Thermon(US:THR)2026-02-05 17:02Financial Data and Key Metrics Changes - The company achieved record-breaking results in Q3, with revenues up 10% year-over-year to $147.3 million, and adjusted EBITDA increased by 12% to $35.6 million [6][21][25] - Adjusted EBITDA margin was 24.2%, up 50 basis points from the previous year, while gross margins improved to 46.6% from 46.2% [25][24] - GAAP earnings per share rose to $0.55, a slight increase from $0.54, while adjusted earnings per share increased by 18% to $0.66 [25] Business Line Data and Key Metrics Changes - OpEx revenues were $122 million, a 5% increase, representing 83% of total revenues, while large project revenue surged 37% to $25.4 million [21][22] - Orders grew by 14% to $158.2 million, with a book-to-bill ratio of 1.1x, indicating strong demand across various sectors [25][9] Market Data and Key Metrics Changes - The U.S. market saw a 10% revenue increase, while EMEA experienced a robust 37% growth, driven by electrification and decarbonization trends [26] - The backlog increased by 10%, supported by a positive book-to-bill ratio and favorable project timing [25] Company Strategy and Development Direction - The company is focused on capitalizing on trends such as data center growth, power generation demand, decarbonization, and electrification [7][30] - Strategic initiatives include expanding capabilities in liquid load banks and medium voltage heaters, with significant investments planned for growth [14][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about improving macro conditions and strong customer relationships, supporting a positive outlook for the remainder of the fiscal year and into 2027 [8][30] - The company raised its full-year 2026 financial guidance for revenue to a range of $516 million-$526 million and adjusted EBITDA to $114 million-$120 million [29][30] Other Important Information - The company generated $13.1 million in free cash flow during Q3, up from $8.4 million, reflecting healthy operating performance [27] - The company ended the quarter with net debt of $96.3 million and a net leverage ratio of 0.8 times, indicating a strong balance sheet [28] Q&A Session Summary Question: Can you talk about the sustainability of the 46%+ gross margin? - Management noted that improved gross margins are driven by the Thermon Business System, productivity gains, and a favorable project mix, with expectations for sustained margins [35][36][37] Question: How have conversations with potential customers in the data center industry evolved? - The company has formed relationships with various stakeholders, including data center construction contractors and end users, indicating a broad engagement strategy [39][41] Question: What is the competitive landscape for liquid load banks? - Management confirmed that the market remains robust, with a significant increase in quoting activity, indicating a strong growth opportunity [49][50] Question: How do you see the medium voltage opportunity progressing? - The company has a backlog of $11 million and a quote pipeline exceeding $150 million, indicating a multi-year growth opportunity [57][58] Question: Can you discuss the growth drivers in the LNG and midstream markets? - Management highlighted ongoing projects in LNG liquefaction and midstream gas processing, which are expected to drive demand for their products [59][61]