Earnings call transcript Q1 2024

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Operator

Greetings and welcome to the Thermon First Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

At this time, I would like to hand the call over to Ivonne Salem, Vice President of FP&A and Investor Relations. Thank you.

You may begin.

Ivonne Salem

Darren. you, Thank thank quarter and joining fiscal today's Good call. you first 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 Call Conference QX call this can our found on Earnings the website IR under Calendar, slides IR News conference be and Events, XXXX.

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

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

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

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

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

Bruce Thames

from and X everyone, reliable, overview in us industrial joining safe, facilities countries for Good heating mission-critical today. today you in Ivonne. We're Thermon. continents. to of quick process thank a with innovative on customers start you, a morning, world XX Thank and solutions providing I'll leader

strategic for creating shareholders executing in by customers and X,XXX detail I'll next employees almost have Our which plan, and record slide. industry-leading the safety on our long-term more cover are to dedicated value an our

for disciplined allocation. additional our diversification value and guided decarbonization, third, strategic first, X pillars: base; long-term by create capital installed growth; and to profitably we're our drive growing shareholders, our to second, order In digitization,

global technology while customers, the This innovative thermal across margin verticals, continuous and end leader culture process heating very for As of our benefit capture us enables our large improvement revenues base. forefront recurring we a critical applying traditional solve our problems to growth drive market of from at supports to the engineering installed expansion.

capturing diversification. our drive end utilize pursuing the outside of We're marketing to across heating addition from digitization, technologies traditional approximately markets to come decarbonization, our we're areas core goal these X our and efforts XX% a revenues end sales also with our of our markets fiscal In growth share markets, to expanding areas around end and having additional oil in gas new and XX% of diversify XXXX. to by of end that

continue digitization and to our we also with across facilities. strategy and monitoring electrification is sustainability our We're that supply customers around expand their products Our optimize as that to our solutions solutions customers transition them their progressing decarbonization. help achieve goals the digital enabling help energy and of range we well maintenance as

our strategy to pillars. two strategic disciplined commitment our Finally, allocation underpins a capital first

through reinvestment growth acquisitions our our financial meet also our to that XXXX We're growth sheet Our fiscal in inorganic goals. organic bolt-on robust positioned objectives. highly-strategic to us enables pursue balance through business drive to meet well

transition. Turning X for on now Thermon to solutions Slide energy

an These of solutions include used X, products Hydrogen be can heating the immersion like you products we'd you ammonia transition. enable bundles. applications. range can tracing heat electric the the quarter see ways both tubing Thermon's green Thermon's Slide of and and shorter electric systems, This electric via embrittle current heaters, via but to to that share much and energy with created or hydrogen future, is blue can or ammonia a transport some resulting and traditional in corrosion On cracking electrically-heated HCC. unanticipated of is hydrogen, phenomenon it's important nitrogen By to pipeline in is difficult easier other means. transport or adding energy called to pipeline HCC failures. life to or means which other asset weaken piece the steel sustainable due that

result, part use the important of ammonia enabling sustainable energy as hydrogen a plants are a As an source. of

grow renewable uses produced produce create ammonia natural hydrogen where COX sequestered. produced annual energy as rate X.X% wind compounded cracked Green and is power gas such Blue case, electrolysis. solar with The and to is ammonia In combined COX, estimated or either nitrogen ammonia ammonia. captured XXXX. growth the hydrogen via through to then is hydrogen generate is at to market when is global to then a

within in ammonia role crucial as a synthesis. heat indirect directly used of or heating such heat heating fluids, stages molten salt can transfer various provide They're process play used oils. hot various of via plants. be the also to for stages heaters ammonia They or Electric to reactants heat at to provide process

and their addition benefits, In They downtime. energy minimizing and precise also cost environmental to savings efficient plants. reducing heating, can electric offer provide for consumption, ammonia heaters

compact their installation, Thermon's with of their efficient heating, process make industrial partner also a easy With of heaters for heating space. electric looking for size heating smaller traditional in electric producers range our sustainability than ideal more allowing footprint and have existing use and expertise systems, us to ammonia efficiency. combined improve an solutions,

Thermon X Slide technology. on to now Turning new

newest heater the Quantum Truflow Heater. line see our addition immersion we called Caloritech in Here the

research heat cost The electric yielded wide a an to using to optimal with reduced institute step from heaters and economically software a energy conversion and and achieve hydrocarbon design traditional heat more market. compelling industry-leading patent-pending been to efficiency. testing development total and in this has end represents in of design Our across partnership ownership even The efficiency advanced modeling that heating transfer investments in range higher make transfer overall validated lab size of lowered change have technology.

trace facilitates maintenance efficiency Network supervisory reliability lower new to the using full in to continues Turning heat our with total we doubling operational as heat and first the and fiscal over all controllers of with significant of with quarter technology solutions digital the controller. the awareness grow and mesh of that benefits fewer now connects to This industry-leading Genesis their added our on trace provide and Slide Thermon's operational costs. X. control by the customers systems recognize provided circuits wireless fiscal circuits this pipeline customers Adoption XXXX. XX% anticipate year. opportunities, Based Genesis Network hours number more increased

of On can that can these end wide Thermon's and we our products across see diversification a Slide be of seeing and continuing sectors. X you growth strategy. to progress across range are several we're solutions market industries, used

over by and up During the quarter, up our year bookings year, XX% by was was and transit XXX%. were and up food commercial from beverage rail XX%,

continue CHIPS bookings with centers bookings XX%, from data high-tech over intake sectors to market by grow the order semiconductor end up Our well accelerated Act. over as from up from and XXX%

are we in energy seeing sectors Importantly, to related also the transition. growth

Our were green across electric were incremental up market by encouraged XXX% our we bookings from these during markets growth power additional diesel the We're quarter. the from biofuels end up share. and XX% and bookings steady capture as

harden On and and period demand Since related again Slide strategy. of revenue gas infrastructure our end U.S. seeing that fiscal 'XX significant the Overall, This specialty make and example, to driver highlight approximately power revenue a across steady progress related made well. we renewables investment we've petrochemicals LNG with as pipeline gases, non-oil growth like our comes spending fuels, markets, has to XX-month of projects I'd continue fabrication. mix of commercial as our XXth, and the last increased end the growing in particularly XX% round in the percentage June around also diversification have opportunities end our There's the been for We're progress another we alternative of end chemicals winterize markets. biofuels, CapEx the to from, toward from the also trailing chart a semiconductor and and quarter, of and XXXX. market goals. for goal hydrogen to ending around growing once such to X, south. generated -- shows market ammonia, diversification

to now Thermon fiscal quarter achieved and first of XX outstanding another team quarter Turning Slide performance. results. XXXX our The

and being strongest quarters is weather to and As first northern with fourth reminder, business typically the being a seasonal quick in quarter weakest due our the the highly hemisphere. third the our colder

appropriate $XXX.X record We year measuring As prior over healthy than largely year in North year over a to sequential Pacific. performance. a year-over-year record, quarterly of XX% due delivered comparisons are up growth more America result, Asia revenue million, comparisons when and

quarter flow over EPS of cash Free share, in year-over-year year, resilient or from Importantly, We revenue of certain stronger the gains. OpEx operating maintenance productivity negative higher $X.XX meaningful due end. price Adjusted XX% after of fiscal in even growth year to volume, XX% adjusted period. an increase with year per $XX.X million, we EBITDA realization, driven by saw the payments activity. was year was prior saw leverage and up timing over

growth showed ratio X.XXx, our demand from book-to-bill our Finally, continued double-digit order demonstrating at customers. strong

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

Kevin Fox

all. and Bruce, good you, Thank to morning

incoming U.S. we rebound year. Book America, XX% Turning $XXX financial Thermon Performance to Customer robust our million successfully bill remained demand strong up Pacific. and to X.XXx. orders, again quarter the in performance year Latin continues QX a fiscal on across was our the over Slide in global in We XXXX continue was strong team of see execute and signs once plan. as the to outstanding remains this to Spending a very Asia quarter. XX. reached

customer in which XX-month sector revenue $XXX beverage, In across guidance. and we expanding Trailing markets. the during million, reached terms our full supports orders the food end and raised the demands growth quarter of our end saw market the with orders, we believe most power year renewables, commercial

year, On that XX%, to derived beverage, quarter Latin in trailing million, the maintenance of renewables, large up activity business first was $XX totaled XX% food versus million, contributed projects $XX the our in The were midstream power up quarter. revenue markets primarily away small revenues prior customer end and U.S. and Revenue from volatile from OpEx $XXX budgets. by million, oil of is X%. and and basis, and indicative spending capital year-over-year growth a projects shifting XX-month also America. the while driven from revenue increase was XX% downstream repairs from and our Revenue across and more of a

XX%. Adjusted $XX basis, adjusted XX-month basis of XX% a adjusted the year year-over-year On EBITDA up over trailing first EBITDA representing year expansion $XX with quarter for was or points. a million, margin revenue, was approximately increase of of million, XX.X% XXX EBITDA

evolution of acquisition As think the our important recently step Thermal the through in we the power about of company adjacent business crossed to over the it a that growth than consider business years, as a past back the threshold XXXX markets the XX-month The largely is heating decades average contributor come. revenue adjusted we EBITDA we to to process the and CCI few THS key trailing business important $XXX earnings growth. will to contribution the overall better Profitability basis. that on take the of this be million slightly is acknowledge data point of believe in and and years December a

THS meaningful a Last, shareholder through not year-over-year capital, return per driving focus XXX over certainly was is basis least, disciplined is to note. demonstrating that increase Adjusted ability the create share XX%. the business on $X.XX inorganic our team's in diluted providing quick capital but current of long-term growth. on earnings quarter, A cost points modeling of value a a the

expense currently XXXX. are share per $X.XX a impact in We fiscal amortization from year estimating

by profitable the environment. continue to you forward, results, operating drive As delivering we meaningful, can complex business our see despite growth these

updated On the cover Slide balance XX, sheet. will we

as quarter, XX.X% end the to as the was quarter paid increase of was EBITDA debt significantly at the debt current of to due primarily time in by in debt XX%, EBITDA $XXX both grown improved year approximately was X.Xx Working we've over mainly collections to of quarter, XX% Working at Our was X.Xx coming June down capital adjusted a inventory in percentage trailing an million lower net XX-month combination Total the period. driven strategic down compared the previous and capital to of of million. end that activity. seasonality. ratio the as $XXX and the in sales at

over year for million, XX% this of at with in $X.X negative Turning flow. was investments quarter $X.X incremental flow around management Net ongoing was spend decrease our CapEx year. due the our to for year-over-year heating million, up $XX our quarter a $XX our reflecting cash particularly first income business. certain was are improving quarter to weakest We million cash cash global we and typically free XX% the and timing the million, capacity growth, process ended cash practices. and as cash payments represented strategic of

XXXX. broader start macroenvironment our While remains are the pleased uncertain, we with to strong fiscal

regions, our metrics. We across trends markets, continue to and financial growth see end strong

XXXX, fiscal and our costs, shareholders. results, value through will we long-term to control As ahead we move diligently continue achieve for positive create

such team like us entire quarter to to the enabled thank results. work, hard first which Thermon would deliver I for their Finally, strong

back And it to with I'll that, turn over Bruce.

Bruce Thames

I'd to guidance All and for now to raising right. revenue fiscal turn earnings year We're like you, full XXXX. Kevin. Thank Slide our XX.

macroeconomic As guidance revenue $XXX of million, over see million and ahead the top coming the end we the which ongoing range our quarters, at $XXX this line as approximately business. growth across the upper raising from increasing volatility the midpoint to our represents to the we're even look conscious $XXX for we to million growth of continue X% full lower to fiscal XXXX. year, At we're time,

to Adjusted midpoint. to raised we progress guidance fiscal to per We'll evaluate as the GAAP year. to share, is $X.XX XX% share. per which also be now expected has continue through EPS to growth per our $X.XX been $X.XX of this the share represents year-over-year $X.XX in EPS at outlook range

significant We evaluate continue us sheet, expect the to M&A a to opportunities. giving balance bolt-on our flow [free] to generate in strong to year maintain the business reinvest and through cash flexibility

On allocation capital our priorities. XX, you details see about Slide more can

Xx top cycles economic priority, to to committed a with leverage healthy under maintaining a our of As across sheet target balance normal are conditions. we X.Xx

Our to us continuous technology, improvement. people, of next strategic and in organic our digitization, diversification. in business fuel enable decarbonization, by priority investments and to These X growth our pursue initiatives reinvesting is

inorganic evaluating We growth continually pursue M&A also by opportunities.

our of acquisitions have and financial strategic bolt-on on opportunities. criteria, we pipeline is focus healthy meet a Our that and

to opportunities continue evaluate appropriate. capital to return shareholders to when our we Finally,

solutions we As XX, we global to high-value diversified end leading reiterate heating want wrap serving reliable, is a providing safe, with today on that innovative and Slide up critical barriers Thermon markets to brand, mission high entry. process

our that order our innovative global end a solutions with excellence installed relentlessly competitive that team differentiated high-margin large create markets products franchise customers. a deliver is recurring variety revenue. Our of that value in longstanding customers resulting advantage, We operational for to and pursues a base significant in aftermarket believe resilient across generates

Our such growth regulations, aligned increasing environmental products the in with chemical demand. and solutions long-term are trends and energy secular transition, as key

associated We opportunities we sustainability through of with well are electrification to on positioned decarbonization energy and customers believe capitalize the that industrial enormous help the our goals. meet to and heat own transition their

high as to our continue gross balance model well and with low flexible significant has sheet economic business and leverage strong Our and to across provide cycles Thermon resilient as optionality. margins remain capital-light enabled

culture thanking performance like to I'd Thermon end entire and today by quarter to and this customers' the team outstanding our for our to continuous improvement dedication of meeting their needs.

As of deliver to excited we XXXX will shareholders. what our I'm and we and profitable confident ahead to I'm the beyond, value together achieve see we for fiscal look growth continue balance will and to

call take back. I'd so Darren, the turn can to Over now like we you, questions. to that some

Operator

line of from [Operator Instructions] Drab Our questions William the come Brian with Blair. first

Tyler Hutin

Orders want way. guidance into results, what on just on then general any And the out, starting the by really view I the just backlog This to Congrats of is that went factors solid know you for year Brian. Hutin and your the year. and looking full of on healthy. balance Tyler just the raise have comments are

Bruce Thames

that and is as a look key on right at at think have guidance, lot you that's of give kind of we continuous and are, and I to of midpoint just turn $XXX of as thing anchor a we as well us going as order And power the looking look confidence seen million, as orders the of we've and our So side EPS we we forward. improvement XX-month that at earnings costs, trailing guide. sitting the margins input of some we're they think our I the moderation the and what our where then efforts backlog intake at

Tyler Hutin

more some Got it. And market then moving commentary. end just of

opportunity the how be on it'd you and been to renewables trending? on that have any think you be update annual Do I what any good revenue hear your comment opportunity. have that's could

Bruce Thames

Yes.

and to see developing ability but opportunities, our track nice types improving we're we continue these growth. So to of

million opportunities, within to quarter, rates updates incoming And go-forward to pipeline basis. so those on north those somewhere see provide grow the the we we fact, there grow. and continue $X on the opportunities the of opportunities well order as and in booked In as continue a we'll

we the improves be to investments our overall, are solutions So provide share. in to differentiated moving direction like see that Heater, and continue and to to the able win these new Quantum new opportunities, as of product some the referred of this space launches, in ability certainly, we

Kevin Fox

on funnel is the particular, but in build decarbonization Kevin. the company initiative the to just we the profitability as top Tyler, the strong, revenue well. just on we when not above this growth generally And It's on is Bruce's like, at quite as look response well. Maybe average that that profitability the of

I at of something business, the look we feel confident about as the well. it's So those with pretty think revenues profitability as the we earnings power

Tyler Hutin

And above a $X for for end like that quarter great wins markets. as into end what I'm opportunities market. wondering, grows, sounds the transitioning Yes, into pipeline those your goes just million Great.

Bruce Thames

Yes.

think some we've the the lot. I front, are but on done So competitive of certainly wins timing, a just

up. is growing really lot investments, in times and which But the this give New capacity lot quite we're a doing the CapEx because, we're Over our investments time, of in typical towards lead technology, differentiated us marketplace. industry of directed a revenue, and that, is being and X.X%, frankly. up pretty that we're constrained of we're is pretty at a a is making reducing so is to what making capacity year, launching position. why supply some sizable X% our

which win all ways those see can we and in convert. as of we So really

Kevin Fox

of is agnostic end technology the the day. Tyler, And at

front well. think really our technology will, sales of business you cycle, understands if the about the if that you end So

really And applying we're of sure so those people front end get leads converted. them the putting making to markets it's just in right and that to

a there's market. huge the the on as in Bruce technology So on more side. demand that It's alluded can investment yes, capacity meet side, not to, so the we

Bruce Thames

in we capabilities about software work different to of have them not And heating we applications around technical but fired electrical last very the the help differentiator comment to and hydrocarbon that only successfully. transition particularly have the and customers and one tools been a the on with able converting heating. that electrification key knowledge in technical the that. able and also Really being our traditionally is marketplace be have those to competence, make And all process, to competence

I So that are key to ability things think are our those the in driving this space. win

Tyler Hutin

Yes, that sounds great.

last most Just my being the markets unexpected market and what renewables end from moving besides renewables, are just the finishing question you on and seeing just upside? end geographies

Bruce Thames

would The growth, say really year. not it Asia expected year bookings, the it's I prior bookings up at this which were well, to that think in U.S., quarter. to lost quite look expected. we as some be it But XX% this but seeing see recovery over was we I was And first in strong we're important as

prior Now our that to orders incoming a as XX% prior that year. over if in record year, was back the was you go up and well

look bookings significant, the and to just lost. that's not we it's at be So pretty growth,

of U.S. petrochemical some wins. seeing so And lot There's nice investments opportunities. the activity of we're a LNG in we've a lot Particularly had and

what certainly we that we've our in and opportunities whether or won additional we've pipeline both. we're the but hydrogen have and the carbon today, seen And beyond opportunities cycle, those upside see little that Just ammonia renewables, later we traditionally capture those, a around so of above the as some are additional in driving a we that's space. see then reminder, for and growth would and storage highlighted

Tyler Hutin

Congrats work. the all it. today. on I solid that's and Got for quarter have again And

Operator

the of [Operator Instructions] Kansas Jon City come Our from questions next Braatz with Capital. line

Jonathan Braatz

Just of a point clarification.

from you a contract -- last $X I mentioned Am completion had some about release, large growth Russia. combination think, a But in in from large and that? of organic was XX%. $X.X I I'm you a the of not million mistaken, press million that -- revenue correct if year

Kevin Fox

Yes.

each million back that be year. about million a would number. it So, about had a to then Jon, about from line was million The Russia project a organic We that and there over revenue of to onetime $X pieces as few rewind large was well, of side factor the $X on the so in maybe [acquisition] in. little $X

Jonathan Braatz

Okay.

adjusted you Kevin, was growth it, rate it like that look Do items, those looks call what near ex would you're, I So organic way? at XX%. it

Kevin Fox

about Jon. That's right,

Jonathan Braatz

Okay.

reference quarters, from So it want that in moderation X Was a there into that for something forward it call looked in first if of unexpected a that? the nature a from somewhat -- point, the looking that. as or to little using that you you're was bit next obviously quarter going transitory

Bruce Thames

quite Yes, Jon, the rate incoming and this is tell Bruce. No, I'll positive. not really, you was order

before right you, gives some actually point certainly, confidence confidence midpoint million, the XX-month and to on get is you tell to it It's that quarters incoming couple and our I'll that revenue full trailing year. the gives though, call back we which of a under rate. being guide going our like we of So I'll us early, belt order into the certainly our $XXX us year.

So to that. I'd point

strength and, lot EPS quite it's improvement to some really fourth positive very of performance quarter then efforts results give continuous certainly a modest beginning backlog we and gains. And frankly, we was see think some the guidance, note in a margins our that important us of to the but 'XX in I probably and in it that move productivity and began some yield are

balance would the just frame but about the that the there and first nothing how year. our So quarter, in cautiously of I we're would was be views, onetime optimistic

Jonathan Braatz

just and then to to these personnel, year say, even year say we this let's Do and easing maybe obviously, that's from begin Kevin, this next investing we spending let's in some as the infrastructure reach that expenses quite look markets. forward, But And year? Okay, maybe new now, heavy were fair. does operating you're that moderate? in quarter. a see resources, buildup

Kevin Fox

right thinking you're think I Jon, it way. about the Yes,

it, resources call million, business line, $X by a it, the maybe I to. alluding think the SG&A as close that's we the on you're that continues primarily grow, at at a to And this look to driven look as that you If in targeting business to XX% model the mid-to-low basis really we think as that XX%, is potentially we're call XX%, XXs where TTM percentage of the, going getting of for of and EBITDA. revenue, about

margins math a historical what business, to solve pretty of gross the easy we're problem that's over the Given time. back for for shooting

I the you're So about to is investment the Will business plan. the absolutely decelerate scale? way it right. That's think thinking continues that as

Operator

no questions floor Thank at like to Thames closing you. There the are further this for time. I turn to would over comments. Bruce now back

Bruce Thames

All for you here your and day. And right, Darren. Appreciate thank rest today. Thank in of you. all joining interest the your enjoy Thermon,

Operator

This does conclude Thank teleconference. today's you.

this you time. You at the and of rest participation may disconnect your lines your enjoy day. for your Thank

Thermon (THR) 3 Aug 232024 Q1 Earnings call transcript