Thermon(THR)2025-05-22 16:00Financial Data and Key Metrics Changes - The company reported revenue of $498 million for fiscal year 2025, a 1% increase year-over-year despite a 37% decline in large capital projects [11] - Adjusted EBITDA margin improved to 22% for fiscal year 2025, up 86 basis points from the previous year [11] - Free cash flow for the year was $53 million, with a gross margin expansion of 196 basis points [12] Business Line Data and Key Metrics Changes - The company achieved 3% organic growth in Q4 2025, marking the first growth in over a year, driven by improved order trends in various verticals, particularly in the LNG market [7][8] - OpEx revenues for Q4 2025 were $111.8 million, a 7% increase year-over-year, representing 83% of total revenues [25] - Large project revenue for Q4 2025 was $22.3 million, down 5% year-over-year but up 20% compared to the previous quarter [25] Market Data and Key Metrics Changes - US sales increased by 6% due to strong OpEx revenue and improved large project trends [27] - EMEA revenue rose by 51% year-over-year, while Canadian sales decreased by 6% due to macroeconomic conditions [27] - APAC revenues were reported at $9.2 million [27] Company Strategy and Development Direction - The company focuses on three strategic pillars: growing the installed base, pursuing decarbonization, digitization, and diversification [14] - The acquisition of Vapor Power expanded the addressable market and increased the sales pipeline by 25% [13] - The company aims to diversify its revenue base, achieving 70% of revenue from diverse markets ahead of schedule [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the positive order momentum and backlog growth, despite broader macroeconomic uncertainties [13][36] - The company anticipates margin headwinds in the first half of fiscal year 2026 due to tariffs, with a projected annualized impact of $16 million to $20 million [32][36] - The guidance for fiscal year 2026 includes revenue expectations between $495 million and $535 million, reflecting a cautious outlook [36] Other Important Information - The company repurchased over $20 million in shares during fiscal year 2025 and plans to refresh its share repurchase program to $50 million [30] - The company maintained a strong financial position with net leverage of 0.9 times at the end of the fiscal year [30] Q&A Session Summary Question: Can you elaborate on the resurgence in LNG? - Management noted that since the lift of the moratorium in January, several projects have moved forward quickly, particularly in the U.S. Gulf Coast and the Middle East, with approximately $80 million in LNG opportunities in the pipeline [40][41] Question: What are the expectations for margins in FY 2026? - Management indicated that there will be near-term impacts on gross margins in the first half of the year due to inflationary pressures from tariffs, but they expect pricing actions to offset these impacts later in the year [44][46] Question: How is the backlog and CapEx spending forecasted for FY 2026? - Management reported a strong backlog build in capital projects and anticipates that order rates for larger projects may be muted until clarity on trade policy is achieved [50][51] Question: What are the capital allocation priorities? - The company plans to maintain capital investments for growth, continue share repurchases, and actively pursue M&A opportunities [64][66] Question: What is the expected net impact of tariffs for the upcoming year? - The net impact of tariffs is projected to be in the range of $4 million to $6 million for the fiscal year, primarily affecting the first half [76][78]