Document

"This was another excellent quarter for Thermon, with record revenue, gross profit and non-GAAP adjusted EPS. The results are a testament to the strong execution of our strategic initiatives and our global team’s ability to operate effectively in a dynamic environment,” said Bruce Thames, President and CEO. “Earnings per share were up approximately 30%, largely due to resilient customer demand combined with productive, incremental investments in our strategic initiatives that are driving profitable growth. Sales volume was driven by healthy demand in the United States and Latin America, along with substantial year-over-year revenue increases across diversified end markets such as Power, Renewables, and Food & Beverage. Decarbonization opportunities represented over 7% of revenues and 11% of bookings in the quarter as we continue to see growth in the pipeline. We enter the second half of our fiscal year with a solid backlog and a balanced outlook that accounts for ongoing macroeconomic volatility and the significant opportunities ahead of us in Fiscal 2024 and beyond."


Financial Highlights	Three Months Ended September 30,								Six months ended September 30,

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

Sales1	$	123.7		$	100.6		22.9	%	$	230.5		$	196.0		17.6	%
Point-in-Time	72.6			62.3			16.5	%	137.8			121.1			13.8	%
Over Time - Small Projects	15.2			15.0			1.3	%	30.3			29.7			2.0	%
Over Time - Large Projects	35.8			23.2			54.3	%	62.5			45.2			38.3	%
Net Income	14.7			11.0			34.1	%	25.7			17.5			46.3	%
EPS	0.43			0.33			32.7	%	0.75			0.52			44.3	%
Adjusted Net Income2	16.9			12.9			31.4	%	30.3			21.3			42.0	%
Adjusted EPS2	0.49			0.38			30.2	%	0.89			0.64			38.9	%
Adjusted EBITDA3	27.7			21.9			26.5	%	49.8			38.5			29.2	%

% of Sales:
Point-in-Time	58.7		%	61.9		%	-320 bps		59.8		%	61.8		%	-200 bps
Over-Time - Small Projects	12.3		%	14.9		%	-260 bps		13.1		%	15.2		%	-210 bps
Over-Time - Large Projects	28.9		%	23.1		%	580 bps		27.1		%	23.1		%	400 bps
Net Income	11.9		%	10.9		%	100 bps		11.1		%	8.9		%	220 bps
Adjusted Net Income2	13.7		%	12.8		%	90 bps		13.1		%	10.9		%	220 bps
Adjusted EBITDA3	22.4		%	21.8		%	60 bps		21.6		%	19.6		%	200 bps

Thermon maintained a strong and flexible balance sheet during Q2 2024. The net debt-to-Adjusted EBITDA ratio was 0.8x as compared to 1.4x in the prior year period. Gross outstanding debt decreased by $32.9 million to $110.6 million. Available liquidity at the end of the quarter totaled $100.6 million, including $30.5 million in cash and cash equivalents and $70.1 million available under credit agreements.

Kevin Fox, Thermon's Chief Financial Officer, added, "Our team's outstanding performance in the second quarter of the fiscal year built on the momentum from the first quarter. This, combined with our balanced outlook for the second half of our fiscal year, allows us to raise our full year Fiscal 2024 revenue guidance to approximately $478 - $498 million. We are also raising full year Fiscal 2024 GAAP EPS guidance to approximately $1.59 - $1.69 per share, with Adjusted EPS of approximately $1.84 - $1.94 per share."

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 Q2 2024 results during a conference call today, November 2, 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.

The Company will host its inaugural investor day in New York City at 9:00am on Tuesday, November 14, 2023. Bruce Thames, President and CEO, and Kevin Fox, CFO, will be joined by other members of the executive management team to present an in-depth review of the Company's overall business, financial performance, long-term strategy and outlook, as well as key initiatives such as how the Company is enabling the energy transition, new product development, and operational excellence. For more information and to register for the event visit https://events.convene.com/thermon-2023investorday.

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 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), and 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 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. Adjusted EPS, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, Organic Sales and Free Cash Flow should be considered in addition to, and not as substitutes for, revenue, income from operations, net income, net income per share 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 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 and Free Cash Flow are calculated and reconciliations to the corresponding GAAP measures, see the sections of this release titled "Reconciliation of Net Income to Adjusted EBITDA," "Reconciliation of Net Income to Adjusted Net Income and Adjusted EPS" and "Reconciliation of Cash Provided by Operating Activities to Free Cash Flow." We are unable to reconcile projected fiscal 2024 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 2024 Adjusted EPS without unreasonable effort.

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 2024 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 amounts)

	Three Months Ended September 30,				Six months ended September 30,
	2023		2022		2023		2022
Sales	$	123,659	$	100,557	$	230,548	$	195,999
Cost of sales	69,201		54,631		128,781		112,848
Gross profit	54,458		45,926		101,767		83,151
Operating expenses:
Selling, general and administrative expenses	30,490		27,754		59,144		52,157
Deferred compensation plan expense/(income)	(247)		(303)		26		(963)
Amortization of intangible assets	2,227		2,437		4,614		4,705
Restructuring and other charges/(income)	304		—		885		—
Income from operations	21,684		16,038		37,098		27,252
Other income/(expenses):
Interest expense, net	(1,925)		(1,408)		(3,509)		(2,243)
Other income/(expense)	(267)		(335)		74		(1,251)
Income before provision for taxes	19,492		14,295		33,663		23,758
Income tax expense	4,762		3,311		7,995		6,218
Net income	$	14,730	$	10,984	$	25,668	$	17,540

Net income per common share:
Basic income per share	$	0.44	$	0.33	$	0.76	$	0.52
Diluted income per share	$	0.43	$	0.33	$	0.75	$	0.52
Weighted-average shares used in computing net income per common share:
Basic common shares	33,689		33,477		33,748		33,439
Fully-diluted common shares	34,127		33,773		34,094		33,611


Thermon Group Holdings, Inc.
Consolidated Balance Sheets
(in thousands, except share per share data)
	(Unaudited)
	September 30, 2023		March 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	30,532	$	35,635
Accounts receivable, net of allowances of $2,812 and $2,682 as of September 30, 2023, and March 31, 2023, respectively	101,564		97,627
Inventories, net	92,550		82,132
Contract assets	27,259		16,272
Prepaid expenses and other current assets	16,865		16,138
Income tax receivable	1,109		3,138
Total current assets	$	269,879	$	250,942
Property, plant and equipment, net of depreciation and amortization of $70,610 and $67,450 as of September 30, 2023, and March 31, 2023, respectively	64,794		63,288
Goodwill	218,864		219,612
Intangible assets, net	88,018		93,970
Operating lease right-of-use assets	12,319		13,570
Deferred income taxes	703		688
Other non-current assets	9,146		7,559
Total assets	$	663,723	$	649,629
Liabilities and equity
Current liabilities:
Accounts payable	$	34,603	$	27,330
Accrued liabilities	30,585		39,364
Current portion of long-term debt	10,226		10,222
Borrowings under revolving credit facility	27,500		14,500
Contract liabilities	7,261		8,483
Lease liabilities	3,387		3,364
Income taxes payable	4,366		6,809
Total current liabilities	$	117,928	$	110,072
Long-term debt, net	72,599		87,710
Deferred income taxes	10,438		12,084
Non-current lease liabilities	11,389		12,479
Other non-current liabilities	9,063		8,296
Total liabilities	$	221,417	$	230,641
Equity
Common stock: $0.001 par value; 150,000,000 authorized; 33,690,712 and 33,508,076 shares issued and outstanding at September 30, 2023 and March 31, 2023, respectively	$	34	$	33
Preferred stock: $.001 par value; 10,000,000 authorized; no shares issued and outstanding	—		—
Additional paid in capital	240,833		239,860
Accumulated other comprehensive loss	(61,424)		(58,100)
Retained earnings	262,863		237,195
Total equity	$	442,306	$	418,988
Total liabilities and equity	$	663,723	$	649,629


Thermon Group Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
	Six months ended September 30,
	2023		2022
Operating activities
Net income	$	25,668	$	17,540
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	8,802		9,852
Amortization of deferred debt issuance costs	174		152

Stock compensation expense	2,688		2,444
Deferred income taxes	(1,562)		(1,749)
Reserve for uncertain tax positions, net	39		20
Remeasurement (gain)/loss on intercompany balances	(226)		530
Changes in operating assets and liabilities:
Accounts receivable	(4,157)		(8,577)
Inventories	(11,569)		(22,013)
Contract assets and liabilities	(12,103)		10,100
Other current and non-current assets	(3,023)		(3,677)
Accounts payable	7,536		7,369
Accrued liabilities and non-current liabilities	(7,607)		(2,807)
Income taxes payable and receivable	(400)		3,347
Net cash provided by operating activities	$	4,260	$	12,531
Investing activities
Purchases of property, plant and equipment	(5,608)		(3,614)
Sale of rental equipment	34		103
Cash paid for acquisitions, net of cash acquired	—		(35,299)
Net cash provided by/(used) in investing activities	$	(5,574)	$	(38,810)
Financing activities

Proceeds from revolving credit facility	13,000		32,000
Payments on revolving credit facility	—		(3,000)

Payments on long-term debt	(15,381)		(10,441)
Repurchase of employee stock units on vesting	(1,715)		(586)
Payments on finance leases	(500)		(30)
Net cash provided by/(used in) financing activities	$	(4,596)	$	17,943
Less: Net change in cash balances classified as assets held-for-sale	905		—
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(583)		(1,050)
Change in cash, cash equivalents and restricted cash	(5,588)		(9,386)
Cash, cash equivalents and restricted cash at beginning of period	38,520		43,931
Cash, cash equivalents and restricted cash at end of period	$	32,932	$	34,545


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

	Three Months Ended September 30,						Six months ended September 30,
	2023			2022			2023			2022
GAAP Net income	$	14,730		$	10,984		$	25,668		$	17,540
Interest expense, net	1,925			1,408			3,509			2,243
Income tax expense/(benefit)	4,762			3,311			7,995			6,218
Depreciation and amortization expense	4,363			4,956			8,802			9,852
EBITDA (non-GAAP)	$	25,780		$	20,659		$	45,974		$	35,853
Stock compensation expense	1,450			1,251			2,688			2,444
Transaction-related costs1	190			—			267			251
Restructuring and other charges/(income)1	304			—			885			—
Adjusted EBITDA (non-GAAP)	$	27,724		$	21,910		$	49,814		$	38,548
Adjusted EBITDA %	22.4		%	21.8		%	21.6		%	19.7		%


Thermon Group Holdings, Inc.
Reconciliation of Net Income to Adjusted Net Income and Adjusted EPS
(Unaudited, in thousands except per share amounts)
	Three Months Ended September 30,				Six months ended September 30,
	2023		2022		2023		2022

GAAP Net income	$	14,730	$	10,984	$	25,668	$	17,540
Amortization of intangible assets	2,227		2,437		4,614		4,705		Intangible amortization
Transaction-related costs1	190		—		267		251		Operating expense
Restructuring and other charges/(income)1	304		—		885		—		Operating expense
Tax effect of adjustments	(561)		(569)		(1,131)		(1,150)
Adjusted Net Income (non-GAAP)	$	16,890	$	12,852	$	30,303	$	21,346

Adjusted Fully Diluted Earnings per Common Share (Adjusted EPS) (non-GAAP)	$	0.49	$	0.38	$	0.89	$	0.64

Fully-diluted common shares	34,127		33,773		34,094		33,611


Thermon Group Holdings, Inc.
Reconciliation of Cash Provided by Operating Activities to Free Cash Flow
(Unaudited, in thousands)
	Three Months Ended September 30,				Six months ended September 30,
	2023		2022		2023		2022

Cash provided by operating activities	$	3,392	$	671	$	4,260	$	12,531
Cash provided by/(used in) by investing activities	(2,785)		(1,917)		(5,574)		(38,810)
Cash provided by/(used in) by financing activities	(2,743)		(4,820)		(4,596)		17,943

Cash provided by operating activities	$	3,392	$	671	$	4,260	$	12,531
Less: Cash used for purchases of property, plant and equipment	(2,807)		(1,997)		(5,608)		(3,614)
Plus: Sales of rental equipment	22		40		34		103

Free cash flow provided (non-GAAP)	$	607	$	(1,286)	$	(1,314)	$	9,020


Balance Sheet Highlights	Three Months Ended September 30,

in millions	2023			2022			% Change


Cash	$	30.5		$	31.9		(4.3)	%
Total Debt	110.6			143.5			(22.9)	%
Net Debt1 / TTM Adjusted EBITDA	0.8		x	1.4		x	(0.6)	x
Working Capital2	159.5			154.5			3.2	%
Capital Expenditures	2.8			2.0			42.3	%
Free Cash Flow3	0.6			(1.3)			Fav