Document

The Company reported GAAP gross profit of $51.5 million for Q4 2023, which was impacted by a benefit of $0.5 million related to the Russia Exit. The Company also reported Q4 2023 GAAP net income of $7.7 million and fully diluted GAAP earnings per share ("EPS") of $0.23, which were adversely affected by charges related to the Russia Exit of $4.5 million or $0.13 EPS, respectively. The Company reported GAAP gross profit of $185.1 million for the year which was impacted by a charge of $4.3 million related to the Russia Exit. The Company also reported GAAP net income of $33.7 million and fully diluted GAAP EPS of $1.00 for Fiscal 2023.

"Thanks to the strong execution by our team, Thermon delivered another quarter of outstanding results, which concluded a record year for revenue, Adjusted EBITDA, and earnings per share performance," said Bruce Thames, President and CEO. "We achieved Adjusted EBITDA margin expansion of 480 basis points and 260 basis points year over year for Fiscal 2023 and Q4 2023, respectively, with strong cash conversion. Robust customer demand in the Western Hemisphere over the course of Fiscal 2023 was a key driver for sales growth, while in the fourth

Thames added, “We are building momentum on executing our strategic plan as we invest for profitable long-term growth through disciplined capital allocation. We are progressing our end market diversification plan, with non-Oil and Gas revenue growth of 13% year over year and climbing to 61% of our total revenues in Fiscal 2023. Our pipeline of decarbonization projects more than doubled, increasing our exposure to high-growth end markets focused on sustainability. We are also seeing an accelerating rate of adoption of our Genesis Network, which is an industry-leading IIoT solution that provides full operational awareness of the heat trace system. I am proud of all that our team accomplished during Fiscal 2023 and look forward to further success in the coming year.”


Financial Highlights	Three Months Ended March 31,								Twelve Months Ended March 31,

Unaudited, in millions, except per share data	2023			2022			% Change		2023			2022			% Change

Sales 1	$	122.5		$	102.6		19.4	%	$	440.6		$	355.7		23.9	%
Point-in-Time	77.8			62.7			24.1	%	277.3			214.8			29.1	%
Over Time - Small Projects	18.8			14.3			31.5	%	65.4			55.7			17.4	%
Over Time - Large Projects	25.9			25.6			1.2	%	97.9			85.2			14.9	%
Net Income (Loss)	7.7			8.7			(11.3)	%	33.7			20.1			67.6	%
GAAP EPS	0.23			0.26			(11.5)	%	1.00			0.60			66.4	%
Adjusted Net Income (Loss) 2	14.0			10.4			35.0	%	52.8			27.9			89.2	%
Adjusted EPS 2	0.41			0.31			32.8	%	1.56			0.83			88.4	%
Adjusted EBITDA3	25.1			18.3			36.8	%	93.3			58.5			59.6	%

% of Sales:
Point in Time	63.5		%	61.1		%	240 bps		62.9		%	60.4		%	250 bps
Over Time - Small Projects	15.3		%	13.9		%	140 bps		14.8		%	15.7		%	-90 bps
Over Time - Large Projects	21.1		%	25.0		%	-390 bps		22.2		%	24.0		%	-180 bps
Net Income (Loss)	6.3		%	8.5		%	-220 bps		7.6		%	5.7		%	190 bps
Adjusted Net Income (Loss) 2	11.4		%	10.1		%	130 bps		12.0		%	7.8		%	420 bps
Adjusted EBITDA 3	20.5		%	17.9		%	260 bps		21.2		%	16.4		%	480 bps

Q4 2023 organic sales (excluding revenue contributed by the acquisition of Powerblanket) were $117.0 million as compared to $102.6 million in Q4 2022, an increase of $14.5 million, or 14%. Sales growth in the Western Hemisphere was due to ongoing deferred maintenance activity in upstream and downstream oil markets and investments driven by sustained commodity prices and global demand. Sales attributable to the recent Powerblanket acquisition were $5.4 million, with integration in progress and on schedule.

Kevin Fox, Thermon's Chief Financial Officer, added, "Based on our continued momentum and investments in our long-term strategy and manufacturing efficiencies, we believe that we can sustain growth in both revenue and earnings for our fiscal year ending March 31, 2024. We expect revenue will be approximately $455 - $485 million, which includes a full twelve months of revenue contribution from the Powerblanket acquisition. We also expect GAAP EPS in Fiscal 2024 to be approximately $1.45-$1.61 per share, with Adjusted EPS to be approximately $1.66-$1.82 per share. We expect continued strength in the Western Hemisphere to lead growth in Fiscal 2024, and Thermon is well positioned to benefit from both tight commodity markets and accelerating, long-term investments in a more digital and lower carbon future."

Thermon's senior management team, including Bruce Thames, President and Chief Executive Officer, and Kevin Fox, Senior Vice President and Chief Financial Officer, will discuss Q4 2023 results during a conference call today, May 25, 2023 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.

Disclosure in this release of "Adjusted EPS," "Adjusted EBITDA," "Adjusted EBITDA margin," "Adjusted Net Income/(Loss)," “Adjusted Gross Margin,” "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, the benefit from the CEWS, 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, costs associated with restructuring and other income/(charges), costs associated with impairments and other charges, and income related to the CEWS. "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 May 31, 2022 acquisition of Powerblanket. "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."

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 Powerblanket acquisition, our execution of our strategic initiatives, our ability to complete the disposition of our Russian subsidiary and anticipated timing and associated charges and our ability to achieve our financial performance targets for Fiscal 2026 and our Fiscal 2023 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) the outbreak of a global pandemic, including the current pandemic (COVID-19 and its variants); (ii) general economic conditions and cyclicality in the markets we serve; (iii) future growth of energy, chemical processing and power generation capital investments; (iv) our ability to operate successfully in foreign countries; (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) the current geopolitical instability in Russia and Ukraine and related sanctions by the U.S. and Canadian governments and European Union; (xxxi) environmental and health and safety laws and regulations as well as environmental liabilities; and (xxxii) climate change and related regulation of greenhouse gases, and (xxxiii) those factors listed under Item 1A “Risk Factors” included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023 filed with the Securities and Exchange Commission (the “SEC”) on May 25, 2023 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.


Thermon Group Holdings, Inc.
Consolidated Statements of Operations
(Unaudited, in thousands except per share data)

	Three Months Ended March 31,				Twelve Months Ended March 31,
	2023		2022		2023		2022

Sales	$	122,481	$	102,584	$	440,590	$	355,674
Cost of sales	70,957		61,472		255,465		215,556
Gross profit	51,524		41,112		185,125		140,118
Operating expenses:
Selling, general and administrative expenses	33,957		26,234		117,003		93,054
Deferred compensation plan expense/(income)	291		(327)		(208)		283
Amortization of intangible assets	2,375		2,177		9,447		8,790
Restructuring and other charges/(income)	1,025		—		3,693		(414)
Income/(loss) from operations	13,876		13,028		55,190		38,405
Other income/(expenses):
Interest expense, net	(1,751)		(786)		(5,871)		(5,815)
Other income/(expense)	506		(648)		(86)		(4,165)
Income/(loss) before provision for taxes	12,631		11,594		49,233		28,425
Income tax expense/(benefit)	4,930		2,909		15,567		8,333
Net income/(loss)	$	7,701	$	8,685	$	33,666	$	20,092

Net income/(loss) per common share:
Basic income/(loss) per share	$	0.23	$	0.26	$	1.01	$	0.60
Diluted income/(loss) per share	$	0.23	$	0.26	$	1.00	$	0.60
Weighted-average shares used in computing net income/(loss) per common share:
Basic common shares	33,505		33,355		33,469		33,308
Fully-diluted common shares	33,980		33,705		33,746		33,515


Thermon Group Holdings, Inc.
Consolidated Balance Sheets
(Unaudited, in thousands, except share and per share data)

	March 31, 2023		March 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	35,635	$	41,445
Accounts receivable, net of allowances of $2,682 and $2,177 as of March 31, 2023 and March 31, 2022, respectively	97,627		95,305
Inventories, net	82,132		71,650
Contract assets	16,272		19,626
Prepaid expenses and other current assets	16,138		11,786
Income tax receivable	3,138		4,626
Total current assets	250,942		244,438
Property, plant and equipment, net of depreciation and amortization of $67,450 and $63,954 as of March 31, 2023 and March 31, 2022, respectively	63,288		66,039
Goodwill	219,612		212,754
Intangible assets, net	93,970		94,908
Operating lease right-of-use assets	13,570		10,534
Deferred income taxes	688		1,211
Other non-current assets	7,559		6,785
Total assets	$	649,629	$	636,669
Liabilities and equity
Current liabilities:
Accounts payable	27,330		33,567
Accrued liabilities	39,364		26,971
Current portion of long-term debt	10,222		7,929
Borrowings under revolving credit facility	14,500		—
Contract liabilities	8,483		8,010
Lease liabilities	3,364		3,624
Income taxes payable	6,809		897
Total current liabilities	$	110,072	$	80,998
Long-term debt, net of current maturities and deferred debt issuance costs and debt discounts of $429 and $640 as of March 31, 2023 and 2022, respectively	87,710		120,431
Deferred income taxes	12,084		17,943
Non-current lease liabilities	12,479		9,659
Other non-current liabilities	8,296		8,434
Total liabilities	$	230,641	$	237,465
Equity
Common stock: $.001 par value; 150,000,000 authorized; 33,508,076 and 33,364,722 shares issued and outstanding at March 31, 2023 and March 31, 2022, respectively	$	33	$	33
Preferred stock: $.001 par value; 10,000,000 authorized; no shares issued and outstanding	—		—
Additional paid in capital	239,860		234,549
Accumulated other comprehensive loss	(58,100)		(38,906)
Retained earnings	237,195		203,528
Total equity	$	418,988	$	399,204
Total liabilities and equity	$	649,629	$	636,669


Thermon Group Holdings, Inc.
Consolidated Statements of Cash Flows
(Unaudited, in thousands)
	Twelve Months Ended March 31,
	2023		2022

Operating activities
Net income/(loss)	$	33,666	$	20,092
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:
Depreciation and amortization	19,231		20,205
Amortization of debt costs	317		596
Loss on extinguishment of debt	—		2,569
Impairment of property, plant and equipment	298		—
Stock compensation expense	5,954		3,803
Deferred income taxes	(4,562)		(1,648)
Reserve for uncertain tax positions, net	36		77
(Gain)/Loss on long-term cross currency swap	—		(774)
Remeasurement (gain)/loss on intercompany balances	(914)		(247)
Loss on sale of business, net of cash surrendered	—		306
Changes in operating assets and liabilities:
Accounts receivable	(2,912)		(21,739)
Inventories	(8,839)		(8,598)
Contract assets	4,051		(3,292)
Other current and non-current assets	57		(2,891)
Accounts payable	(7,119)		13,752
Accrued liabilities and non-current liabilities	11,147		2,227
Income taxes payable and receivable	7,303		4,316
Net cash provided by/(used in) operating activities	$	57,714	$	28,754
Investing activities
Purchases of property, plant and equipment	(9,453)		(5,220)
Sale of rental equipment	197		689

Cash paid for acquisitions, net of cash acquired	(35,299)		—


Net cash provided by/(used in) in investing activities	$	(44,555)	$	(4,531)
Financing activities
Proceeds from Term Loan A	—		139,793
Payments on Term Loan A	(27,180)
Proceeds from revolving credit facility	34,500		18,459
Payments on revolving credit facility	(20,000)		(170,780)
Issuance costs associated with debt financing	—		(1,265)
Lease financing	(142)		(155)
Issuance of common stock including exercise of stock options	—		97
Repurchase of employee stock units on vesting	(643)		(673)
Net cash provided by/(used in) financing activities	$	(13,465)	$	(22,658)
Less: Net change in cash balances classified as assets held-for-sale	(3,939)		—
Effect of exchange rate changes on cash and cash equivalents	(1,166)		(84)
Change in cash and cash equivalents	(5,411)		1,481
Cash, cash equivalents and restricted cash at beginning of period	43,931		42,450
Cash, cash equivalents and restricted cash at end of period	$	38,520	$	43,931


Thermon Group Holdings, Inc.
Reconciliation of Net Income/(Loss) to Adjusted EBITDA
(Unaudited, in thousands)

	Three Months Ended March 31,						Twelve Months Ended March 31,
	2023			2022			2023			2022
GAAP Net income/(loss)	$	7,701		$	8,685		$	33,666		$	20,092
Interest expense, net	1,751			786			5,871			5,815
Income tax expense/(benefit)	4,930			2,909			15,567			8,333
Depreciation and amortization expense	4,674			4,856			19,231			20,205
EBITDA (non-GAAP)	$	19,056		$	17,236		$	74,335		$	54,445
Stock compensation expense	1,516			1,104			5,954			3,803
Transaction-related costs	209			—			335			—
Restructuring and other charges/(income)	1,025			—			3,693			(414)
Other impairment charges/(income)	3,279			—			8,945			—
Loss on debt extinguishment	—			—			—			2,569
Canadian Emergency Wage Subsidy	—			—			—			(1,952)
Adjusted EBITDA (non-GAAP)	$	25,085		$	18,340		$	93,262		$	58,451
Adjusted EBITDA %	20.5		%	17.9		%	21.2		%	16.4		%


Thermon Group Holdings, Inc.
Reconciliation of Net Income/(Loss) to Adjusted Net Income/(Loss) and Adjusted EPS
(Unaudited, in thousands except per share amounts)
	Three Months Ended March 31,				Twelve Months Ended March 31,
	2023		2022		2023		2022

GAAP Net income/(loss)	$	7,701	$	8,685	$	33,666	$	20,092
Transaction-related costs	209		—		335		—		Operating expense
Amortization of intangible assets	2,375		2,177		9,447		8,790		Intangible amortization
Restructuring and other charges/(income)1	1,025		—		3,693		(414)		Operating expense
Impairments and other charges/(income)1	3,279		—		8,945		—		Cost of Sales and Operating expense
Tax expense/(benefit) for impact of foreign rate adjustments	—		—		—		505		Tax expense
Withholding tax on dividend related to debt amendment	—		—		—		301		Tax expense
Loss on extinguishment of debt	—		—		—		2,569		Other income/(expense)
Canadian Emergency Wage Subsidy	—		—		—		(1,952)		Cost of Sales and Operating expense
Tax effect of adjustments	(598)		(500)		(3,307)		(1,999)
Adjusted Net Income/(Loss) (non-GAAP)	$	13,991	$	10,362	$	52,779	$	27,892

Adjusted Fully Diluted Earnings per Common Share (Adjusted EPS) (non-GAAP)	$	0.41	$	0.31	$	1.56	$	0.83

Fully-diluted common shares	33,980		33,705		33,746		33,515


Thermon Group Holdings, Inc.
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow
(Unaudited, in thousands)
	Three Months Ended March 31,				Twelve Months Ended March 31,
	2023		2022		2023		2022

Cash provided by/(used in) by operating activities	$	26,109	$	15,008	$	57,714	$	28,754
Cash provided by/(used in) by investing activities	(4,246)		(1,846)		(44,555)		(4,531)
Cash provided by/(used in) by financing activities	(20,194)		(5,371)		(13,465)		(22,658)

Cash provided by operating activities	$	26,109	$	15,008	$	57,714	$	28,754
Less: Cash used for purchases of property, plant and equipment	(4,280)		(2,300)		(9,453)		(5,220)
Plus: Sales of rental equipment	34		454		197		689

Free cash flow provided (non-GAAP)	$	21,863	$	13,162	$	48,458	$	24,223


Thermon Group Holdings, Inc.
Reconciliation of Gross Profit to Adjusted Gross Profit
(Unaudited, in thousands)
	Three Months Ended March 31,						Twelve Months Ended March 31,
	2023			2022			2023			2022


GAAP Gross profit	$	51,524		$	41,112		$	185,125		$	140,118
Plus: Impairments and other charges/(income)1	(506)			—			4,325			—
Adjusted Gross Profit	51,018			41,112			189,450			140,118

% of Sales
GAAP Gross profit	42.1		%	40.1		%	42.0		%	39.4		%
Adjusted gross profit	41.7		%	40.1		%	43.0		%	39.4		%


Balance Sheet Highlights	Three Months Ended March 31,

Unaudited, in millions	2023			2022			% Change


Cash and Cash Equivalents	$	35.6		$	41.4		(14.0)	%
Total Debt	112.9			129.0			(12.5)	%
Net Debt1 / TTM Adjusted EBITDA	0.8		x	1.5		x	(0.7)	x
Working Capital 2	152.4			133.4			14.2	%
Capital Expenditures	4.3			1.8			138.9	%
Free Cash Flow 3	21.9			13.2			65.9	%