1.5% [24] - Adjusted EBITDA was $31.8 million, up from $30.7 million last year, reflecting a 3% increase [30] - Adjusted EBITDA margin improved to 23.7%, up from 22.5% last year [30] Business Line Data and Key Metrics Changes - OpEx revenues increased by 12.6% year-over-year to $115.8 million, while large project revenue decreased by 45% to $18.6 million [26][27] - OpEx revenues represented 84% of total revenues on a trailing twelve-month basis, up from the low 70% range a few years ago [17] - The backlog increased by 48% year-over-year to $235.6 million, with a 9% organic increase excluding acquisitions [32] Market Data and Key Metrics Changes - EMEA sales were $13.8 million, up 11%, while APAC sales declined by 3% to $9.8 million [27] - US Latin America sales decreased by 8% to $67.2 million, primarily due to the contraction in large project sales [27] - Canadian sales increased by 6% year-over-year to $43.5 million, indicating favorable demand in that region [27] Company Strategy and Development Direction - The company aims to reduce exposure in the oil and gas sector while diversifying its revenue base [19] - The acquisition of ThoughtView is part of the strategy to enhance competitive positioning and mitigate risks from tariffs [15] - The company is focused on disciplined capital allocation, balancing investments in organic growth, strategic M&A, and opportunistic share repurchases [21] Management's Comments on Operating Environment and Future Outlook - Management noted improving customer confidence and order momentum, particularly in the oil and gas sector [39] - The company expects a rebound in large capital expenditures, which will positively impact revenue mix [17] - The potential impacts of tariffs remain uncertain, but the company is monitoring trade negotiations closely [14][29] Other Important Information - Free cash flow for the first nine months of fiscal 2025 was $23 million, up $3 million from the previous year [11] - The company paid down $12 million in debt during the quarter, reducing net leverage to just over one times [11] - The company has a robust M&A pipeline and remains well-capitalized with total cash and available liquidity of $136 million [35] Q&A Session Summary Question: Can you discuss the point-in-time revenue of $99 million? - Management noted that a normalized heating season contributed to the strong revenue, along with efforts to drive recurring revenues from the installed base and contributions from new acquisitions [56] Question: What is the outlook for large CapEx spending? - Management highlighted a surge in LNG project activity and noted that they are well-positioned to benefit from this trend, along with other energy projects [63][65] Question: Can you comment on gross margin expectations? - Management indicated that while gross margins are expected to remain strong, they may see some downside if customer sentiment does not shift positively [70] Question: What is the current bid pipeline since the new administration took over? - Management expressed cautious optimism about growth in FY26, citing increased quoting activity and improved customer sentiment [78] Question: How is the company addressing SG&A spending? - Management expects SG&A spending to remain relatively flat in the near term due to recent acquisitions [92] Question: Can you provide details on the performance of Vapor Power and ThoughtView? - Management noted that ThoughtView performed exceptionally well, while Vapor Power fell short of expectations due to capacity constraints [100][101]