Earnings call transcript: Thermon Group Q1 2025 misses forecast, shares fall

Thermon Group Holdings Inc. (THR) reported mixed financial results for Q1 2025, with earnings per share (EPS) slightly missing expectations and revenue falling short of forecasts. The company posted an EPS of $0.36, compared to a forecast of $0.3681, and revenue of $108.9 million, below the expected $122.85 million. Following the announcement, Thermon’s stock dropped 10.82% to $26.25 in trading, reflecting investor concerns over the earnings miss and revenue decline. According to InvestingPro data, the company maintains strong fundamentals with a healthy current ratio of 2.43 and an impressive Altman Z-Score of 5.95, indicating robust financial stability despite the recent earnings disappointment.

Key Takeaways

• Thermon reported Q1 2025 EPS of $0.36, missing forecasts slightly.
• Revenue decreased by 5% year-over-year, falling short of expectations.
• Stock price declined by 10.82% post-earnings announcement.
• Gross margin improved slightly to 44.1%.
• The company launched new products and expanded its market presence.

Company Performance

Thermon’s overall performance in Q1 2025 was mixed, with revenue declining by 5% compared to the same period last year. This decline was largely driven by an 11% reduction in organic revenue. The company managed to improve its gross margin to 44.1% from 43.8% in the previous year, indicating better cost management. InvestingPro analysis reveals the company is currently trading at a high P/E ratio relative to its near-term earnings growth, with a PEG ratio of 4.32. Despite the revenue challenges, Thermon continued to expand its product offerings and market reach, particularly in the data center and rail/transit sectors. For deeper insights into Thermon’s valuation and growth prospects, investors can access comprehensive Pro Research Reports, available exclusively on InvestingPro.

Financial Highlights

• Revenue: $108.9 million, a 5% decrease year-over-year.
• Earnings per share: $0.36, down 5% from $0.38 in the previous year.
• Gross margin: 44.1%, up from 43.8% last year.
• Adjusted EBITDA: $21.2 million, a 9% decrease.
• Book-to-bill ratio: 1.11x, with a 13% organic increase in backlog.

Earnings vs. Forecast

Thermon’s Q1 2025 EPS of $0.36 fell short of the forecasted $0.3681, resulting in a negative surprise of 2.2%. Revenue also missed expectations by 11.36%, coming in at $108.9 million against a forecast of $122.85 million. This marks a significant deviation from the company’s historical performance, where it typically met or exceeded market expectations.

Market Reaction

Following the earnings release, Thermon’s stock price fell by 10.82% to $26.25. This decline positioned the stock closer to its 52-week low of $23.05. The negative market reaction reflects investor disappointment in the earnings miss and revenue shortfall, despite some positive developments in gross margin and product innovation. Based on InvestingPro’s Fair Value analysis, the stock appears undervalued at current levels, with additional ProTips and detailed valuation metrics available to Pro subscribers. The company maintains a moderate debt level with a debt-to-equity ratio of 0.31, suggesting financial flexibility for future growth initiatives.

Outlook & Guidance

For the full fiscal year, Thermon has set a revenue guidance range of $495 million to $535 million and an adjusted EBITDA target between $104 million and $114 million. The company expects a more balanced revenue distribution, with 44-45% in the first half and 55-56% in the second half of the fiscal year. Thermon remains focused on managing global trade dynamics and capitalizing on opportunities in the electrification market.

Executive Commentary

CEO Bruce Thames emphasized the company’s strategic focus and operational discipline, stating, "We remain highly focused on effectively managing the factors within our control." Thames also highlighted the emerging opportunities in the electrification sector, noting, "We’re seeing significant investments in electrification to reduce scope one emissions."

Risks and Challenges

• Supply chain disruptions could impact production and delivery timelines.
• Market saturation in core segments may limit growth potential.
• Fluctuating global trade dynamics pose challenges to revenue distribution.
• Economic uncertainties could affect customer spending and project timelines.
• Increased competition in the thermal solutions market could pressure margins.

Q&A

During the earnings call, analysts were particularly interested in the data center load bank opportunities and the impact of the FATI acquisition. Executives highlighted the potential for hundreds of load bank units per data center and expressed optimism about initial revenues from these products in the latter half of the fiscal year.

Full transcript - Thermon Group Holdings Inc (THR) Q1 2026:

Conference Operator: Greetings, and welcome to the Fairmont’s Earnings Conference Call Q1 Fiscal Year twenty twenty six. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce you to your host, Yvonne Salem, Vice President, FP and A and IR.

Thank you, Yvonne. You may begin.

Yvonne Salem, Vice President, FP&A and IR, Thermon Group: Good morning, and thank you for joining Thermo Group’s first quarter fiscal twenty twenty six results conference call. Leading the call today are CEO, Bruce Thames and Chief Financial Officer, Jan Schott. Earlier this morning, we issued an earnings press release, which has been filed with the SEC on Form eight ks and is also available on the Investor Relations section of our website. Additionally, the slides for this conference call can be found in our IR website under News and Events IR Calendar Earnings Conference Call Q1 twenty twenty six. During the call, we will discuss some items that do not conform to Generally Accepted Accounting Principles.

We have reconciled those items to the most comparable GAAP measures in the tables at the end of the earnings press release. These non GAAP measures should be considered in addition to and not as a substitute for measures of financial performance reported in accordance with GAAP. I would like to remind you that during this call, we might make certain forward looking statements regarding our company. Please refer to our annual report and most recently quarterly report filed with the SEC for more information regarding our forward looking statements, including the risks and uncertainties that could impact our future results. Our actual results might differ materially from those contemplated by these forward looking statements, and we undertake no obligation to publicly update any forward looking statements, whether as a result of new information, future developments or otherwise, except as it might be required by law.

Today’s call will begin with remarks from our CEO, Bruce Thames, who will provide a review of our recent business performance, including an update on our strategic initiatives, followed by a financial update and review from our CFO, Jan Schopf. Bruce will then wrap up our prepared remarks with an update on our business outlook. At the conclusion of these prepared remarks, we will open the line for questions. With that, I will turn the call over to Bruce.

Bruce Thames, CEO, Thermon Group: Well, you, Yvonne, and good morning to everyone joining us on the call today. At a high level, I’m pleased to report that the team delivered resilient performance in the first quarter as they navigated a complex and rapidly evolving market landscape. The outcomes we achieve underscore the strength of our long term vision and strategic initiatives, which are intentionally focused on driving a higher quality, more profitable revenue mix. Combined with proactive tariff mitigation efforts, these actions enabled us to achieve gross margin improvement over prior year, affirming the effectiveness of our operational framework and the agility of our organization. However, the strength in our margin performance was offset by a year over year decline in revenues that was largely attributable to temporary delays in backlog conversion and project execution timing, factors we fully expect will translate into realized revenue in the upcoming quarters.

Additionally, we experienced some softness in our incoming order rates following Liberation Day, which we anticipated as a risk coming into our fiscal year and factored into our full year guidance. As we tracked our bookings trends through the quarter, we saw a sharp decline in the daily order rate in late April through May followed by a notable recovery to more normalized levels in June. On a positive note, order momentum has continued to build through the July. While the current market dynamics, particularly surrounding global trade, presents near term unpredictability, our strategic focus and operational discipline have us well equipped to harness renewed momentum as conditions stabilize. We remain confident in our strategic positioning to benefit from several very long term secular growth drivers.

This positioning when combined with our robust approach to gross margin enhancement sets a strong foundation for sustained growth and value creation for our stakeholders. With that as a backdrop, I’ll begin my commentary with the first quarter highlights. As I just discussed, our first quarter revenues were impacted by roughly $10,000,000 in delayed backlog conversion, which contributed to the 5% decline from prior year. These delays, stem from short term supply chain challenges and an unanticipated production delay caused by a capital improvement project, are not indicative of lost revenue opportunity. They’re simply a matter of timing.

Our robust backlog, which continues to grow, positions us well to recognize these revenues in the quarters ahead. While our bookings during the first quarter were down 5% versus last year, We remain confident in our growth outlook. Our strength in bookings over the prior several quarters, the backlog at quarter end up 27% from last year, the delayed revenues in Q1 and strong order trends at Fati all combined to provide a clear path to achieve our revenue plan for the year. Additionally, our total bid pipeline was up 43% at quarter end, boosted by the Vapor Power acquisition and driven by activity across several key end markets, including chemical, petrochemical, power and nuclear, LNG and renewables. Based on these factors, we remain confident that we’re well positioned to generate solid long term organic growth.

As noted, I was very pleased with the team’s execution to deliver strong gross margin performance during the quarter, which was up 30 basis points from last year despite the volume declines and impact of tariffs. The gross margin improvement was a direct function of our strategic shift toward higher margin OpEx revenues across diverse end markets, as well as our tariff mitigation measures, which included actions like pre buying of materials, shifting of sourcing and production, and price increases, which began to take effect very late in Q1. And finally, our disciplined financial management enabled us to maintain our strong balance sheet with leverage of just one times at quarter end, which provides us the flexibility to execute on our growth strategy, both organic and inorganic, while opportunistically returning capital to our shareholders. Our M and A pipeline remains active and we continue to search for opportunities to deploy capital to augment our strategic growth initiatives. During the quarter, we returned nearly $10,000,000 in capital through our share repurchase program and we will continue balancing capital allocation between opportunistic share repurchases and growth investments with a focus on driving returns for our shareholders.

Before I turn it over to Jan, I’d like to take some time to discuss several strategic initiatives that we’re very excited about and expect will be key contributors to our growth in the coming quarters and years. These include an emerging opportunity in the data center market, rail and transit, and our most recent acquisition, FAPTI. Turning now to Slide six. We believe unprecedented investments in the data center market represent an emerging growth opportunity for Thermon. According to an independent study, the global load bank market was roughly $280,000,000 in 2024 with growth projections to $445,000,000 in 02/1932, representing a 4.8% compounded annual growth rate.

With the advent of AI and liquid cooled data centers, the demand for liquid load banks to provide both thermal and electrical loads to test critical cooling systems and power infrastructure has rapidly grown. Based upon management estimates, we believe the current market opportunity for liquid load banks will grow from an estimated 84,000,000 in 2024 to $386,000,000 in 02/1932, which represents a compounded annual growth rate of 21%. To serve this growing market, Thermon launched the new Pontus and Poseidon load banks on July 28. As data centers shift from air to liquid cooling, we believe that the opportunity for Thermon legacy solutions like heat tracing, environmental heaters, immersion heaters, tubing bundles, and removable heating blankets grows accordingly. It’s early, but we’re already seeing a growing pipeline of project activity with new prospective customers that we anticipate will translate into meaningful growth in this segment for years to come.

Turning now to Slide seven, the rail and transit market is another vertical that we’re extremely excited about. The Infrastructure Investment and Jobs Act, representing the largest federal investment in public transportation in US history, has provided a very favorable demand environment. With higher levels of government funding to modernize public transit and passenger rail systems. We’re seeing strong order momentum with the rail and transit backlog doubling over the last twelve months. Based on these strong order trends and the longer term opportunity in this market segment, we’re deploying capital and resources to provide to to rapidly expand capacity to support this growing opportunity.

And finally, the Fatih acquisition in October has quickly become our fastest growing acquisition, and we continue to be very excited by the opportunity set for this business. Fonti strategically positions us to take advantage of the growing electrification market across Europe. While we’ve seen a shift in US policy that has stalled investment, the electrification market in Europe is experiencing solid growth. We’re seeing strong order momentum with our backlog doubling in just the last six months with a solid pipeline of high probability opportunities going forward. We’re extremely encouraged by these opportunities, which highlight the strength of our diversification strategy.

Looking ahead, our ability to leverage our technologies across high growth verticals such as data centers, transit systems and electrification positions us to capitalize on dynamic market trends and deliver sustainable shareholder value. This highlights the ingenuity and dedication of our team whose relentless pursuit of excellence allows us to consistently deliver safe, reliable and innovative thermal solutions for our customers. The successes we see today underscore our differentiated position in the industry and reinforce our confidence in the path forward. With that, I’ll turn it over to Jan, who will provide a more detailed review of our first quarter results before I wrap up with some remarks on our financial outlook. Jen?

Jan Schott, CFO, Thermon Group: Thank you, Bruce, and good morning, everyone. I will review the financial results for the quarter, give an update on working capital and free cash flow and conclude with comments on the balance sheet and liquidity. Moving now to slide eight, I will start with our first quarter operating highlights. Revenue in the first quarter was 108,900,000.0, a year over year decrease of 5%. Excluding revenue contributed from Foti, first quarter organic revenue decreased 11%.

Our OpEx revenues were $93,300,000 during the first quarter, a decrease of 4% compared to last year. Excluding the contributions from Foti, OpEx revenues decreased 11% from the same period last year due to the delayed backlog conversion as well as the impact of the tariff uncertainty. OpEx revenues represented 86% of total revenues for the quarter. Large project revenue was $15,600,000 during the first quarter, 11% from last year. While we noted some improvement in large project bookings last quarter, many of these remain in the engineering phase and we continue to see project schedules shift to the right.

Based upon the current schedules, we anticipate that execution will begin in quarter two carrying through the balance of the year. Our gross profit was 48,000,000 during the first quarter, a decrease of 5% compared to the first quarter last year as the revenue decline was partially offset by more favorable revenue mix and tariff mitigation measures, including pricing benefits. As a result, gross margin was 44.1% during the first quarter, up from 43.8% last year, owing to improved profitability and OpEx sales, price and productivity enhancements. Adjusted EBITDA was $21,200,000 during the first quarter, down from $23,200,000 last year, a decrease of 9% due to the revenue decline combined with continued investments in growth initiatives. Adjusted EBITDA margin was 19.5% during the first quarter, down from 20.1% last year, as the improved gross margins were offset by lower volumes and a modest increase in SG and A due in part to the Fati acquisition.

GAAP earnings per share for the quarter was $0.26 up 4% from $0.25 in the prior year. Adjusted earnings per share was $0.36 down 5% from $0.38 last year. The decline was primarily driven by lower sales volumes and increased SG and A expenses, partially offset by improved gross margins and reduced interest expense. Orders decreased 5% on a reported basis and were down 19% organically. Orders were down across each geography, particularly in APAC due to tariff.

While bookings were generally weaker across the board, we did see some pockets of strength in commercial, LNG and as Bruce already discussed rail and transit. Our first quarter book to bill was 1.11 times, which was flat from the prior year. Backlog increased 13% organically due to the positive book to bill in the quarter combined with project execution timing. Turning to performance by geography, year over year sales in U. S.

Lam and Canada declined by 17% and respectively, primarily due to delayed backlog conversion and reduced customer demand amid ongoing market uncertainty related to tariffs. In contrast, EMEA delivered strong growth with revenue more than doubling, driven by solid performance in our organic business and a $6,800,000 contribution from the Fati acquisition. APAC revenue was 6,600,000.0, down from 9,000,000 in the prior year period, reflecting softer demand in the region. Moving to slide nine for an update on our balance sheet and liquidity. Working capital increased by 9% to $172,000,000 at the end of the quarter, primarily driven by the Fatih acquisition and higher inventory as we built stock for the fall heating season and purchase materials in advance of tariffs.

CapEx was $2,400,000 during the quarter compared to $3,900,000 last year, which included capital investments to support growth initiatives in the prior year. Free cash flow during the first quarter was $8,300,000 down modestly from $8,700,000 last year. We repurchased $9,800,000 in shares during the first quarter, bringing our total shares repurchased since the start of fiscal twenty twenty five to 30,000,000. As a reminder, in May, we refreshed our repurchase authorization back to 50,000,000. So we currently have 44,500,000.0 remaining under our current authorization.

We ended the quarter with net debt of 102,800,000.0 and a net leverage ratio of one point zero times. We recently closed our $240,000,000 credit facility, which extends the maturity to July 2030. In summary, we maintained our strong financial discipline during the first quarter and continued to execute our balanced capital allocation strategy. We remain focused on maintaining a strong balance sheet and ended the quarter with total cash and available liquidity of 130,800,000.0. This liquidity provides us with ample flexibility to support our capital allocation needs and we will continue to prioritize investments in organic and inorganic growth while balancing opportunistic share repurchases and debt reduction.

With that, I will turn the call over to Bruce.

Bruce Thames, CEO, Thermon Group: Well, thank you, Jan. And now if you’ll all turn to slide 10. We remain focused on navigating a dynamic global trade environment with discipline and agility. We’re very pleased with our results during the first quarter as our tariff mitigation efforts were a key factor enabling us to drive gross margin improvement despite the revenue weakness and tariff headwinds. With the announcements on August 1 and questions regarding the details about how these new tariffs will be applied, we’re currently assessing the impact to our business.

As we gain clarity, I’m confident in our team’s ability to quickly respond and minimize and mitigate any impacts going forward. As you can see here, our outlook for fiscal twenty twenty six remains unchanged from our initial expectations. We continue to operate in an uncertain market created by the volatile and rapidly changing trade environment, which makes it very challenging to predict the second and third order impacts from the tariffs, particularly as it relates to customer behaviors impacting demand. Our guidance continues to assume the most recent and any future announcements do not have a notable positive or negative impact on input costs or customer sentiment and the recovery we’ve seen in order trends is sustained. While we were able to mitigate the impact of tariffs during the first quarter, we continue to see some margin risk for the balance of the year as the full impact of the tariffs is felt and we gained clarity on the most recent announcements.

Based on these factors, we’re reiterating our fiscal twenty twenty six financial guidance that calls for a revenue in a range of $495,000,000 to $535,000,000 and adjusted EBITDA in a range of $104,000,000 to $114,000,000 While ongoing global trade dynamics present challenges, we remain highly focused on effectively managing the factors within our control. We’ve made significant progress diversification growth strategy in recent years and are now strategically positioned to benefit from several powerful secular growth drivers, including reshoring, electrification, decarbonization, and power and data centers. We’re in an extremely strong financial position with more than sufficient financial flexibility to continue pursuing our strategic priorities, including the disciplined allocation of capital, all with an ongoing focus on generating the long term value for our shareholders. That completes our prepared remarks, and we’re now ready for the question and answer portion of our call.

Conference Operator: Thank you. We will now be conducting a question and answer session. Thank you. First question comes from the line of Brian Drab with William Blair. Please proceed.

Brian Drab, Analyst, William Blair: Hi, good morning. Thanks for taking my questions. Good morning, morning. Brian. I just wanted to ask, I think you said there was a capital improvement productivity improvement project that led to some production delays.

Did you say, is that in the past now or the timing of, getting that resolved and then the orders that were delayed when those would ship?

Bruce Thames, CEO, Thermon Group: Yes. Yeah. Brian, we we did have a capital improvement project that took one of our value streams down about twice as long as we had anticipated in the first quarter. It’s now up and fully operational, and it’s back to running at historical throughput levels. And, again, we would expect those revenues to convert, in q two and the balance of the year.

We also did have some chain disruption that impacted another value stream and those have been fully resolved as well.

Brian Drab, Analyst, William Blair: Okay. Got it. And so I know you talked about 10,000,000 delayed revenue. Is that a different issue? Or what’s the amount of revenue that is associated with that capital improvement delay?

Bruce Thames, CEO, Thermon Group: The supply chain improvement in the capital excuse me, the supply chain disruptions in the capital project are roughly 60% of that $10,000,000 The balance is more in project execution and timing in the quarter.

Brian Drab, Analyst, William Blair: Got it. Okay, perfect. Thank you. And can we talk a little bit about the liquid load bank opportunity in data center? I guess, maybe just at the moment, could you just spend a little time just describing what the product is that you’re shipping?

I know you had a press release on this recently, but maybe it’d be worth just explaining, briefly what the product is. I don’t think it’s super intuitive for everybody. And how what is your order book looking like and or pipeline looking like for that type of activity? And like going in, you know, a year from now, like, what’s sort of the revenue opportunity for that business line?

Bruce Thames, CEO, Thermon Group: Yeah. Great question. So first and foremost, liquid load banks are actually they’re actually they’re based on boiler technology, but essentially, they are used to provide both thermal and electrical loads to test the effectiveness of the cooling systems in these new liquid datas liquid cooled data centers. They also provide an electrical load so that the our customers can test the electrical power distribution systems in those data centers. So historically, they had largely just used inductive and resistive load banks.

Our technology allows them to test not only the electrical load, but the thermal loads on those systems as well. And and the move from air cooled to liquid cooled has created the demand for, these systems. As we look forward, the pipeline of opportunity is building. We’re just now have just launched these products only a couple of weeks ago, so it’s still very early. But we’re building that pipeline of opportunities.

We’re out talking to customers and different types of end users and channels in the market. But we would expect over time to be able to build a 20% to 25% market share in this growing opportunity. And those numbers I covered in the prepared remarks and are outlined in the slide we had in the investor materials.

Brian Drab, Analyst, William Blair: Okay. Thanks very much. And then maybe just one more question. Can you comment more specifically on gross margin expectations for the next quarter and and the and the balance of the year?

Bruce Thames, CEO, Thermon Group: Yeah. So first of all, as I said earlier, we’re pleased with the results in the first quarter. You know, our outlook had been a little more pessimistic given the impact we anticipated in tariffs. We do expect there to be some margin headwinds in in q two and beyond. The good news is we’re beginning to see pricing come through.

By the end of the second quarter, our, new prices should be in full effect. And, we feel like those are adequate to position us well to fully offset the the impact of tariffs as we know it today in the back half of the year. So overall, our view of performance in q one is positive. We do see there could be some potential headwinds in q two and our our our expectations are that pricing will offset cost in the back half of the year. On a trailing 12 basis, I think we’re sitting at about 44.8% gross margins.

I would think by the end of the year, we should be trending in that same direction.

Brian Drab, Analyst, William Blair: Oh, okay. Alright. That’s very helpful. Thanks, Bruce.

Bruce Thames, CEO, Thermon Group: Thank you.

Conference Operator: Thank you. Our next question comes from the line of Justin Age with CJS Securities. Please proceed.

Justin Age, Analyst, CJS Securities: Appreciate the color on the data centers. Can you elaborate on the strong demand that you’re seeing at SATi and what has changed the fiscal fourth quarter, the last report?

Bruce Thames, CEO, Thermon Group: Yeah. Justin. So first of all, we we did on the fourth quarter, we talked about just the strong demand environment. We’ve seen that continue. As as we noted in prepared remarks, the backlog there has literally doubled since we closed that deal on October second of of last year.

They had a very good first quarter in shipments and and bookings were quite strong north of 17,000,000 in in the first quarter. So, you know, we’re seeing very strong demand in the pipeline of opportunities there is is quite strong as well. The bulk of this is really related to electrification opportunities in in Europe and The Middle East. The way their regulations there are moving forward, we are seeing significant investments in electrification to be able to convert historical heating sources that have been hydrocarbon based to electric to reduce scope one emissions. So that has been a very positive trend on the European continent, and we’re seeing the same in The Middle East.

And a couple of these opportunities that they’ve secured have been related to LNG export liquefaction and export facilities as well, very large heaters for those applications. So again, we’re seeing quite strong demand due to a couple of different market drivers there for FODI. I think the big impact has been taken that business plugging it into Thermon’s global sales network and being able to effectively develop and close opportunities, through Thermon’s sales channels, to really build that backlog over the last seven or seven or eight months.

Justin Age, Analyst, CJS Securities: That that’s helpful. Thanks, Bruce. And then, Jan, maybe you could elaborate on the capital allocation priorities. I know you you touched on it in the prepared remarks, but just hoping to see, you know, an update on if there’s anything in the M and A funnel or how you’re approaching share buybacks. Any more color there would be helpful, please.

Jan Schott, CFO, Thermon Group: Sure. Thanks, Justin. The M and A pipeline is still very active. And as we’ve stated before, we’ll continue to look for opportunities that complement our strategy. You know, besides, I think, you know, that’ll be something that we’re focused on.

I think we have done some organic investments. So looking more for inorganic investments. We’ll also continue with our share repurchase program, you know, that would be if we if we don’t have opportunities to prioritize growth. So, you know, that’s always something that, you know, we’ve done when we can buy back shares at attractive levels, if there’s nothing or we don’t have anything, you know, really that’s attractive in the M and A pipeline or that we think we can execute on. So we think we have lots of flexibility there.

And then, you know, I think we’re in a good spot with our with our debt. So the, you know, the last part of that would just be debt reduction, but at one point zero times, it’s it’s really hard to allocate any free cash flow there.

Justin Age, Analyst, CJS Securities: Thank you, Jen. I appreciate it.

Bruce Thames, CEO, Thermon Group: Sure.

Conference Operator: Thank you. Our next question comes from the line of Chip Moore with ROTHMKM. Please proceed.

Chip Moore, Analyst, ROTHMKM: Hi, thanks for taking the question. Apologies, I hopped on a few minutes late. So not sure if you addressed it. Bruce, wondering on the Heat Trace side, pipeline on large projects, what you’re seeing, there’s been some big FIDs out there and and just just any any color there.

Bruce Thames, CEO, Thermon Group: Yes. Chip, good morning. Yes. So on the pipeline of opportunities, as I noted, we’ve seen some nice growth year over year. It’s about 43%.

Some of the large project bookings were weaker in the quarter, but as we had talked about, the cadence of bookings has improved and we’re seeing some very positive awards that we’ve received here in early in Q2. And the pipeline of opportunities again looks to be robust. We have secured some orders rail and transit in Q1. There’s been some key LNG wins that have been larger projects in scope. Certainly, we’ve had some opportunities in downstream oil, which we’ve secured the first quarter as well.

I think the key thing to note is as our backlog is up 27% year over year and we’ve, you know, 13% organically, we’ve seen a big increase in our just the engineering load today, and and we’re staffing up to be able to, be able to respond and get those projects designed and and, and be able to convert that to bills of material and ultimately drive revenue. So that has contributed to the revenue delays in Q1. We’ve seen that those projects begin to translate to revenue in Q2, and we would expect that through Q3 and Q4 in the back half of the year. I think coming in, we had made some assumptions around tariffs and demand and the like and timing of projects. We were thinking the year might be more front end loaded based on what we’re seeing today.

It looks to be a more typical revenue distribution we would expect with roughly 44 to 45 of revenues in h 155% to 56% of revenues in h two. And that’s actually roughly the around the five year average for the business.

Chip Moore, Analyst, ROTHMKM: I appreciate the color, Bruce. And maybe if I could sneak in one more on data center. Obviously, growth numbers out there, we all know those are huge. So interesting to see the opportunity. I’m just wondering, I guess one on the load bank, I assume this comes on later in construction when these facilities are coming online.

Then any thoughts on go to market? Do you need a partner there or you know, some some proof points or how are thinking about, actually looking more aggressively? Thanks.

Bruce Thames, CEO, Thermon Group: Yeah. So first of all, you’re right. These are used, these are really used in two ways. One is they can be installed permanently in the facilities, and and they’re used not only for startup and commissioning, testing, but they’re used throughout the life cycle of the asset, as they do maintenance on their HVAC or the cooling systems, and also as they expand those facilities as new technologies come in. All of those, are opportunities or or requirements for additional testing.

So you can see part of this could be earlier in the construction phase. And then there’s a lot of these that are used temporarily, in the commissioning phase. And we see that through, rental houses as well as other big, hyperscalers. They’ll have their own fleets of of this equipment. So it is later in the commissioning phase where we see these really, it’s used predominantly.

So later in the the build cycle. For the channels to market, we’re going direct globally, but we do have a potential for new partners in both the rental and technology space that we’re working on developing, those relationships today.

Chip Moore, Analyst, ROTHMKM: Great. Appreciate the color. Thanks very much. Thank you.

Conference Operator: Thank you. Our next question comes from the line of Jon Braatz with Kansas City Capital. Please proceed.

Jon Braatz, Analyst, Kansas City Capital: Good morning, Bruce and Jan.

Brian Drab, Analyst, William Blair: Good morning.

Jon Braatz, Analyst, Kansas City Capital: A couple more questions on the data center market. And I think you maybe answered it, I’m not quite sure, but would the customer be maybe the data center or the, the manufacturer of the cooling system? Would you work in potentially in in in conjunction with the cooling provider?

Bruce Thames, CEO, Thermon Group: Yes. So, it’s really both and it depends on the specific project. In some cases, could be, some of the hyperscalers. In other cases, it’s the, HVAC contractor that’s responsible for the cooling system. And then in some cases, we’re actually going through a, rental channel, to provide these assets on-site for the startup and commissioning phase.

So there’s really different channels to market, and it depends on, really whether this is being installed permanently in the facility or being used, just during the startup and commissioning phase to test the asset.

Jon Braatz, Analyst, Kansas City Capital: Okay. You know, if they if they continue to use it during the, during the life of the data center, is it one one unit per data center or does data centers acquire, need multiple units?

Bruce Thames, CEO, Thermon Group: Hundreds. Pardon? These are hundreds of units.

Jon Braatz, Analyst, Kansas City Capital: Okay. Okay. So, what’s out there now? What how are the, data centers, you know, using what are they using now? What’s the sort of the competitive landscape, in that in this, in this product area?

Bruce Thames, CEO, Thermon Group: So this is an emerging opportunity. It’s nascent, and there are a few competitors, out there globally for these liquid load banks. More traditionally, there have been, resistive and inductive load banks, which are more strict strictly focused for power, distribution testing. This is actually for thermal load testing as well as power testing. And this has really emerged with the advent of liquid cooled data centers.

So this is fairly new, to the market.

Jon Braatz, Analyst, Kansas City Capital: Okay. Okay. Okay. Good. And and I think you you addressed this earlier, but, you know, in in in a best case scenario, how quickly do you think we would begin seeing some meaningful revenues from this new product?

Are we six months away, nine months? Any any any indication from you?

Bruce Thames, CEO, Thermon Group: Yes. So, you know, our goals are to begin to generate revenues from this in the back half of the year and begin to build the backlog going into fiscal twenty twenty seven.

Jon Braatz, Analyst, Kansas City Capital: Okay. Okay. Will you separately note some of that some of those numbers to give us We an will

Bruce Thames, CEO, Thermon Group: as we begin to develop the pipeline, close orders and begin to ship, we’ll highlight that on a go forward basis.

Jon Braatz, Analyst, Kansas City Capital: Okay, Bruce. Thank you very much.

Bruce Thames, CEO, Thermon Group: Thank you.

Conference Operator: Thank you. There are no further questions at this time. I’d like to pass the call back over to Bruce for any closing remarks.

Bruce Thames, CEO, Thermon Group: Yes. Thank you, Alicia. And thank you all for joining today. We appreciate your interest in Thermon. And if we look forward to speaking you with you, if we don’t talk to you before the next call.

So thank you all and enjoy the rest of your day.

Conference Operator: This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.

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