THR - Earnings call transcript Q3 2022 | Thermon Group Holdings, Inc.

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Operator

Greetings and welcome to the Thermon Group Holdings Third Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. Please note that this conference is being recorded. the Officer to for turn Fox, host, now Financial Chief Thermon will conference our over Kevin I Group Holdings. you. Thank

begin. may You

Kevin Fox

Thank the conference on section and fiscal morning press also release, we you, available for been earnings Form Diego. today's filed of X-K has joining is with issued thank an Relations XXXX on Earlier our the call. you quarter Investor which website. this SEC morning, third Good and

on conference QX this website call for the slides found Calendar Call IR News be Conference the XXXX. IR Events, Additionally, under can Earnings

During that Accounting the to call, Principles. we not Accepted will discuss some Generally do items conform

We have reported be this in addition results. measures refer like you to end measures Annual call, regarding Please could more the of performance our our GAAP reconciled the company. a I'd we to of and during certain information most earnings forward-looking financial not considered comparable in regarding the our as These make may those substitute should to most press for recent SEC accordance filed quarterly to the measures including at the future in uncertainties GAAP. tables risks for remind release. that with and with items that impact report the forward-looking our statements, and Report non-GAAP statements

of as result undertake by law. and actual required to Our a by except contemplated information, publicly statement results as may or differ no otherwise, obligation we whether be any those forward-looking statements, future materially these may from update developments forward-looking new

Officer, remarks. for introduce Bruce Thames, opening Now President our Chief to I'd Executive and like his

Bruce Thames

provide is conference Kevin details good We and on remarks. QX for interest call good performance appreciate CFO to morning. you financial our additional Thermon. listening staying and safe in our my Kevin, health. our here in Thank following and your is joining Fox, We hope you, everyone

Manufacturing for started, Salm, Senior service. of his recognize to of get Vice Rene XX take to I'd our we Van Der President years Before like this opportunity

instrumental we his the time, the international Sigma, April. manufacturing many but of an the Senior stepping of the achievements. Roberto Manufacturing. Vice has an also have in brings company's the Six will important Kuahara system of experience in At excellence. role same join XX, tenure, played excited Toyota team of be in has of assist the Rene of through knowledge part to transition February the as and operational new are Roberto Production will end a wealth as During been and operations, down Thermon President and He

quarter be the results. quarter X the income, turn across capabilities backlog. with in growth will in quarter Revenue Moving now in the quarter saw that bookings restrictions business strategy. market competencies by hemisphere, There in we over environment, challenging lagged lot third in million, I'd prior growth our and markets seeing was In to positive the a top-line, to are due largely the as by America. is growth, driven XX.X%, quarter recover. year to chain more in $XXX.X a was as up particularly points. strong project persisted XX.X% million year, the Eastern top-line showed with over continuing to solid COVID-XX supply execution basis Asia, in end for one-time quarter team also recovery year finishing see countries. a we the over Inflation XX.X% by team has the things $XX.X forward, expanding and team of we're like of within and this highlighted the are Slide instrumental to anticipate impact to point The gross higher he by senior business needed costs to positive XXX was leadership execute third prior up net large We North million the rise. XXX the in of headwind had to at Net quarter, appear XXX disruptions, Prices as EBITDA growth. been the a Adjusted and in income adept was input peaked be QX we of challenges material was improving labor fourth points, and this the continue dilutive XX% both price year. up and in prior many margins contributing very basis a navigating believe further $XX.X which basis chain costs. QX. strong of realization approximately With at supply

labor year. quarter at with in team run SG&A material year. $X.XX respectively risk adjusted calendar the of managing year the and The through for costs job EPS EPS However, of the around both prior we the adjusted also an XX.X% and the the middle excellent and of trending GAAP see continued with has projected availability were below from XX.X% per up share the sales EPS and rate for quarter. done $X.XX

our our long-term investing will detail Our in in and strategic platforms address call. three commitment more to later remains these in success I

end see recovery our We broad-based markets. strong continue a in to

result a $XXX we $XXX third for the guidance to raising quarter full-year to As are avenue million million. consecutive

markets Turning X. now environment external our Page and to on the end

and areas As approaching we additional room see but activity in markets, we fiscal and also throughout further QX for geographies see XXXX, as lag. levels, our end we pre-COVID look across year recovery other areas in certain

reinforce the this couple would key points. As I a on page on presentation, we look to like the chart of of

sectors. our end and oil of markets are First, gas outside the XX% roughly

XX% winter moving these outlook petrochemical petrochemical, greater sector, over driven markets following Coast, represents activity maintenance than the chemical, by much power Uri. shown natural which now our Texas by spending more class Second, capital storm sector recovery has And now the a of are fuel In nice just and shelved been that bridge up forward. in the emergence revenues. prior seeing is were than are year as the natural a chemical the of XX% tied gas power The bookings developing oil, markets and of upstream year-to-date. middle XX% robust and had gas across sectors in we being economies, petrochemical Gulf led and projects growth with end chemical, the power, and to

over bookings prior year We the rail quarter. and win to XX% sector continue in business transit the up with

line We opportunities transit of space. sight also a several multi-million to dollar in this have

to is hydrogen key As our power strategic in energy we to safe, role From adjacencies, play to the biofuels, reliable Thermon to are wind critically a operation. well solutions transition. power, and look positioned efficient, the

blue hydrogen is many pipeline particularly power nascent, While our exciting both opportunities for with processing today. green in hydrogen and

basis, X to QX orders presentation. on trailing of Slide a at FYXXXX. Moving On not finished seen of level a million, $XXX XX-month the since

one-time the QX. Backlog XX% to prior XX% just the During X, book-to-bill above year-over-year the current finished is secured grew million year the but XX% when a were project $XX.X and project. in up large impact orders the one-time quarter, down over period, for of sequentially of quarter adjusting due

a As six over our to in a Kevin provide we more to Kevin? it quarter had Fox, last positive have of the quarters. eight review a hand results. third now of financial note, CFO, I'd year-to-date the detailed to book-to-bill like and

Kevin Fox

due the America growth $X Thank U.S., current by in million than and quarter COVID had on the restrictions. growth great maintenance to Revenue XX% the concurrent was driven quarter The strong an of exchange. materials the was up from Canada increase easing Revenue a less spending, X. XX% XX-month Latin revenue on with benefit regions you, We Page with foreign of both basis. top-line Bruce. trailing on quarter's year and includes another versus up prior

one-time revenue companies U.S. investments large benefited both see impact Coast hurricanes infrastructure, the continue the last the of the making mentioned quarter We period. almost the power winter booked million also year. especially and of to in The last infrastructure, from contract with the improve Gulf $X to storm after from in U.S. we

are both XX% in will and On recovery project our to nature the impacted the certain a basis, continuing more these point APAC given declined than sales. due hemisphere, for We slower the as pass impact been size contracts. into from the EMEA countries. TTM figures year-over-year of the and comparability revenues In inflection Eastern both In business has provide pandemic we growth. revenue regions, up the the purposes, material and

the prior contract of put first year the impact reminder; the we Reported realizing continue are in of impact our to expect the points we business. overall margins fourth XXXX positive which XX.X% in If versus margins year, fiscal increases XX%. gross quarter. those the a from trend We in basis of the large had XX.X% period. have is to impact Pricing most one-time the a XXX impact a as been are the and materials half second of the exclude price quarter were in applicable of would in accelerating half place with the about

global of factors on times availability. those higher supply extended on pricing productivity the continue about those availability Pricing basis So challenges points through costs, input higher QX, basis to The accretive as to headwinds than labor business raw continue currently, margins, inconsistent XXX impact materials the lead our XXX from slightly positive year. gross was limited of through the The basis a of is cumulative actions points persist. we expect and XXX anticipated and contract impact impact or points impact approximately in was chain dilutive. manufacturing

industry. navigate versus of decreased diligently in plus team COG had approximately the our customers versus points was work Emergency an reported projects to Wage of year that The impact we this Finally, have in Subsidy from a the the with that margin year. environment last to continues significantly suppliers basis revenue different combination our benefit within mix XXX prior and Canadian the challenging

to to certain While challenges, of that pose the input we pricing the help impact cost taken headwinds offset actions in the availability qualified P&L. continue expect will and labor we've

X, fiscal revenues be and MRO/UE Page time framework confirm, point the on XXXX. overtime no on focus versus will Now continue in want I'll disclosing to the to in longer we

only the derivative previous this incorporated XXX% over And comparability. the standards available are time our filings since GAAP a in MRO/UE time unique our project revenues recognition versus or material time of robust point a in aligned where the revenues project XX%. recognized time, XX% generally material point We Over more believe with only sales. disclosure. new of is more is or more revenue we also revenues, product this accurate installation for quarter work, information whereas revenues includes heat are streams. of have framework its services, legacy As representation previous and metric whereas reminder, total representative our a the SEC revenue in the remains Revenues of Historical than of tracing business. engineering revenue two from construct represented

in XX%:XX% the strong the previous Excluding global Point on time spending one-time XX%:XX% this installed contract, was the which viewed large in XX% XX% year-to-date longer is highlights maintenance representative of the increases of in basis, base revenues our of customer business. split versus of value over the again, and and term grew the quarter year. the a our

cost million which of projected Page start year, XX% our funding our heating the the continues technology-enabled We will provide initiatives On mix and plans and X, in XX% quarter, markets, the lines. The heat On prior below will $XX.X process our development we process target of we are of versus And versus general approximately was respectively XX% through additional roadmaps sheet Canadian for Greenfield includes growth This we basis, was share expenses. maintenance investment our and of the versus trend the of this $XX XX% and from the $X.XX per year. pricing, benefits any reported $XX.X million XX% of previously EPS program. the sales. million the started rate this due impact improved a to execute and to the Page Greenfield volume build the was share balance up year's on Adjusted last to developing administrative MRO/UE increase global from EPS depreciation the that have but per SG&A was we debt down for $X.XX. do EBITDA will was a of while offset GAAP that in manage SEC for the diversification, deduct and year-over-year, Subsidy We managing or the is increased paid or our team the down mentioned SG&A for On metric, $XXX,XXX. of items $XX EBITDA year the Cash not prior right is Adjusted as of we've sales. Emergency direction adjusted and Wage prior management processes. we we year by continues the product we continue continue strategic to run tracing business. X, at believe, versus of from as XX.X% an spend. end year. $X.X MRO/UE $X.XX million million controllable revenue. cash a to deduction and $X.XX, we've In and our selling,

can You debt X.X the adjusted net EBITDA debt resulting reduction times. see year versus impact to on with a of XX% total in our prior

the the available. million days decline result continuing Net The days. fiscal under expect remains execute impact year-over-year as to with our of M&A down over flow X.X conversion points external XXX new cash This we to cycle to business. is given of the the year, end by $X The a to approximately pipeline times ample acquisitions. or excluding capacity a any We of revenue. debt are and focused especially suppliers around down XX is working six this we're the percentage agreement great have year-over-year improvement environment, further opportunities on is when and capital to potential improve our of of cash attractive robust,

Overall, the in performance top-line capital, our as another flow delivering in working as operating see and only with our predominantly and to will continue the the fourth expect in costs, focused top-line. grow transportation see financial free with quarter, maintenance We quarters input on facilities we quarter while generate initiatives we growth continue to rising results, price in our continue of of will global CapEx pleased quarter. the $X.X was to good invested and keeping investments to and continues flows customers. $XXX,XXX ahead. The likely I'm quarterly to realization incremental business. strategic net million respond team safely for the cash along the our with we and positive our of we cash in

strong. is sheet balance Our

winning special our and our with our turn customers a the is an for make across market employees their for it in fantastic with initiatives. shareholders. that, and and people update strategic we're work want And all making the progress they you every I to doing over the are the to thank day. on difference back technology say for our commitment to a Our I'll Bruce globe

Bruce Thames

Thank Slide XX. to you, Kevin. I'd now like to turn

market XXXX, advancing in team EBITDA low by platforms markets, in range. is achieve the the in fiscal to initial revenue plans making developing we in will points. driving excellence emerging XXXX Now specific end be operational while has of next and growing share identifying an our by $XXX country to in Beginning meet these achieve market roadmap and built the margins by or region. analysis strategic mid-XX% our On goal We've year for of would economies. customer requirements, the more with progress the to our instrumental a to local localization needs team of call, three lead our established fiscal times that the price million end provide detailed reasonable

seen will in believe delay return from is have we economies Eastern in market as recovery we that overall restrictions. there While COVID-XX Hemisphere, the the pent-up demand emerge a

Switch-heater Halogen is and a double has expect Hellfire Europe. that in our advance our Recently, our Smoke to tracing for rail of the Rail also manager cable end feedback have particularly continue development well. quarter in upon Duty markets new customers. rail have We we in added year. gaining diversification heat as well Hovey transit to momentum, Blizzard one a business Zero commercial received new sales launched launched and from We've our that Low the partner, channel by we Class coming Based been

with in campaign wins is the the for wins new finally, applications. During And key early data secured have centers yielding in some food our marketing products. commercial we've that beverage quarter, launched two we in and results

million those foodles As interested weekend, Game production potato Day a in to essentials dressing know may Thermon and operations. much with to chip, needed watch brewing role and orders the for you prepare next you X.X in that Superbowl plays providing be

growing to network pilot The technology-enabled gain continues in are been Genesis maintenance adopters across The the platform centralized is marketplace. that mesh installations Our the customer self-healing in operations. momentum expand is network control third to early quote programs. has enables strategic successful early and their seeking backlog

announced set year will of during We that also this solution augment introductions have new be first half the to XXXX. product fiscal

XX, the QX critical our recovery of will that in end positioning the in very for end underway. in and majority markets are be team job our on are done Thermon fiscal Solutions recovery we momentum additional that in Page business has pleased traditional excellent this business. XXXX, the and our We we see the forward, we and during are transition the energy seeing adverse addressable success year augmented with The by mission and an grow markets is serve. to Looking throughout expand our efforts in continued Thermon markets.

As a the XX% year-over-year full-year consecutive $XXX top-line our representing million to to result $XXX to million to for from guidance quarter, revenue growth. million, million we third $XXX $XXX raising XX% are

input of combined that the be quarters transitory, mitigate headwind margins. excited on with EBITDA these a be productivity increases drive the price gains the operational and costs to our residual excellence some costs personally that to ahead. anticipate will continue opportunities lie about margins, over several While expand to further I'm we programs to EBITDA impact next

that generates us capable call. We hand markets strong that, and our With back over I'd have very end to business moderator time. a a recovering our at that of like to margins, it model portion for strategy well cash flow a resilient attractive the sound Q&A shareholder position to create over team, value

Operator

Instructions]. ladies be you. time, at And a session. conducting this we and Thank [Operator gentlemen, will question-and-answer

Our Jon question. Please comes Kansas first question with from City Braatz your Capital. state

Jon Braatz

when me it the of how markets markets? But How much capital maybe can around new maybe you questions. tell significant projects? be that weak Bruce, turn in the couple the there. happens? know eastern be your I of hemisphere demand can front may Asian that pent-up A opportunity you what been in have

Bruce Thames

walk recovery well the there's year. lift I'm see impression as don't And we're yes, western similar. away As to it demand that in certain the the what the not additional there. want I in demand is experiencing off that now I a the as North even it's in Jon, west. from to same I bit particularly. can look But I the in see east, We expect look we much that at you last hemisphere business very in at our America Asia; pent-up look would various the that

where look to say see opportunity I we nice So here Europe, XX% the EMEA, in XX% kind room running of Middle XX% I in some growth as the I at previously, I in easily would more Africa, East dips when were east. and recovery. well. In is in XX%, in see be the range, growth additional also certainly but opportunities may west additional it

Jon Braatz

Sure, sure.

And Kevin, the how that okay. to Okay, -- project of be much large filled? remains

Kevin Fox

Jon. Yes,

So we've done $XX think almost million year-to-date. I

little $X think $X was last. $XX If this think north a million quarter, going it you to probably million little of under We the it's under a for year. million be

little through over a we're that contract So halfway now. right

Jon Braatz

Okay.

still -- in the fourth So some margin still quarter? headwinds

Kevin Fox

that's Yes, correct.

Jon Braatz

very a then, of -- these, -- And terms bit? that you and the Or sort do more be are you time? might unusual some permanent, Okay. ratio well back expenses. there this these Are good will come little SG&A a very in obviously view is of anything job us there for managing in with

Kevin Fox

Yes, Jon.

I think latter, back roll year. maybe think, you more if of clock a the the

business was essentially. business what we it a look SG&A like today, There should The the more on when in some obviously starting to the had to base we as that as continue be take the to looks actions like grow. a some to intention permanent operating we future on call more on get leverage that So But is a -- of place basis, to is sales basis get where than think XX-months but sales, a a year-to-date XX of representative it there a today months not percentage we is think yet. the in XXs more I basis below ago. six, I of SG&A XX, permanent to we place trailing as can On spend what percentage the or a cost.

Operator

you. Thank

Blair. Our question. next question comes Please with Brian your from William Drab state

Brian Drab

recovery and a execution. Hi, here and thanks on congratulations continued the

bit the I gross I about these But to the guess just answered one-time I you X, you with Slide at wage we contract couple just is wondering, that headwinds looking off Slide these that? X quarters. of looking called was out at Can emergency part a a you the chain are duration subsidy. after talk this How that think supply going first, of headwinds? fall margin contract little and on Just question. more

Bruce Thames

Yes, Brian, this is Bruce.

will end by will the the largely year. of completed bulk So this it contract be the fiscal with of

is to gross it's So accretive dilutive while margin. EBITDA to it

the as off. that increases, When labor we've So look the used supply and increases transitory. falling in be some that at of cost I will of that believe some incurred they're I these. I've chain here costs

I are of these think some commodities.

there's some been other shortage been electronic supply gouging, in think of and price I particularly cases, in there's components.

those supplies will think, return I normalize. as

costs of that think in to price will So probably the come locked do the well. I are material labor think see I stay. back. as believe get we'll I here increases some that And there's

the during evaluating where some going to we selectively price fourth these price landing is I that expect expect And expect probably on. the than certainly that need year. My increase calendar market. quarter. we to our additional do of of opportunities of yours. ball So come to And we no back and in better as middle to more I be cost see get residual have earlier, some realization see the said forward, glass we're But we pricing I

Brian Drab

Got it.

a the any quarters. I tell think like I level fiscal us the as up. give So of you you here. we it? you normalized gross year? us just first margin? the for around to as forward for fourth be lot that, fiscal it's think know Can quarter for shoot can there's you I factors average, look directional us Can guidance at on like look year And going you it's and XX.X% averaged. But if to forward This of more the what's that should it you'd kind building any sense -- three give next next directionally, look year, guess

Bruce Thames

this of in to to XX% one-time low the seen, expect dilution because What coming project range be expect, one-time the in I headwinds would margins the we've the year. and mid of I some of would the unusual and some expenses

depend in will And and my we for and year on obviously stronger depend that Obviously, the on end top-line. of if capital the projects on which that, influence. be coming see would will some it cycle, strong a back were the an capital mix that how have the come positive expectation of would so lower that

Brian Drab

it. Got

then, about the hope Thanks. how OpEx was we longer-term. talking kind think run about can been look little you're of of terms numbers run more in could rate modeling Kevin, minus. at a of But with plus $XX this I Okay. percentage my the for, I in to on of And adjusted though. you -- it. sales I get or near-term of like if want kind help kind It's OpEx on just basis so line-up million rate the old

like you'd couple Is kind be? guide -- here we're through we're to quarters. that -- where at the quarters is this that to $XX sustainable of where Now, for four million the us going or of last five next

Kevin Fox

about target jumping first the the kind is $XX here is the we've this that million the off year of Brian, depreciation. excludes talked point guess, I around about; thing Yes, for

the of here. delta I $X on cost we leverage and a business, the million think your probably your $XX But maybe to as game base growth, the profitable think quarter the the $XX and name that's million this of million. $X million between is operating about

running leverage thinking got be that So expect people can we're sales investments and the about the trying labor that's who the making making to in significant initiatives. those calibrate going Clearly the qualified in plants But sure around that business. we've strategic there's operating we're force do we nature. business, to and around everything be our whether

if create that is growing XX%, to So to going profitability think business. improved X%, the is a SG&A XX% the rate that that at is number top-line be growing the we below in by

talk we too business that expect of growing, to probably that fiscal certainly XXXX. taking for So transition as early about the kind numbers hold. a the specific is energy is But

to that going initiatives here invest have to to is do managing we're balance going to incremental the going in in are is costs. same a those way at time. be to profitable drive But We growth that strategic the where

fiscal next that to we back want conversation the with that's quarter. about can But the we're against we talk the in probably and come to really don't right So put $X leaderships that here when now, having board. XXXX generally

Brian Drab

Got it.

I your in four what, the of business. can't been guess years you one call you Are Thermon what, or CCI. you both, then, I in talk you're the seeing already would what, it's the one better that and you could since And as other? And Okay. heating is legacy seeing business believe about than recovery it just acquired performing systems

Bruce Thames

Yes, Bruce. actually lines seeing environmental and last. the call Actually, process recovery same business, if that is the that heat did you in thing product Brian this we're here. they heating the kind lead they tracing the of in And

recovering seeing as business, or and lagging by are it's But tracing a is we actually tracing the the heat it's so. So the heat-based six heating. recovery earlier well. stronger business in months process and environmental And we expect

what's has now. It's what happened. it's So happening historically

can feel in it's about indicator So what it's we business. And the good where and also expect a going. leading we that business legacy

Brian Drab

anything say one today you relative can margins to relative And businesses those another? in to are Right. the

Bruce Thames

comment? to you do want Kevin,

Brian Drab

just the Yes, other. like higher one than relative like is precisely, just

-- So

Kevin Fox

relatively business I accretive viewed slightly been versus Yes, I THS as think Brian; core. the think always the has

I through think that the continued trend of has course acquisition. the

I So balance process little a shift profile the tracing. say more on wouldn't attractive heating any two business being between there's the the on heat fundamental of versus the with been the

Bruce Thames

It's more dilutive on the side. than tend tracing project be which sales, heat material sales to the

Brian Drab

where non-oil the just sands? you sands that last of that question, XX% slide, revenue oil just oil between showed how then curious And on Okay. does break from Upstream I'm and down days these

Bruce Thames

I it's of revenues XX% in colder Eurasia, climates, those bulk the actually that, more. in and of or are bulk least in say, The would all at Canada, not but

Brian Drab

Yes.

a much, really in And sands, MRO still don't oil you -- generating previously? so know, sands lot talked the not of that about from you're still as that's is the in business revenue oil

Bruce Thames

linked a is produce $XX -- continue MRO/UE it's that they material got to million back a those very year, in in I It and operate markets. revenue are a No. stream it's, to largely end maintain assets. go to and They some of yes, those sales could and is and it solid recurring Canada

Brian Drab

relatively still it --? that's isn't And with higher margin self-heating business

Bruce Thames

nice. Very

Brian Drab

Self-regulated [indiscernible]?

Bruce Thames

Yes, absolutely.

Operator

this there turn Thank And further at ladies questions to are I'll Bruce you. time. remarks. our no and gentlemen, Thames closing it for back

Bruce Thames

interest. for just shareholders. interest to your our like like each on take value day. our and for I'd customers Enjoy I'd and Well, Appreciate serve every also Thermon that our focus thank their to thank the around your creating day, of a employees for and moment in and everyone the our globe joining. rest

Operator

parties conference. you. may today's All This good disconnect. day. Have concludes Thank a

Thermon (THR) 3 Feb 222022 Q3 Earnings call transcript