Document

"This was another solid quarter for Thermon, with continued growth in revenue, gross profit, net income and fully diluted GAAP EPS. The results are evidence of the successful execution of our strategy and our ability to operate efficiently and effectively in a dynamic environment,” said Bruce Thames, President and CEO. “Earnings per share were up 86%, largely due to resilient customer demand combined with productive, incremental investments in our strategic initiatives that continue to fuel profitable growth. Sales volume was driven by healthy demand in the US-LAM, EMEA and Asia Pacific, along with significant year-over-year revenue increases across diversified end markets such as Chemical, Power and Commercial. Decarbonization opportunities represented over 4% of revenues with the opportunities growing to represent over 20% of the pipeline, which will be further enhanced by the acquisition of Vapor Power. As we enter the fourth quarter of our fiscal year with a solid backlog, we see challenges in both mix and timing in the quarter."


Financial Highlights	Three Months Ended December 31,								Nine months ended December 31,

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

Sales1	$	136.4		$	122.1		11.7	%	$	367.0		$	318.1		15.4	%
Point-in-Time	85.5			78.4			9.1	%	223.3			199.5			11.9	%
Over Time - Small Projects	17.3			16.9			2.4	%	47.5			46.7			1.7	%
Over Time - Large Projects	33.7			26.8			25.7	%	96.2			71.9			33.8	%
Net Income	15.8			8.4			88.0	%	41.5			26.0			59.8	%
EPS	0.46			0.25			86.2	%	1.21			0.77			57.2	%
Adjusted Net Income2	20.1			17.5			14.4	%	50.4			38.8			29.8	%
Adjusted EPS2	0.59			0.52			12.8	%	1.47			1.15			27.7	%
Adjusted EBITDA3	30.7			29.8			3.3	%	80.6			68.2			18.2	%

% of Sales:
Point-in-Time	62.7		%	64.2		%	-150 bps		60.8		%	62.7		%	-190 bps
Over-Time - Small Projects	12.7		%	13.8		%	-110 bps		12.9		%	14.7		%	-180 bps
Over-Time - Large Projects	24.7		%	21.9		%	280 bps		26.2		%	22.6		%	360 bps
Net Income	11.6		%	6.9		%	470 bps		11.3		%	8.2		%	310 bps
Adjusted Net Income2	14.7		%	14.3		%	40 bps		13.7		%	12.2		%	150 bps
Adjusted EBITDA3	22.5		%	24.4		%	-190 bps		22.0		%	21.4		%	60 bps

Thermon maintained a strong and flexible balance sheet during Q3 2024. The net debt-to-Adjusted EBITDA ratio was 1.5x as compared to 1.1x in the prior year period, due to the financing of the Vapor Power acquisition and remains within our long term target range of 1.5x - 2.0x. Gross outstanding debt increased by $80.0 million to $213.3 million. Available liquidity at the end of the quarter totaled $120.3 million, including $55.4 million in cash and cash equivalents and $64.9 million available under credit agreements.

The Company’s withdrawal from its operations in the Russian Federation through a disposition of its Russian subsidiary (the “Russia Exit”) is on track to be completed in the fourth quarter of Fiscal 2024 and Thermon received the requisite regulatory approvals in January 2024. During the three months ended December 31, 2023, the Company recorded a total charge of approximately $1.3 million or an impact of $0.04 to EPS, related to the Russia Exit.

Kevin Fox, Thermon's Chief Financial Officer, added, "Our team continued to perform well in the third quarter of the fiscal year as we executed the strategy presented at our investor day in November. This included the strategic acquisition of Vapor Power, a company with complementary technology that accelerates our diversification and decarbonization efforts. We are again raising our full-year Fiscal 2024 revenue guidance, to approximately $490 - $500 million. We are also adjusting full-year Fiscal 2024 GAAP EPS guidance to approximately $1.42 - $1.50 per share, with Adjusted EPS of approximately $1.76 - $1.84 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 Q3 2024 results during a conference call today, February 1, 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.

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

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 Vapor Power 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 December 31,				Nine months ended December 31,
	2023		2022		2023		2022
Sales	$	136,427	$	122,110	$	366,975	$	318,109
Cost of sales	79,017		71,660		207,798		184,508
Gross profit	57,410		50,450		159,177		133,601
Operating expenses:
Selling, general and administrative expenses	31,853		30,889		90,997		83,046
Deferred compensation plan expense/(income)	651		464		677		(499)
Amortization of intangible assets	2,121		2,367		6,735		7,072
Restructuring and other charges/(income)	1,336		2,668		2,221		2,668
Income from operations	21,449		14,062		58,547		41,314
Other income/(expenses):
Interest expense, net	(1,754)		(1,877)		(5,263)		(4,120)
Other income/(expense)	653		659		727		(592)
Income before provision for taxes	20,348		12,844		54,011		36,602
Income tax expense	4,511		4,419		12,506		10,637
Net income	$	15,837	$	8,425	$	41,505	$	25,965

Net income per common share:
Basic income per share	$	0.47	$	0.25	$	1.22	$	0.78
Diluted income per share	$	0.46	$	0.25	$	1.21	$	0.77
Weighted-average shares used in computing net income per common share:
Basic common shares	33,704		33,494		33,946		33,457
Fully-diluted common shares	34,202		33,880		34,325		33,756


Thermon Group Holdings, Inc.
Consolidated Balance Sheets
(in thousands, except share per share data)
	(Unaudited)
	December 31, 2023		March 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	55,396	$	35,635
Accounts receivable, net of allowances of $1,913 and $2,682 as of December 31, 2023 and March 31, 2023, respectively	120,624		97,627
Inventories, net	96,299		82,132
Contract assets	19,397		16,272
Prepaid expenses and other current assets	16,363		16,138
Income tax receivable	1,648		3,138
Total current assets	$	309,727	$	250,942
Property, plant and equipment, net of depreciation and amortization of $72,193 and $67,450 as of December 31, 2023 and March 31, 2023, respectively	67,932		63,288
Goodwill	268,538		219,612
Intangible assets, net	133,247		93,970
Operating lease right-of-use assets	14,482		13,570
Deferred income taxes	1,072		688
Other non-current assets	10,090		7,559
Total assets	$	805,088	$	649,629
Liabilities and equity
Current liabilities:
Accounts payable	$	26,611	$	27,330
Accrued liabilities	40,392		39,364
Current portion of long-term debt	15,945		10,222
Borrowings under revolving credit facility	32,500		14,500
Contract liabilities	15,414		8,483
Lease liabilities	3,429		3,364
Income taxes payable	5,448		6,809
Total current liabilities	$	139,739	$	110,072
Long-term debt, net	163,954		87,710
Deferred income taxes	10,835		12,084
Non-current lease liabilities	13,368		12,479
Other non-current liabilities	9,767		8,296
Total liabilities	$	337,663	$	230,641
Equity
Common stock: $0.001 par value; 150,000,000 authorized; 33,711,599 and 33,508,076 shares issued and outstanding at December 31, 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	242,111		239,860
Accumulated other comprehensive loss	(53,421)		(58,100)
Retained earnings	278,701		237,195
Total equity	$	467,425	$	418,988
Total liabilities and equity	$	805,088	$	649,629


Thermon Group Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
	Nine months ended December 31,
	2023		2022
Operating activities
Net income	$	41,505	$	25,965
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	13,075		14,557
Amortization of deferred debt issuance costs	236		230
Impairment of property, plant and equipment	—		367
Stock compensation expense	4,132		4,438
Deferred income taxes	(1,817)		(4,186)
Reserve for uncertain tax positions, net	—		36
Remeasurement (gain)/loss on intercompany balances	(836)		134
Changes in operating assets and liabilities:
Accounts receivable	(12,305)		1,145
Inventories	(5,329)		(18,047)
Contract assets and liabilities	(3,343)		4,447
Other current and non-current assets	(2,914)		(695)
Accounts payable	(1,793)		(4,066)
Accrued liabilities and non-current liabilities	(2,103)		1,433
Income taxes payable and receivable	80		5,847
Net cash provided by operating activities	$	28,588	$	31,605
Investing activities
Purchases of property, plant and equipment	(7,882)		(5,173)
Sale of rental equipment	75		163
Cash paid for acquisitions, net of cash acquired	(100,472)		(35,299)
Net cash provided by/(used) in investing activities	$	(108,279)	$	(40,309)
Financing activities
Proceeds from revolving credit facility	18,000		34,500
Payments on revolving credit facility	—		(10,000)
Proceeds from Term Loan A	100,000		—
Payments on long-term debt	(17,778)		(17,121)
Issuance costs associated with revolving line of credit and long term debt	(659)		—
Repurchase of employee stock units on vesting	(1,880)		(588)
Payments on finance leases	(145)		(62)
Net cash provided by/(used in) financing activities	$	97,538	$	6,729
Less: Net change in cash balances classified as assets held-for-sale	849		—
Effect of exchange rate changes on cash, cash equivalents and restricted cash	51		(754)
Change in cash, cash equivalents and restricted cash	18,747		(2,729)
Cash, cash equivalents and restricted cash at beginning of period	38,520		43,931
Cash, cash equivalents and restricted cash at end of period	$	57,267	$	41,202


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

	Three Months Ended December 31,						Nine months ended December 31,
	2023			2022			2023			2022
GAAP Net income	$	15,837		$	8,425		$	41,505		$	25,965
Interest expense, net	1,754			1,877			5,263			4,120
Income tax expense/(benefit)	4,511			4,419			12,506			10,637
Depreciation and amortization expense	4,273			4,705			13,075			14,557
EBITDA (non-GAAP)	$	26,375		$	19,426		$	72,349		$	55,279
Stock compensation expense	1,444			1,994			4,132			4,438
Transaction-related costs1	1,592			—			1,859			126
Restructuring and other charges/(income)1	1,336			2,668			2,221			2,668
Other impairment charges/(income)1	—			5,666			—			5,666
Adjusted EBITDA (non-GAAP)	$	30,747		$	29,754		$	80,561		$	68,177
Adjusted EBITDA %	22.5		%	24.4		%	22.0		%	21.4		%


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 December 31,				Nine months ended December 31,
	2023		2022		2023		2022

GAAP Net income	$	15,837	$	8,425	$	41,505	$	25,965
Transaction-related costs1	1,592		—		1,859		126		Operating expense
Amortization of intangible assets	2,121		2,367		6,735		7,072		Intangible amortization
Restructuring and other charges/(income)1	1,336		2,668		2,221		2,668		Operating expense
Impairments and other charges/(income)1	—		5,666		—		5,666
Tax effect of adjustments	(821)		(1,585)		(1,914)		(2,657)
Adjusted Net Income (non-GAAP)	$	20,065	$	17,541	$	50,406	$	38,840

Adjusted Fully Diluted Earnings per Common Share (Adjusted EPS) (non-GAAP)	$	0.59	$	0.52	$	1.47	$	1.15

Fully-diluted common shares	34,202		33,880		34,325		33,756


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

Cash provided by operating activities	$	24,328	$	19,074	$	28,588	$	31,605
Cash provided by/(used in) by investing activities	(102,705)		(1,499)		(108,279)		(40,309)
Cash provided by/(used in) by financing activities	102,134		(11,214)		97,538		6,729

Cash provided by operating activities	$	24,328	$	19,074	$	28,588	$	31,605
Less: Cash used for purchases of property, plant and equipment	(2,274)		(1,559)		(7,882)		(5,173)
Plus: Sales of rental equipment	41		33		75		163

Free cash flow provided (non-GAAP)	$	22,095	$	17,548	$	20,781	$	26,595


Balance Sheet Highlights	Three Months Ended December 31,

in millions	2023			2022			% Change


Cash	$	55.4		$	35.4		56.5	%
Total Debt	213.3			132.8			60.7	%
Net Debt1 / TTM Adjusted EBITDA	1.5		x	1.1		x	0.4	x
Working Capital2	190.3			153.8			23.7	%
Capital Expenditures	2.2			1.5			46.3	%
Free Cash Flow3	22.1			17.5			25.9	%