Thermon(US:THR)2024-02-01 21:15Financial Data and Key Metrics Changes - The company reported record revenue of $136.4 million for Q3 2024, representing a 12% year-over-year increase, driven by growth in the U.S., Europe, and Asia, while the Canadian market contracted by 5% year-over-year [7][8][71] - Adjusted EBITDA increased by 2% year-over-year to $30.7 million, attributed to volume growth, pricing, and productivity improvements [7][9] - Adjusted diluted EPS was $0.59, reflecting a 13% increase year-over-year [9] - Net income for the quarter was $16 million, up 88% year-over-year, with free cash flow improving to $22 million [21][41] Business Line Data and Key Metrics Changes - Oil and gas revenues increased by 9%, while revenues from diversified end markets rose by 26%, with food and beverage sector revenue growing by 209% year-over-year [4][67] - Large project revenue reached $34 million, up 26% from the prior year, while small projects and maintenance revenue totaled $103 million, up 8% [20] - Approximately 66% of trailing 12 months revenue came from diversified end markets, with an updated pro forma figure of 69% including the recent acquisition of Vapor Power [4][20] Market Data and Key Metrics Changes - The U.S. and Latin America were the strongest performing regions, with three of four regional units reporting double-digit revenue growth [71] - The food and beverage sector saw the highest growth rate, with significant demand also noted in power renewables, rail and transit, and commercial end markets [42][67] Company Strategy and Development Direction - The company is focused on three strategic pillars: profitably growing the installed base, decarbonization, digitization, and diversification, and disciplined capital allocation [3][15] - The acquisition of Vapor Power is seen as a significant step in advancing the strategy for profitable growth through decarbonization and diversification [5][79] - The company aims for approximately 70% of revenues to come from outside oil and gas by the end of fiscal 2026 [15] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing macroeconomic volatility but expressed confidence in the long-term strategy to diversify the business for continued profitable growth [9][85] - The company expects some deceleration in growth in the fourth quarter, particularly in Canada, but remains optimistic about future opportunities [27][50] - Management noted that the warmer winter impacted product mix and gross margins, but they believe this is an anomaly [41][85] Other Important Information - The company adjusted its full-year revenue guidance for fiscal 2024 to a range of $490 million to $500 million, implying 12% growth at the midpoint [22] - The balance sheet remains strong, with a net debt to adjusted EBITDA ratio of 1.5 times, allowing for further growth opportunities [40][43] Q&A Session Summary Question: Revenue expectations for Q3 and guidance for Q4 - Management indicated that Q3 revenue was in line with internal expectations, with a slight softness anticipated in Q4 due to Canadian market conditions [100][101] Question: Concerns about declining backlog - Management noted that while bookings were down 1% year-over-year, operational excellence programs have improved lead times, contributing to a decrease in backlog [103] Question: Growth expectations for fiscal 2025 - Management expects slower organic growth rates but anticipates that the acquisition of Vapor Power will contribute positively to growth in fiscal 2025 [94][95]