Earnings call transcript Q4 2023

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Operator

Hello, and welcome to the Thermon Q4 2023 Earnings Conference Call and Webcast. [Operator Instructions] A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It's now my pleasure to turn the call over to your host, Ivonne Salem, Vice President, FP&A and Investor Relations. Please go ahead, Ivonne.

Ivonne Salem

Kevin. you, Thank thank quarter and joining fiscal today's Good call. you fourth conference XXXX morning, for

Earlier issued Form morning, section filed also this we on of with has release, available the been our which website. SEC Investor on the X-K, is an and Relations earnings press

Additionally, for QX call XXXX. call this can our found in conference the website calendar, under earnings, slides IR news, conference be event, IR

items that accounting During do conform the discuss call, accepted we to principles. some will generally not

to the tables as items in comparable GAAP of We earnings financial the those have and These a considered most measures in measures GAAP. of should performance at the not reconciled for addition to be end reported the substitute with non-GAAP in press release. measures accordance

you we including forward-looking report annual the filed could to impact this regarding SEC during our information statements forward-looking future for results. like report may our and certain most company. would Please statements, to call, our more with the that recent risks quarterly I remind uncertainties refer make and our that regarding

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

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

Bruce Thames

and morning, everyone, for joining you Good thank Ivonne. you, Thank today. us

like year, a talk start we brief Before Thermon. I'd by to of setting a and quarter stage overview record today the with about

across been and resilient economic year-old many cycles. we've XX company, tested a As proven

countries solutions process reliable safe, four continents. leader to We're and in providing on a customers XX in facilities industrial heating from mission-critical world

in to for we executing safety forward employees creating thank to what have record all are can for customers seeing to together fiscal them like plan. years our an I'm performance our to by almost the come. our and contributing XXXX. And to record achieve I'd in looking strategic X,XXX of Our industry-leading dedicated long-term value

Slide our order strategic see you three pillars. value long-term for we X, shareholders, focused can on In On areas. our remain to create key

our First, installed growing profitably base.

third, Second, benefit diversification, revenues, our from to and growth which capture across decarbonization. base, provides allocation. digitization global In significant and a first market disciplined our while verticals. large pillar, recurring capital a And opportunity installed very driving we traditional

In our second end driving diverse growth attractive markets. across additional strategic pillar, expansion through we're adjacencies into

Our through are electrification transition through sustainable decarbonization also enabling and long-term towards sources. energy solutions

solutions reliability, Things customer with In Internet addition, utilize safety. of support products the digital efficiency and and we're productivity, enhanced for expanding industrial our that demand

strategic to is two pillars capital commitment first our disciplined allocation. our Underpinning

of strength and the by Given our current to returns shareholders. balance appropriate, exceed [ph] that returning three through priorities include acquisitions with growth when capital WAAC our sheet, inorganic bolt-on year

Turning on efforts. to an our Slide X diversification and update

the end grew progress make and where you on and continue see, solid XXX% markets As markets was we we to ongoing diversification of year. can food growth our wins in up XX% Commercial the with also the as across transit, XX% saw year. rail key and in of beverage strategic such

linked markets to secular we're long-term traction selected seeing trends. addition, other growth In in

market up In the in inroads revenue We XX%, semiconductor power from our biofuels end market alternative from the biotechnology up up nuclear end green is XXX%. made over is energy revenue revenue with is space, up and diesel and and revenue our from our XX%, XXX%.

years they with revenue ahead. ability market market that of the the combined $XX these sectors in of represent in million in represents small we each addressable from contributions individual aggregate, breadth total fiscal our opportunity believe XXXX, and over grow growth is share a to of today, the solid While the

efficiency over their back This industry-leading uptime to operational The the costs. trace greater using introduced heat we our control Network. the hours the with platform trace latest operational our on market-leading and platform, addition fewer heat digitization Genesis connects increased last room. full control now to enables to controllers quarter, mesh digital Duo, Moving technology and strategy, X to awareness that supervisory provides Genesis Slide customers through wireless all you with systems maintenance the

expanded as This back the look XXXX, resonating readily XXX% customers digital fiscal Adoption innovative of the fiscal of it's benefits increase that continue released in we accelerating functionality the platform in with quarter, growing at a results year-over-year are a our customers. latest Genesis with with to this customer software increasingly to apparent we new for circuits Using and is April. feedback, XXXX Network innovate opportunities. our pipeline the of update in provide

Turning on energy enabling now the Slide transition. to X

growth see an our Here, is representing energy increasingly business, opportunities that achieving and goals decarbonization. customers rapid incoming orders fiscal our of important in help as contribute support sustainability of solutions projects to for wins you X% and the 'XX, our can transition. part year in This of the products of pipeline our overall and their enable

recent the our of we selected have side wins. examples right the On slide, of

products innovative to a and thermal are and solutions renewable fuels of across energy applications batteries to Our capture storage. variety from lithium-ion carbon from used

external made market to strategy. diversification the our progress emphasize against reviewing environment, the I'd end X, like Slide again On that we've

'XX, XX% see updated the from non-oil end our recent period of acquisition, gas markets our roughly XX% XX, Powerblanket. ending an mix end to March we XX year XXXX. fiscal chart most Here, for excluding with and revenue in trailing market month compared Approximately came

XX% now revenue, year a outstanding rebound North in team's up execution as recent XXXX, our Turning of Pacific. driven year America EPS as demand our to fiscal well in by ongoing by X. and XXXX results despite in in on Asia million adjusted Thermon Revenue macroeconomic EBITDA continued was driven record full approximately achieved strong growth year-over-year, fiscal volatility. Slide $XXX.X for

cyclicality of the of spending decrease less of More large the grew from installed recurring which compared base customer projects. capital revenues going business is CapEx This significantly OpEx our projects, to forward. and that importantly, the to greater revenue growth revenue from exposure believe exposure to upstream indicative we helps from

XXX volume robust adjusted Record margin gross margins. volume XXXX driven approximately basis also XX.X%. EBITDA operational in year fiscal expanded to were improved XX% of and metrics with points a excellence increased million to profitability $XX.X and Our price, Adjusted during year-over-year initiatives. by XXXX, fiscal due EBITDA margin

result, to the a million As cash $XX.X year. in free flow doubled

record increase approximately we $X.XX Finally, adjusted year-over-year XX%. EPS achieved of a share, of a

XX%. to and Record due Moving by our fiscal $XXX.X improved fourth $X.XX increase a to expanded quarter volume Free Slide prior and million, of period. record all than year of cost EBITDA flow was results. XX% across another EPS geographies. share, sales controlled growth. margin QX margins from management XXXX cash increased up XX spending. $XX.X million Thermon and delivered year-over-year growth with driven outperformance Adjusted by more was of approximately an XX% Adjusted basis revenue EBITDA quarter adjusted on XX.X% XX% up points $XX.X gross to XXX the of million, to

and If our remain we look now continue strong. see can Slide orders backlog to to that XX, you

momentum pleased We seeing business. very the with are we're the in

quarter, grew a in an on $XXX high. This bookings incoming to month million, a year-over-year, XX million up achieved record we XX%, XX% basis $XXX trailing orders, up while all-time

book-to-bill. Our the achieved book-to-bill represents a was positive last where X.XX our times. tenth XX, of This we've quarter

FX up Our backlog million was of X% impacts. year-over-year, excluding $XXX

of call With in-depth for to our over more Kevin that, turn like I'd financial review the results. Kevin? to a

Kevin Fox

you, Thank Bruce.

delivered was team this Revenue outstanding fourth global customer expectations. travel on in activity and from with we $XXX exceeding the drive restrictions. seeing Turning to versus reduced demand. internal prior in quarter green to the Asia all as year demand sustained growth We and XX. strong and due Performance XX% the Thermon Page was million, are quarter in to while profitable continued revenue strong up geographies shoots meeting improvement growth, maintenance

expect from and gas market fiscal dollar. than XX% oil and will negatively of diversification. are goal at U.S. growth $X stronger on XX% we is spending By in fiscal to end other While million XXXX. was market revenue XX% approximately FX leading against focused our and markets gas, diversified executing driver, and total we oil in due the from the that of maintenance renewable today up general markets in industrial impacted long-term by the of and XXXX, the least robust still come revenues

XXXX. $X financials million revenue revenue million this include and Powerblanket of also quarter the results since Reported June in in acquisition in were $XX

is now incremental through quarter. new to product team flat growth our in We launches. Powerblanket on are capitalizing deal were Large project with the and pleased complete that channels market integration focus driving the to largely shared roughly our shifting the of revenues

As we more with are overtime are reminder, aligned cyclical in revenues a large budgets believe spending project customer and nature. capital

and and small downstream by design Small oil and that were revenue uptime of a upgrades projects increased Small growth and repair projects the XX% are in projects, and our chemical particularly supply in and XX% driven which activity respectively, markets. XX% production, on quarter, on customers XX% efficiency. end TTM base and our representative maximize and maintenance repair repair and installed maintenance, maintenance basis and in up and help was revenues,

and XX% represented repair of Small quarter revenue projects revenues and total of large revenues versus project XX%. maintenance this

the upstream years, has with more maintenance the spending reduced we our projects, dependence last this large Over growth aligned CapEx on management few are now and cycle.

the while Page over pockets margins fourth chain in last in quarter margins pricing In versus last were improved XXX of Gross to navigate. contributed maintenance margins for they there of challenges XX% we incremental year, to XXXX, a customer and gross Supply still And were growth Now some on basis due and points. points. increase generally XX. headwinds XXX XX.X% quarter a of SG&A the of negative volume over XX.X% the are representing an reported fiscal year, basis have continue spending.

and an impact On and are continuous inventory points due TTM adjusted points. in of previously Year-end the up headwind contributed the offsetting improvement volume basis higher to XXX from basis XXX adjustments headwinds. mentioned pricing basis, investments an additional margins

diversification versus of XX of the Powerblanket, of year, and the SG&A $XXX up future the XX% of to million decarbonization, we and a will of million or believe basis, or revenue. year acquisition long-term the revenue within revenue, On growth from drive or XX% that higher in month and prior $XX of quarter, XX% costs In XX% our was million investment SG&A trailing the revenue of in reflecting digitization variable prior $XX.X SG&A million $XX.X business. the initiatives the was compared

long-term continue to in and to execute scale business. on profitable especially driving invest growth, to diversify focus We strategic as resources the our plan we the needed

growth the and the an will business. between and As the next has of profitability, the we job you'll invest we maximize in see slide, managing each value the on dollar done balance team excellent

the of basis, month adjusted for or result almost EBITDA XXX and sales increased $X represent share. was per is new environment. to in to million on $XX.X of for deliver basis year, earnings expansion up a as a intensity the strength from On results prior of really continue with margin This Thermon in now to EBITDA Moving trailing year's Adjusted XX team. Adjusted XX.X%, million up XX% Page XX%, quarter. we EBITDA high-margin, EBITDA of million, along model year-over-year, low the asset a adjusted the complex expansion operating basis expansion the record, margin margins points. XXX XX fantastic $XX.X of with an a points along business

quarter $X.XX slightly $X.XX the prior was year. EPS share. per in share versus GAAP fourth year's in $X.XX share, the share to per compared per per EPS was the down last $X.XX Adjusted

trailing period, EPS was $X per XX For EPS was $X.XX the month share. and GAAP adjusted

for amount. has per Last $X.XX of in of our a to QX And entity impact EPS an full $X.XX March share in nominal to value and resulted quarter, written share we 'XX Russia. XX, down per in been the year. exit announced as operations GAAP the the of This

We Russia do subject associated incremental of end to material the of expect expenses the with second approvals, by XXXX, quarter anticipate regulatory fiscal complete receipt we the not the process. any and of that to exit

updated substantial this Powerblanket growth, year-over-year improvement the sheet. million. year. in with quarter to with the adjusted ended net EBITDA resulted versus a prior times, for the X.X balance X.X combined cover acquisition, the we debt $XX XX, Page and million $XX of in debt Despite the cash was We ratio borrowings the at On incremental an lower times EBITDA

recent a quarter quarters. sales inventory the the percentage with elevated a levels capital reduction as with in lower from ended We working of in

not to in and changes operational fully many chain implementing yet the navigate improving, an new environment while continue reliable We but drive improved quarters supply to ahead. years and manufacturing profitability

XXXX. of XX% the Strong of reflects $XX in income net fiscal of and total million and a in free cash million XXX% flow of $XX.X quarter revenue

allocation in XXXX. low yields Our of margin and This technology strong our expansion a our significant cash while cash and In step plan sheet conversion, for since fiscal world-class of excellent annually combination sheet strength improving represents free our significant the big growth, investment flow capital to provides delivered the we very low forward industrial acquisition a balance and our first balance business. volume completing free build flow with model leverage forward. capital operating optionality going XXXX,

the some are across all Thermon a are we macro ago, uncertainty plans. to chain and trends industry-leading against costs growth lead times the in and regions, While long-term seeing exists, short- environment strong and execute team versus continues supply year improving its

will great to customers, years for enables We to deliver work value shareholders our results that continue the create shareholders and in drive us global thanks for ahead. to and strong for Many Thermon commitment our team the and communities. the

And with to hand it Bruce. that, back

Bruce Thames

Thank you you, for Kevin. fiscal all And XXXX. for to guidance Slide I'd like turn to year our XX

believe includes and key have very $X grow are product sales development, the an plan strength strategic with set going year. forward. our our new business XXXX execute into development. in investments, continue new for fiscal our pleased In record fiscal to as fiscal a and in incremental baseline initiatives, of move this us XXXX million order to We We we the results business

X.X% In in anticipate capacity and investing revenues of operational addition, to strategic X% we growth expansion CapEx fund approximately to excellence. initiatives,

the spending may that Looking result that forward, in could mindful higher we're rates lead recession. slowdown interest a to in a of

rates up at However, or and volumes near our order and record X% backlog levels, quote year-over-year, robust. is our incoming is remain

for X% projections. Based from be for M&A XXXX. in factors, growth represents is at revenue $XXX to year, is approximately over $XXX FYXX the million on No million to these projected full activity the included which guidance fiscal these midpoint

share anticipate range to $X.XX a growth GAAP in at the a the to of For be representing share, a the year-over-year full $X.XX midpoint. XX% we year, EPS

strong balance We throughout expect a sheet year. maintain to the

revenue Moving our long-term and to Slide XX goals.

Our across two growth multiple that range initial plan our advancements XXXX ongoing goals first the we're remain with our diversification very encouraged goals with unchanged. years our around exceeding five significantly We're end for fiscal in the XXXX, pleased markets. We're the growth performance expectations. fiscal year our of making is of through by upper important

our of in creating and the advantages progress platform accelerating continued And adoption are we align development our digital The digitization marketing further our and our competitive innovative sales with new product of marketplace. strategy sustainable market with the transition sustainability additional activities solutions expect to trends secular decarbonization capture the share growth we customers them and achieve providing and goals. their to of that energy products to by long-term enable our as

with our will to leverage believe we margins fixed our going operational to in addition EBITDA range In that excellence growth, revenue low combined mid-XX% costs on yield the forward.

and capital our priorities. allocation to XX Turning Slide

Our allocation disciplined approach growth to our underpins capital aspirations.

We X.X maintaining we're with First target economic and cycles, foremost, three technology investments committed across to to under drive of to strategic us continuous continually These of a investing to in and healthy balance digitization leverage capital diversification. initiatives people, organic our normal our enable growth while sheet X return opportunities improvement. times seek to conditions, shareholders. decarbonization, and a to pursue by evaluating

product XX% XXXX Our revenues. and index reinvestment fiscal new and in vitality development robust a through has in the development representing business of research resulted

against platform target invested opportunities M&A end strategic our means as evaluate by a industrial our to while WAAC our We criteria markets. diversifying exceed on of building heating three. accretive to continue year return we Finally, and capital financial

leading Slide is And Thermon wrapping safe, process diversified serving on barriers entry. up end innovative brand, global markets solutions, XX, reliable with and mission-critical to high providing high-value, heating a

the in global results, differentiated talented excellence innovative delivering development operational and driving product is marketplace. solutions that creates Our safely while team to committed

achieving in electrification clients Our decarbonization very a a revenue. positioned associated heat. transition energy customers of that goals, on generates vast the to large global and industrial our advantage, is the their sustainability with resilient recurring in are installed that we We base through and to the well high-margin significant with opportunity competitive long-standing franchise support believe resulting capitalize aftermarket

Finally, across our to our meaningful has is that high demonstrated free margin, generates due cycles that business our history operating capital economic model resilient low intensity flow. cash

Thermon of ahead shareholders and to the about execution the look the our front us. continue I'm and global we our As opportunities year growth Through coming strength and creating of the for team business, excited to in delivering beyond. XXXX, value outstanding profitable fiscal ready by our is in

over to turn Kevin. that, like back moderator, our to With I'd this

Operator

you. Thank

a Brian is now will William We Our question from Drab Instructions] [Operator Blair. conducting be today from coming session. first question-and-answer

now is live. line Your

Tyler Hutin

Brian. Good morning. This is Tyler on for

your start you the from the headwinds, other but margin explained at previous sequentially gross I the down headwinds quarters? any there to fourth know out, Just in was looking reason the quarter, quarters? Were is than larger it

Kevin Fox

side we strong. end kind volume get Tyler, season. was the some Yes, Maybe was a the purchases of reflect Kevin. to to the for this higher things. really is really the gross positive out margin quite the internally periods, previous the in inventories on if consumed things Pricing still start in But Obviously, few of heating those call cost of of at quarter.

that little So was a headwind. a bit

think investing We side there. as the as a the XX We we for continuous a and power had that still year-end you had lot last in from a have pull adjustments take Kaizen hit we've forward, But think pivot business of you things, a behind the to model plant, of inventory. year. the bit look there improvement is inventories, market. And us. in the some events in been about really we the going we there's news in push completed through is sequentially over the quarter. pricing And opportunity But good the about the if I of here little a you at think

got going less 'XX, guidance behind of years the the volume in more higher higher And fiscal we've for is to those be cost ahead. given or think certainly, some us. We input we items think I

we So going fairly I improving positive about still margins feel think forward.

Tyler Hutin

question, second year? upside potential guidance a is throughout Or like just that reason that there Sounds higher? revenue leads like there fiscal the the any guidance, kind with for EPS is is a my good. strong the into Yes, of

Kevin Fox

we what's a think Washington. it's elections I on Tyler, some look Western There's the the or that's world on discussion going in and in events whether take Europe in Yes. going geopolitical at of factor bit in into the up we're think, the standpoint of seeing to that bottom province There's wanted that a customer a from in little just line. maybe hesitation, Canada. I we

for at speaking, feels in But of the think are be where we are guide would So I for day, here the where year. that expectation I good generally we the the May think end today. the

Tyler Hutin

'XX of visibility pretty Sounds good. do And CapEx spending, projects? you touching the on fiscal maintenance just the opposed good throughout that to have as

Bruce Thames

look got Yes. of They've customers' kind vast for calendar an the the of that majority spending. the on at if we get margins right our budgets. commodity they them some end a as sense more high, budgets. We money And pricing at are year seen The overall traditional markets, Particularly, to huge you good annual spend. good. of their CapEx are is now haven't look

base what and to seen So current of in of throughput, we've maximize be of meet of demand. a kind improve -- is they asset the kind have in place uptime, to shift assets investment to kind volume reliability able

environment expect the year. continue and maintenance robust levels ongoing spend for believe those is of we to this into So

Kevin Fox

if maybe than then, bring aware, think obviously full is about it you of project-based And to business we that's Tyler, alluding that to, higher-margin circle guys a more that the are mix some activity. generally Bruce as

Tyler Hutin

I all it. that's questions. taking Got the Thanks Yes, for have.

Bruce Thames

Thank you.

Operator

comments. any the end I'd floor reached further We turn to you. question-and-answer back Bruce like for our closing over to of Thank or session. the

Bruce Thames

in joining and thank Thermon, appreciate the and Thank your you We day. today. enjoy us you, of and rest your for Kevin, interest all investment your

Operator

Thank teleconference you. and today's That conclude webcast. does

thank at day. disconnect participation for your We today. your this you wonderful line and time, may a have You

Thermon (THR) 25 May 232023 Q4 Earnings call transcript