Thermon Reports Fourth Quarter Fiscal 2024 Results

• Record Revenue, Adjusted EBITDA, and Adjusted EPS for Fiscal 2024
• Grew Revenue from Diversified End Markets to 68% of Total Revenue in Fiscal 2024
• Introducing Fiscal 2025 Revenue Guidance of $527 million - $553 million

AUSTIN, TX / ACCESSWIRE / May 29, 2024 / Thermon Group Holdings, Inc. (NYSE:THR) ("Thermon"), a global leader in industrial process heating solutions, today announced consolidated financial results for the fourth quarter ("Q4 2024") of the fiscal year ended March 31, 2024 ("Fiscal 2024"). Key highlights for Q42024 as compared to the three months ended March 31, 2023 ("Q42023") include:

• Produced record revenue of $127.7 million, an increase of 4%, driven by sales growth across diversified end markets and decarbonization projects
• Realized fully diluted GAAP earnings per share ("EPS") of $0.29, an increase of 26%, driven by higher volume and pricing, and non-GAAP Adjusted EPS of $0.34, a decline of 17%
• Generated net income of $10.1 million, an increase of 31% and Adjusted EBITDA of $23.6 million, a decrease of 6%, driven by planned investment to support long-term strategy
• Achieved gross profit of $52.4 million, an increase of 2% and gross margin of 41.0%, compared to 42.1%, a contraction of approximately 110 basis points
• Delivered bookings of $117.0 million, a contraction of 12%, with 73% of orders in diversified end markets, and a book-to-bill ratio of 0.92x

Key highlights for Fiscal 2024 as compared to the twelve months ended March 31, 2023 ("Fiscal 2023") include:

• Produced record revenue of $494.6 million, an increase of 12%, driven by diversified end markets and decarbonization projects
• Realized fully diluted GAAP EPS of $1.51, an increase of 52%, and record non-GAAP adjusted EPS of $1.82, an increase of 17%, largely driven by higher volume
• Generated net income of $51.6 million, an increase of 53%, and record Adjusted EBITDA of $104.2 million, an increase of 12%
• Achieved gross profit of $211.6 million, an increase of 14%, and gross margin of 42.8%, as compared to 42.0%, an expansion of approximately 80 basis points due to improved margins on over-time sales
• Delivered bookings of $472.1 million, an expansion of 3%, with 72% of orders in diversified end markets, and a book-to-bill ratio of 0.95x

"By successfully executing our strategy, the Thermon team delivered outstanding results in Fiscal 2024, including record revenue, Adjusted EBITDA, and Adjusted EPS," said Bruce Thames, President and CEO. "In line with our disciplined capital allocation strategy, we deployed our strong balance sheet to acquire Vapor Power, an innovative company specializing in electric- and gas-fired boilers, in the fourth quarter. We made significant progress on our end market diversification strategy, with revenue from non-oil and gas end markets comprising 68% of Thermon's total revenue for the year, inclusive of revenue from Vapor Power in Q4. This achievement positions us within striking distance of our 70% revenue diversification target two years ahead of schedule. Additionally, in Fiscal 2024, we more than doubled our revenue associated with decarbonization and accelerated the expansion of the Genesis Network, our digital solution for heat trace system controls and monitoring. As we look ahead to Fiscal 2025, while we expect the operating environment to remain dynamic, the Thermon team will be laser-focused on realizing continuous improvement, implementing our strategy and creating long-term value for our shareholders."

_{1 Over Time sales were previously reported as a single figure and are now presented as Over Time - Small Projects and Over Time - Large Projects. Over Time - Small Projects are each less than $0.5 million in total revenue and Over Time - Large Projects are each equal to or greater than $0.5 million in total revenue.
2 Adjusted net income represents net Income (Loss) after the impact of acquisition costs, restructuring, costs associated with impairments and other charges, amortization of intangible assets and the tax expense/(benefit) for impact of foreign rate increases (see table, "Reconciliation of Net Income to Adjusted Net Income and Adjusted EPS").
3 See table, "Reconciliation of Net Income to Adjusted EBITDA."}

Sales attributable to the recent Vapor Power acquisition were $10.9 million in the quarter, with integration in progress and on schedule. Organic sales (excluding contribution from Vapor Power) were $116.8 million as compared to $122.5 million in Q4 2023, a decrease of $5.7 million, or 5% driven by a slowdown in Oil and Gas end markets partially offset by growth in diversified end markets as well as investments in decarbonization and electrification projects.

Backlog was $186.1 million as of March 31, 2024, representing a $22.8 million increase, or 14%, as compared to Q4 2023 backlog of $163.3 million. Orders in Q4 2024 were $117.0 million compared to $133.2 million in Q4 2023, a decrease of $16.2 million or 12%.

Balance Sheet, Liquidity and Cash Flow

Thermon maintained a strong and flexible balance sheet during Q4 2024. The Net Debt-to-Adjusted EBITDA ratio increased to 1.2x from 0.8x in the prior year period and decreased by 0.3x compared to Q3 2024. The sequential reduction was due to the repayment of $40.6 million of debt during the quarter. Gross outstanding debt increased year-over-year by $59.6 million to $172.5 million, driven by the acquisition of Vapor Power. Available liquidity at the end of the quarter totaled $141.3 million, including $48.6 million in cash and cash equivalents and $92.7 million available under credit agreements.

Working capital increased by 6% to $162.2 million during Q42024 largely related to the Vapor Power acquisition. Capital expenditures during the quarter were $3.1 million, a decrease of $1.2 million from the prior year period. Cash from operating activities was $37.4 million and Free Cash Flow was a record $35.1 million in the quarter.

The Company's withdrawal from its operations in the Russian Federation through a disposition of its Russian subsidiary (the "Russia Exit") was completed in the fourth quarter of Fiscal 2024 following the receipt of all requisite regulatory approvals.

_{1 Total company debt, net of cash and cash equivalents.
2 Working Capital equals Accounts Receivable plus Inventory less Accounts Payable.
3 See table, Reconciliation of Cash Provided by Operating Activities to Free Cash Flow.}

Fiscal 2025 Outlook

Greg Lucas, Thermon's Vice President, Corporate Controller, added, "For the coming fiscal year ending March 31, 2025 ("Fiscal 2025"), we expect our customers to remain cautious with respect to large capital projects under the current macroeconomic backdrop. Nonetheless, we are optimistic about our ability to deliver revenue and earnings growth in Fiscal 2025 as we continue to execute our strategy and improve our cost structure through operational efficiency. We anticipate revenue to be in the range of approximately $527 million to $553 million, which represents year-over-year growth of 9% at the midpoint and Adjusted EBITDA to be approximately $112 million to $120 million representing 11% growth at the midpoint of the range. We expect GAAP EPS to be approximately $1.57 to $1.73 and Adjusted EPS to be approximately $1.90 to $2.06. We will continue to prudently invest to advance our strategy and position Thermon for success over both the near and long term."

Conference Call and Webcast Information

Thermon's senior management team, including Bruce Thames, President and Chief Executive Officer, and Greg Lucas, Vice President, Corporate Controller, will discuss Q4 2024 results during a conference call today, May 29, 2024 at 10:00 a.m. (Central Time). The call will be simultaneously webcast and the accompanying slide presentation containing financial information can be accessed on Thermon's investor relations website located at http://ir.thermon.com. Investment community professionals interested in participating in the question-and-answer session may access the call by dialing (877) 407-5976 from within the United States/Canada and (412) 902-0031 from outside of the United States/Canada. A replay of the webcast will be available on Thermon's investor relations website after the conclusion of the call.

About Thermon

Through its global network, Thermon provides safe, reliable and mission critical industrial process heating solutions. Thermon specializes in providing complete flow assurance, process heating, temperature maintenance, freeze protection and environmental monitoring solutions. Thermon is headquartered in Austin, Texas. For more information, please visit www.thermon.com.

Non-GAAP Financial Measures

Disclosure in this release of "Adjusted EPS," "Adjusted EBITDA," "Adjusted EBITDA margin," "Adjusted Net Income/(Loss)," "Free Cash Flow," "Organic Sales" and "Net Debt," which are "non-GAAP financial measures" as defined under the rules of the Securities and Exchange Commission (the "SEC"), are intended as supplemental measures of our financial performance that are not required by, or presented in accordance with, U.S. generally accepted accounting principles ("GAAP"). "Adjusted Net Income/(Loss)" and "Adjusted EPS" (or "Adjusted fully diluted EPS") represent net income/(loss) before the impact of restructuring and other charges/(income), costs associated with impairments and other charges, acquisition costs, amortization of intangible assets, tax expense for impact of foreign rate increases, and any tax effect of such adjustments. "Adjusted EBITDA" represents net income/(loss) before interest expense (net of interest income), income tax expense, depreciation and amortization expense, stock-based compensation expense, acquisition costs and costs associated with restructuring and other income/(charges), costs associated with impairments and other charges. "Adjusted EBITDA margin" represents Adjusted EBITDA as a percentage of total revenue. "Free Cash Flow" represents cash provided by operating activities less cash used for the purchase of property, plant, and equipment, net of sales of rental equipment and proceeds from sales of land and buildings. "Organic Sales" represents revenue excluding the impact of the Company's December 29, 2023, acquisition of Vapor Power. "Net Debt" represents total outstanding principal debt less cash and cash equivalents on hand.

We believe these non-GAAP financial measures are meaningful to our investors to enhance their understanding of our financial performance and are frequently used by securities analysts, investors and other interested parties to compare our performance with the performance of other companies that report Adjusted EPS, Adjusted EBITDA, Adjusted EBITDA margin or Adjusted Net Income/(Loss). Adjusted EPS, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income/(Loss) Free Cash Flow and Organic Sales should be considered in addition to, and not as substitutes for, income from operations, net income/(loss), net income/(loss) per share, revenue and other measures of financial performance reported in accordance with GAAP. We provide Free Cash Flow as a measure of liquidity. Our calculation of Adjusted EPS, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income/(Loss) and Free Cash Flow may not be comparable to similarly titled measures reported by other companies. For a description of how Adjusted EPS, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income/(Loss) and Free Cash Flow are calculated and reconciliations to the corresponding GAAP measures, see the sections of this release titled "Reconciliation of Net Income/(Loss) to Adjusted EBITDA," "Reconciliation of Net Income/(Loss) to Adjusted Net Income/(Loss) and Adjusted EPS" and "Reconciliation of Cash Provided by Operating Activities to Free Cash Flow." We are unable to reconcile projected Fiscal 2025 Adjusted EPS to the most directly comparable projected GAAP financial measure because certain information necessary to calculate such measures on a GAAP basis is unavailable or dependent on the timing of future events outside of our control. Therefore, because of the uncertainty and variability of the nature of and the amount of any potential applicable future adjustments, which could be significant, we are unable to provide a reconciliation for projected Fiscal 2025 Adjusted EPS without unreasonable effort.

Forward-Looking Statements

This release includes forward-looking statements within the meaning of the U.S. federal securities laws in addition to historical information. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements regarding our industry, business strategy, plans, goals and expectations concerning our market position, future operations, margins, profitability, capital expenditures, liquidity and capital resources and other financial and operating information such as the anticipated financial performance of our Vapor Power acquisition, our execution of our strategic initiatives, and our ability to achieve our financial performance targets for Fiscal 2026 and our Fiscal 2025 full-year guidance. When used herein, the words "anticipate," "assume," "believe," "budget," "continue," "contemplate," "could," "should" "estimate," "expect," "intend," "may," "plan," "possible," "potential," "predict," "project," "will," "would," "future," and similar terms and phrases are intended to identify forward-looking statements in this release. Forward-looking statements reflect our current expectations regarding future events, results or outcomes. These expectations may or may not be realized. Some of these expectations may be based upon assumptions, data or judgments that prove to be incorrect. In addition, our business and operations involve numerous risks and uncertainties, many of which are beyond our control, which could result in our expectations not being realized or otherwise materially affect our financial condition, results of operations and cash flows.

Actual events, results and outcomes may differ materially from our expectations due to a variety of factors. Although it is not possible to identify all of these factors, they include, among others, (i) general economic conditions and cyclicality in the markets we serve; (ii) future growth of our key end markets and related capital investments; (iii) our ability to operate successfully in foreign countries; (iv) the outbreak of a global pandemic, including COVID-19 and its variants; (v) our ability to successfully develop and improve our products and successfully implement new technologies; (vi) competition from various other sources providing similar heat tracing and process heating products and services, or alternative technologies, to customers; (vii) our ability to deliver existing orders within our backlog; (viii) our ability to bid and win new contracts; (ix) the imposition of certain operating and financial restrictions contained in our debt agreements; (x) our revenue mix; (xi) our ability to grow through strategic acquisitions; (xii) our ability to manage risk through insurance against potential liabilities (xiii) changes in relevant currency exchange rates; (xiv) tax liabilities and changes to tax policy; (xv) impairment of goodwill and other intangible assets; (xvi) our ability to attract and retain qualified management and employees, particularly in our overseas markets; (xvii) our ability to protect our trade secrets; (xviii) our ability to protect our intellectual property; (xix) our ability to protect data and thwart potential cyber-attacks; (xx) a material disruption at any of our manufacturing facilities; (xxi) our dependence on subcontractors and third-party suppliers; (xxii) our ability to profit on fixed-price contracts; (xxiii) the credit risk associated to our extension of credit to customers; (xxiv) our ability to achieve our operational initiatives; (xxv) unforeseen difficulties with expansions, relocations, or consolidations of existing facilities; (xxvi) potential liability related to our products as well as the delivery of products and services; (xxvii) our ability to comply with foreign anti-corruption laws; (xxviii) export control regulations or sanctions; (xxix) changes in government administrative policy; (xxx) environmental and health and safety laws and regulations as well as environmental liabilities; (xxxi) climate change and related regulation of greenhouse gases and (xxxii) those factors listed under Item 1A "Risk Factors" included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024, which we anticipate filing with the Securities and Exchange Commission (the "SEC") on May 29, 2024, and in any subsequent Quarterly Reports on Form 10-Q, Current Reports on Form 8-K or other filings that we have filed or may file with the SEC. Any one of these factors or a combination of these factors could materially affect our future results of operations and could influence whether any forward-looking statements contained in this release ultimately prove to be accurate.

Our forward-looking statements are not guarantees of future performance, and actual results and future performance may differ materially from those suggested in any forward-looking statements. We do not intend to update these statements unless we are required to do so under applicable securities laws.

CONTACT:
Greg Lucas, Vice President, Corporate Controller
Ivonne Salem, Vice President, FP&A and Investor Relations
(512) 690-0600
Investor.Relations@thermon.com

_{1 Charges related to the Russia Exit}

_{1 Charges related to the Russia Exit}

SOURCE: Thermon Group Holdings, Inc.

Released May 29, 2024