thr-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number: 001-35159

THERMON GROUP HOLDINGS, INC.

(Exact name of registrant as specified in its charter)


Delaware			27-2228185
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

7171 Southwest Parkway, Building 300, Suite 200, Austin, Texas 78735

(Address of principal executive offices) (zip code)

(512) 690-0600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value per share

THR

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒Yes ☐No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐Yes ☒ No

As of November 6, 2024, the registrant had 33,685,142 shares of common stock, par value $0.001 per share, outstanding.

THERMON GROUP HOLDINGS, INC.

QUARTERLY REPORT

FOR THE QUARTER ENDED SEPTEMBER 30, 2024

TABLE OF CONTENTS


			Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of September 30, 2024 and March 31, 2024			2
Condensed Consolidated Statements of Operations and Comprehensive Income for the three and six months ended September 30, 2024 and 2023			3
Condensed Consolidated Statements of Equity for the three and six months ended September 30, 2024 and 2023			4
Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2024 and 2023			6
Notes to Condensed Consolidated Financial Statements (Unaudited)			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			19
Item 3. Quantitative and Qualitative Disclosures About Market Risk			29
Item 4. Controls and Procedures			30
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			31
Item 1A. Risk Factors			31
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities			31
Item 3. Defaults Upon Senior Securities			31
Item 4. Mine Safety Disclosures			31
Item 5. Other Information			31
Item 6. Exhibits			31
EXHIBIT INDEX			33
SIGNATURE			34

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Thermon Group Holdings, Inc.

Condensed Consolidated Balance Sheets

(Dollars in thousands, except share and per share data)


	September 30, 2024		March 31, 2024
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	37,000	$	48,631
Accounts receivable, net of allowances of $851 and $1,428 as of September 30, 2024 and March 31, 2024, respectively	93,504		107,318
Inventories, net	93,596		86,321
Contract assets	15,582		16,690
Prepaid expenses and other current assets	33,463		14,010
Income tax receivable	1,874		1,630
Total current assets	$	275,019	$	274,600
Property, plant and equipment, net of depreciation and amortization of $76,417 and $73,422 as of September 30, 2024 and March 31, 2024, respectively	67,412		68,335
Goodwill	269,513		270,786
Intangible assets, net	120,726		127,092
Operating lease right-of-use assets	11,808		13,613
Deferred income taxes	1,760		1,074
Other non-current assets	15,294		12,240
Total assets	$	761,532	$	767,740
Liabilities
Current liabilities:
Accounts payable	$	30,421	$	31,396
Accrued liabilities	27,436		31,624
Current portion of long-term debt	16,875		14,625
Borrowings under revolving credit facility	5,000		5,000
Contract liabilities	13,402		20,531
Lease liabilities	3,322		3,273
Income taxes payable	1,813		2,820
Total current liabilities	$	98,269	$	109,269
Long-term debt, net	143,169		151,957
Deferred income taxes	8,726		9,439
Non-current lease liabilities	10,855		12,635
Other non-current liabilities	10,226		9,553
Total liabilities	$	271,245	$	292,853
Commitments and contingencies (Note 10)
Equity
Common stock: $0.001 par value; 150,000,000 shares authorized; 33,888,390 issued and 33,755,279 outstanding, and 33,730,243 issued and 33,722,225 outstanding at September 30, 2024 and March 31, 2024, respectively	$	34	$	34
Preferred stock: $0.001 par value; 10,000,000 authorized; no shares issued and outstanding	—		—
Additional paid in capital	243,119		243,555
Treasury Stock	(4,089)		(250)
Accumulated other comprehensive loss	(55,565)		(57,235)
Retained earnings	306,788		288,783
Total equity	$	490,287	$	474,887
Total liabilities and equity	$	761,532	$	767,740

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

Thermon Group Holdings, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)

(Dollars in thousands, except share and per share data)


	Three Months Ended September 30, 2024		Three Months Ended September 30, 2023		Six Months Ended September 30, 2024		Six Months Ended September 30, 2023
Sales	$	114,648	$	123,659	$	229,774	$	230,548
Cost of sales	63,736		69,201		128,430		128,781
Gross profit	50,912		54,458		101,344		101,767
Operating expenses:
Selling, general and administrative expenses	31,259		30,490		62,347		59,144
Deferred compensation plan expense/(income)	434		(247)		537		26
Amortization of intangible assets	3,402		2,227		6,799		4,614
Restructuring and other charges	614		304		2,723		885
Income from operations	15,203		21,684		28,938		37,098
Other income/(expenses):
Interest expense, net	(2,790)		(1,925)		(5,637)		(3,509)
Other income/(expense)	563		(267)		706		74
Income before provision for income taxes	12,976		19,492		24,007		33,663
Income tax expense	3,482		4,762		6,002		7,995
Net income	$	9,494	$	14,730	$	18,005	$	25,668


Comprehensive income:
Net income	$	9,494	$	14,730	$	18,005	$	25,668
Foreign currency translation adjustment	5,587		(7,845)		1,708		(3,388)
Other miscellaneous income/(expense)	(7)		51		(38)		64
Comprehensive income	$	15,074	$	6,936	$	19,675	$	22,344
Net income per common share:
Basic	$	0.28	$	0.44	$	0.53	$	0.76
Diluted	$	0.28	$	0.43	$	0.53	$	0.75
Weighted-average shares used in computing net income per common share:
Basic	33,793,583		33,688,514		33,775,253		33,748,425
Diluted	34,143,403		34,126,884		34,096,049		34,093,791

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

Thermon Group Holdings, Inc.

Condensed Consolidated Statements of Equity (Unaudited)

(Dollars in thousands)


	Common Stock Outstanding	Common Stock		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income/(Loss)		Total
Balances at March 31, 2024	33,722,225	$	34	$	243,555	$	(250)	$	288,783	$	(57,235)	$	474,887

Issuance of common stock as deferred compensation to employees	56,614	—		—		—		—		—		—
Issuance of common stock as deferred compensation to executive officers	87,782	—		—		—		—		—		—
Issuance of common stock as deferred compensation to directors	7,241	—		—		—		—		—		—
Stock compensation expense	—	—		1,065		—		—		—		1,065
Repurchase of employee stock units on vesting	—	—		(2,995)		—		—		—		(2,995)
Repurchase of shares under authorized program	(49,341)	—		—		(1,579)		—		—		(1,579)
Net income	—	—		—		—		8,511		—		8,511
Foreign currency translation adjustment	—	—		—		—		—		(3,879)		(3,879)
Other	—	—		1		—		—		(31)		(30)

Balances at June 30, 2024	33,824,521	$	34	$	241,626	$	(1,829)	$	297,294	$	(61,145)	$	475,980

Issuance of common stock as deferred compensation to employees	924	—		—		—		—		—		—

Issuance of common stock as deferred compensation to directors	5,586	—		—		—		—		—		—
Stock compensation expense	—	—		1,511		—		—		—		1,511
Repurchase of employee stock units on vesting	—	—		(18)		—		—		—		(18)
Repurchase of shares under authorized program	(75,752)	—		—		(2,260)		—		—		(2,260)
Net income	—	—		—		—		9,494		—		9,494
Foreign currency translation adjustment	—	—		—		—		—		5,587		5,587



Other	—	—		—		—		—		(7)		(7)
Balances at September 30, 2024	33,755,279	$	34	$	243,119	$	(4,089)	$	306,788	$	(55,565)	$	490,287


	Common Stock Outstanding	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income/(Loss)		Total
Balances at March 31, 2023	33,508,076	$	33	$	239,860	$	237,195	$	(58,100)	$	418,988

Issuance of common stock as deferred compensation to employees	73,345	—		—		—		—		—
Issuance of common stock as deferred compensation to executive officers	93,826	—		—		—		—		—
Issuance of common stock as deferred compensation to directors	5,718	—		—		—		—		—
Stock compensation expense	—	—		1,238		—		—		1,238
Repurchase of employee stock units on vesting	—	—		(1,685)		—		—		(1,685)

Net income	—	—		—		10,938		—		10,938
Foreign currency translation adjustment	—	—		—		—		4,457		4,457
Other	—	—		—		—		13		13


Balances at June 30, 2023	33,680,965	$	33	$	239,413	$	248,133	$	(53,630)	$	433,949

Issuance of common stock as deferred compensation to employees	2,550	—		—		—		—		—

Issuance of common stock as deferred compensation to directors	7,197	—		—		—		—		—
Stock compensation expense	—	—		1,450		—		—		1,450
Repurchase of employee stock units on vesting	—	—		(30)		—		—		(30)
Net income	—	—		—		14,730		—		14,730
Foreign currency translation adjustment	—	—		—		—		(7,845)		(7,845)



Other	—	1		—		—		51		52
Balances at September 30, 2023	33,690,712	$	34	$	240,833	$	262,863	$	(61,424)	$	442,306

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

Thermon Group Holdings, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)


	Six Months Ended September 30, 2024		Six Months Ended September 30, 2023
Operating activities
Net income	$	18,005	$	25,668
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	11,137		8,802
Amortization of deferred debt issuance costs	250		174

Stock compensation expense	2,576		2,688
Deferred income taxes	(1,507)		(1,562)
Reserve for uncertain tax positions, net	—		39
Remeasurement (gain)/loss on intercompany balances	327		(226)
Changes in operating assets and liabilities:
Accounts receivable	13,097		(4,157)
Inventories	(6,985)		(11,569)
Contract assets and liabilities	(6,277)		(12,103)
Other current and non-current assets	(5,230)		(3,023)
Accounts payable	(685)		7,536
Accrued liabilities and non-current liabilities	(2,338)		(7,607)
Income taxes payable and receivable	(1,149)		(400)
Net cash provided by operating activities	$	21,221	$	4,260
Investing activities
Purchases of property, plant and equipment	(5,785)		(5,608)
Sale of rental equipment	36		34

Net cash used in investing activities	$	(5,749)	$	(5,574)
Financing activities
Proceeds from revolving credit facility	—		13,000


Payments on long-term debt	(6,750)		(15,381)

Repurchase of employee stock units on vesting	(3,012)		(1,715)
Repurchase of shares under authorized program	(3,838)		—
Payments on finance leases	(59)		(500)
Net cash used in financing activities	$	(13,659)	$	(4,596)
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	454		(583)
Change in cash, cash equivalents and restricted cash	2,267		(5,588)
Cash, cash equivalents and restricted cash at beginning of period	50,431		38,520
Cash, cash equivalents and restricted cash at end of period	$	52,698	$	32,932

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

Thermon Group Holdings, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Dollars in thousands, except share and per share data)

1. Basis of Presentation

Thermon Group Holdings, Inc. and its subsidiaries are referred to collectively as “we,” “our,” or the “Company” herein. We are one of the largest providers of highly engineered industrial process heating solutions for process industries. We offer a full suite of products (heating units, electrode and gas-fired boilers, heating cables, industrial heating blankets and related products, temporary power solutions and tubing bundles), services (engineering, installation and maintenance services) and software (design optimization and wireless and network control systems) required to deliver comprehensive solutions to some of the world's largest and most complex projects.

Our condensed consolidated financial statements are prepared in conformity with generally accepted accounting principles in the United States ("GAAP") and the requirements of the United States Securities and Exchange Commission ("SEC") for interim financial information. Accordingly, the accompanying condensed consolidated financial statements do not include all disclosures required for full annual financial statements and should be read in conjunction with our audited consolidated financial statements and notes thereto for the fiscal year ended March 31, 2024 ("fiscal 2024"). In our opinion, the accompanying condensed consolidated financial statements reflect all adjustments considered necessary to present fairly our financial position at September 30, 2024 and March 31, 2024, and the results of our operations for the three and six months ended September 30, 2024 and 2023. Certain reclassifications have been made to these condensed consolidated financial statements and accompanying footnotes to conform to the presentation to the current fiscal year.

Summary of Significant Accounting Policies

Please refer to Note 1, "Summary of Significant Accounting Policies” in our consolidated financial statements from our fiscal 2024 Form 10-K, as filed with the SEC on May 29, 2024, for the discussion on our significant accounting policies.

Use of Estimates

Generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. While management has based its assumptions and estimates on the facts and circumstances existing at September 30, 2024, actual results could differ from those estimates and affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities and the corresponding revenues and expenses as of the date of the financial statements. The operating results for the three and six months ended September 30, 2024, are not necessarily indicative of the results that may be achieved for the fiscal year ended March 31, 2025 ("fiscal 2025").

Restricted Cash and Cash Equivalents

The Company maintains restricted cash related to certain letter of credit guarantees and performance bonds securing performance obligations. At September 30, 2024 and March 31, 2024, our restricted cash balance totaled $15,698 and $1,800, respectively. Of the $15,698, $13,950 relates to restricted cash held in anticipation of our recently announced acquisition in our EMEA (as defined below) segment. Refer to Note 14, "Subsequent Events."

Amounts included in restricted cash are included in prepaid expenses and other current assets and represent amounts required to be set aside by a contractual agreement, which generally contain cash deposits pledged as collateral on performance bonds and letters of credit.

Recent Accounting Pronouncements

Please refer to Note 1, "Summary of Significant Accounting Policies” of our Consolidated Financial Statements, from our Annual Report on Form 10-K for the fiscal year ended March 31, 2024, filed with the SEC on May 29, 2024, for the discussion on accounting pronouncements that have been issued but not yet effective for the interim periods presented that are not expected to have a material impact on our financial position or results of operations.

2. Acquisition

Vapor Power

On January 2, 2024, we announced our acquisition (the "Vapor Power Acquisition") of 100% of the issued and outstanding equity interests of Vapor Power International, LLC and its affiliates, (“Vapor Power”), a leading provider of high-quality industrial process heating solutions, including electric, electrode and gas fired boilers. The acquisition was

consummated on December 29, 2023 (the "Vapor Power Acquisition Date") and the seller was Stone Pointe, LLC. We have integrated Vapor Power into our United States and Latin America ("US-LAM") reportable segment.

The initial purchase price for Vapor Power was $107,523, with cash acquired of $7,051, for a net closing purchase price of $100,472. The initial purchase price is subject to customary adjustments for cash acquired, preliminary working capital adjustments, outstanding indebtedness, and transaction expenses. During the three months ended September 30, 2024, we adjusted the preliminary purchase price allocation by $1,566 for customary working capital adjustments for a total purchase price of $105,957. The Vapor Power Acquisition was funded with cash on hand, the existing revolving credit facility, and an expanded term loan amended on December 29, 2023, in connection with the transaction.

Acquisition Costs

In accordance with GAAP, costs to complete an acquisition are expensed as incurred. Total acquisition costs recognized in the Vapor Power Acquisition were approximately $1,766, recognized primarily in fiscal 2024. These fees represent legal, advisory, and other professional fees paid by the Company to complete the acquisition.

Preliminary Purchase Price Allocation

We have accounted for the Vapor Power Acquisition according to the business combinations guidance found in ASC 805, Business Combinations, henceforth referred to as acquisition accounting. Acquisition accounting requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. We used primarily Level 2 and 3 inputs to allocate the purchase price to the major categories of assets and liabilities shown below. For valuing the customer-related intangible assets, we used a common income-based approach called the multi-period excess earnings method; for the marketing-related and developed technology intangible assets, we used a relief-from-royalty method. The carrying values of inventories and property, plant, and equipment, and leases were adjusted to fair value, while the carrying value of any other asset or liability acquired approximated the respective fair value at time of closing.

The allocation of the purchase price to the assets acquired and liabilities assumed, including the residual amount allocated to goodwill, is based upon preliminary information and is subject to change within the measurement period (up to one year from the Vapor Power Acquisition Date) as additional information concerning final asset and liability valuations is obtained. Additionally, we are still evaluating Vapor Power's customer contracts and related revenue recognition policies, and as such, the value of contract assets and/or contract liabilities is subject to change. During the measurement period, if new information is obtained about facts and circumstances that existed as of the Vapor Power Acquisition Date that, if known, would have resulted in revised estimated values of those assets or liabilities as of that date, we will revise the preliminary purchase price allocation. The effect of any measurement period adjustments to the estimated fair values will be reflected in future updates to our purchase price allocation. Goodwill will be deductible for tax purposes and generally represents expected synergies from the combination of efforts of the acquired business and the Company.


Preliminary Purchase Price Allocation - Vapor Power
	Amortization Period (years)	Fair Value
Cash		$	7,051
Accounts receivable		8,683
Inventories		8,254
Other current assets		1,693
Property, plant and equipment		2,576
Operating lease right-of-use assets		2,700
Intangibles:
Customer relationships(1)	2 - 15	22,953
Trademarks	10	7,879
Developed technology	15	13,689
Goodwill		49,429
Total fair value of assets acquired		$	124,907
Current liabilities		(16,401)
Operating lease liability		(2,549)
Total fair value of liabilities acquired		$	(18,950)
Total purchase price		$	105,957

(1) Included in the customer relationships intangible assets is $4,407 related to customer backlog with an estimated useful life of 2 years.

Unaudited Pro Forma Financial Information

The following unaudited pro forma results of operations assume that the Vapor Power Acquisition occurred at the beginning of the periods presented. These unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations would have been if the Vapor Power Acquisition had occurred at the beginning of the periods presented, nor are they indicative of future results of operations.


	Three Months Ended September 30, 2024		Three Months Ended September 30, 2023		Six Months Ended September 30, 2024		Six Months Ended September 30, 2023
Sales	$	114,649	$	136,557	$	229,774	$	252,417
Net income	9,624		16,726		18,187		28,073

3. Fair Value Measurements

Fair Value

We measure fair value based on authoritative accounting guidance, which defines fair value, establishes a framework for measuring fair value, and expands on required disclosures regarding fair value measurements.

Inputs are referred to as assumptions that market participants would use in pricing the asset or liability. The use of inputs in the valuation process are categorized into a three-level fair value hierarchy.

•Level 1 — uses quoted prices in active markets for identical assets or liabilities we have the ability to access.

•Level 2 — uses observable inputs other than quoted prices in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

•Level 3 — uses one or more significant inputs that are unobservable and supported by little or no market activity, and that reflect the use of significant management judgment.

Financial assets and liabilities with carrying amounts approximating fair value include cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other current liabilities. The carrying amount of these financial assets and liabilities approximates fair value because of their short maturities. At September 30, 2024 and March 31, 2024, no assets or liabilities were valued using Level 3 criteria, except for those acquired in our acquisition of Vapor Power, as discussed in Note 2, "Acquisition."

Information about our financial assets and liabilities is as follows:


	September 30, 2024				March 31, 2024
	Carrying Value		Fair Value		Carrying Value		Fair Value		Valuation Technique
Financial Assets:
Deferred compensation plan assets	$	8,998	$	8,998	$	8,384	$	8,384	Level 1 - Active Markets
Foreign currency contract forwards assets	49		49		7		7		Level 2 - Market Approach
Financial Liabilities:
Outstanding borrowings from revolving line of credit	$	5,000	$	5,000	$	5,000	$	5,000	Level 2 - Market Approach
Outstanding principal amount of senior secured credit facility	160,750		159,946		167,500		167,081		Level 2 - Market Approach
Deferred compensation plan liabilities	8,197		8,197		7,574		7,574		Level 1 - Active Markets
Foreign currency contract forwards liabilities	(15)		(15)		23		23		Level 2 - Market Approach

At September 30, 2024 and March 31, 2024, the fair value of our long-term debt is based on market quotes available for issuance of debt with similar terms. As the quoted price is only available for similar financial assets, the Company concluded the pricing is indirectly observable through dealers and has been classified as Level 2.

Additionally, we acquired certain assets and liabilities as disclosed in Note 2, "Acquisition" at fair value according to acquisition accounting.

Deferred Compensation Plan

The Company provides a non-qualified deferred compensation plan for certain highly compensated employees where payroll contributions are made by the employees on a pre-tax basis. Included in “Other non-current assets” in the condensed consolidated balance sheets at September 30, 2024 and March 31, 2024 were $8,998 and $8,384, respectively, of deferred compensation plan assets held by the Company. Deferred compensation plan assets (mutual funds) are measured at fair value on a recurring basis based on quoted market prices in active markets (Level 1). The Company has a corresponding liability to participants of $8,197 and $7,574 included in “Other non-current liabilities” in the condensed consolidated balance sheets at September 30, 2024 and March 31, 2024, respectively. Deferred compensation plan expense/(income) is included as such in the condensed consolidated statements of operations and comprehensive income, and therefore is excluded from "Selling, general and administrative expenses." Deferred compensation plan expense/(income) was $434 and $(247) for the three months ended September 30, 2024 and 2023, respectively, and $537 and $26 for the six months ended September 30, 2024 and 2023, respectively. Expenses and income from our deferred compensation plan were offset by unrealized gains and losses for the deferred compensation plan included in "Other income/expense" on our condensed consolidated statements of operations and comprehensive income. Our unrealized losses/(gains) on investments were $(435) and $234, for the three months ended September 30, 2024 and 2023, respectively, and $(528) and $(50) for the six months ended September 30, 2024 and 2023, respectively.

Trade Related Foreign Currency Forward Contracts

We transact business in various foreign currencies and have established a program that primarily utilizes foreign currency forward contracts to address the risk associated with the effects of certain foreign currency exposures. Under this program, increases or decreases in our foreign currency exposures are offset by gains or losses on the forward contracts to mitigate foreign currency transaction gains or losses. These foreign currency exposures arise from intercompany transactions as well as third party accounts receivable or payable that are denominated in foreign currencies. Our forward contracts generally have terms of 30 days. We do not use forward contracts for trading purposes or designate these forward contracts as hedging instruments pursuant to ASC 815. We adjust the carrying amount of all contracts to their fair value at the end of each reporting period and unrealized gains and losses are included in "Other income/(expense)" on our condensed consolidated statements of operations and comprehensive income. These gains and losses are designed to offset gains and losses resulting from settlement of receivables or payables by our foreign operations which are settled in currency other than the local transactional currency. The fair value is determined by quoted prices from active foreign currency markets (Level 2). Fair value amounts for such forward contracts on our condensed consolidated balance sheets are either classified as accounts receivable, net or accrued liabilities depending on whether the forward contract is in a gain (accounts receivable, net) or loss (accrued liabilities) position. Our ultimate realized gain or loss with respect to currency fluctuations will depend on the currency exchange rates and other factors in effect as the contracts mature. As of September 30, 2024 and March 31, 2024, the notional amounts of forward contracts were as follows:


Notional amount of foreign currency forward contracts by currency
	September 30, 2024		March 31, 2024

Euro	$	10,044	$	—
Canadian Dollar	1,000		2,500


Mexican Peso	—		3,000
Australian Dollar	—		500



British Pound Sterling	700		1,000

Total notional amounts	$	11,744	$	7,000

In the three months ended September 30, 2024 and 2023, foreign currency gains or losses related to our forward contracts in the accompanying condensed consolidated statements of operations and comprehensive income were gains of $32 and losses of $(148), respectively. For the six months ended September 30, 2024 and 2023, losses were $(56) and gains were $28, respectively. Gains and losses from our forward contracts were offset by transaction gains or losses incurred with the settlement of transactions denominated in foreign currencies. In the three months ended September 30, 2024 and 2023, our net foreign currency transactions resulted in gains of $130 and losses $(38), respectively. In the six months ended September 30, 2024 and 2023, our net foreign currency transactions resulted in gains of $158 and losses of $(13).

4. Restructuring and Other Charges

Fiscal 2025 charges

On April 8, 2024, we enacted certain cost-cutting measures, including a reduction-in-force plan, as well as a facility consolidation, that together affected 68 employees across our US-LAM and Canada reportable segments. Pursuant to the

foregoing, we are moving certain operations and equipment associated with our rail & transit business from our Denver, Colorado location to San Marcos, Texas, where we have an existing manufacturing and back-office presence. These efforts, in part, will allow us to streamline certain operations, reduce our manufacturing footprint, and position us for more profitable growth. As a result, we recorded $614 and $2,723 in Restructuring and other charges, for the three and six months ended September 30, 2024, respectively. Additionally, $2,115 of related land and building net book value qualified as assets held-for-sale in the three months ended September 30, 2024. As a result, we reclassified this amount to Prepaid expenses and other current assets from Property, plant and equipment, net at September 30, 2024.

Fiscal 2024 charges

As a result of the continued impact of the Russo-Ukrainian war, including the sanctions related thereto, the Company commenced a strategic assessment of its operations in its Russian subsidiary. On January 31, 2023, our board of directors authorized the Company to withdraw from its operations in the Russian Federation (the “Russia Exit”), through a planned disposition of its Russian subsidiary. In fiscal 2023, we moved the assets related to our Russian subsidiary into a separate asset group deemed as "assets held-for-sale," and wrote down the related net assets to a nominal value. In the three and six month ended September 30, 2023, we recognized total charges related to the Russia Exit of $304 and $885, recorded to "Restructuring and other charges" on our condensed consolidated statements of operations and comprehensive income.

Restructuring and other charges by reportable segment is as follows:


	Three Months Ended September 30, 2024		Three Months Ended September 30, 2023		Six Months Ended September 30, 2024		Six Months Ended September 30, 2023
United States and Latin America	$	614	$	—	$	1,329	$	—
Canada	—		—		1,394		—
Europe, Middle East and Africa	—		304		—		885
Asia-Pacific	—		—		—		—
Restructuring and other charges	$	614	$	304	$	2,723	$	885

5. Net Income per Common Share

The reconciliations of the denominators used to calculate basic and diluted net income per common share for the three and six months ended September 30, 2024 and 2023, respectively, are as follows:


	Three Months Ended September 30, 2024		Three Months Ended September 30, 2023		Six Months Ended September 30, 2024		Six Months Ended September 30, 2023
Basic net income per common share
Net income	$	9,494	$	14,730	$	18,005	$	25,668
Weighted-average common shares outstanding	33,793,583		33,688,514		33,775,253		33,748,425
Basic net income per common share	$	0.28	$	0.44	$	0.53	$	0.76


	Three Months Ended September 30, 2024		Three Months Ended September 30, 2023		Six Months Ended September 30, 2024		Six Months Ended September 30, 2023
Diluted net income per common share
Net income	$	9,494	$	14,730	$	18,005	$	25,668
Weighted-average common shares outstanding	33,793,583		33,688,514		33,775,253		33,748,425
Common share equivalents:
Stock options	34,090		29,108		34,090		25,209
Restricted and performance stock units	315,730		409,262		286,706		320,157
Weighted average shares outstanding – dilutive (1)	34,143,403		34,126,884		34,096,049		34,093,791
Diluted net income per common share	$	0.28	$	0.43	$	0.53	$	0.75

(1) For the three months ended September 30, 2024 and 2023, zero and zero, respectively, were not included in the calculation of diluted net income per common share, as they would have had an anti-dilutive effect. For the six months ended September 30, 2024 and 2023, zero and 1,633 were not included in the calculation of diluted net income per common share, as they would have had an anti-dilutive effect.

The number of common share equivalents, which includes options and both restricted and performance stock units, is computed using the treasury stock method. With regard to the performance stock units, we assume that the associated

performance targets will be met at the target level of performance for purposes of calculating diluted net income per common share until such time that it is probable that actual performance will be above or below target.

6. Inventories

Inventories consisted of the following:


	September 30, 2024		March 31, 2024
Raw materials	$	60,519	$	58,197
Work in process	9,256		5,339
Finished goods	27,220		26,552
Inventories, gross	96,995		90,088
Valuation reserves	(3,399)		(3,767)
Inventories, net	$	93,596	$	86,321

7. Goodwill and Other Intangible Assets

The carrying amount of goodwill by operating segment as of September 30, 2024, is as follows:


	United States and Latin America		Canada		Europe, Middle East and Africa		Asia-Pacific		Total
Balance as of March 31, 2024	$	133,095	$	112,846	$	18,532	$	6,313	$	270,786
Goodwill acquired(1)	(2,320)		—		—		—		(2,320)
Foreign currency translation impact	—		235		633		179		1,047
Balance as of September 30, 2024	$	130,775	$	113,081	$	19,165	$	6,492	$	269,513

(1) Refer to Note 2, "Acquisition," for more information on the goodwill acquired and the related measurement period adjustment regarding our acquisition of Vapor Power.

Goodwill is tested for impairment on an annual basis and between annual tests if indicators of potential impairment exist. We perform a qualitative analysis to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If required, we also perform a quantitative analysis using the income approach, based on discounted future cash flows, which are derived from internal forecasts and economic expectations, and the market approach, which is based on market multiples of guideline public companies. The most significant inputs in the Company's quantitative goodwill impairment tests are projected financial information, the weighted average cost of capital and market multiples for similar transactions. Our annual impairment test is performed during the fourth quarter of our fiscal year. To date, there have been no indicators of impairment.

Our total intangible assets consisted of the following:


	Gross Carrying Amount at September 30, 2024		Accumulated Amortization		Net Carrying Amount at September 30, 2024		Gross Carrying Amount at March 31, 2024		Accumulated Amortization		Net Carrying Amount at March 31, 2024
Products	$	61,634	$	(42,630)	$	19,004	$	61,505	$	(39,466)	$	22,039
Trademarks	54,533		(3,217)		51,316		54,158		(2,650)		51,508
Developed technology	28,374		(8,286)		20,088		28,288		(7,372)		20,916
Customer relationships	136,553		(107,351)		29,202		136,088		(104,699)		31,389
Certifications	433		—		433		429		—		429
Other	1,280		(597)		683		1,280		(469)		811
Total	$	282,807	$	(162,081)	$	120,726	$	281,748	$	(154,656)	$	127,092

8. Accrued Liabilities

Accrued current liabilities consisted of the following:


	September 30, 2024		March 31, 2024
Accrued employee compensation and related expenses	$	13,773	$	17,319
Accrued interest	847		494
Warranty reserves	1,885		978
Professional fees	3,010		2,912
Sales taxes payable	3,594		3,564
Accrued litigation payable	983		1,356
Other	3,344		5,001
Total accrued current liabilities	$	27,436	$	31,624

9. Debt

Long-term debt consisted of the following:


	September 30, 2024		March 31, 2024
U.S. Term Loan Facility due September 2026, net of deferred debt issuance costs of $175 and $226 as of September 30, 2024, and March 31, 2024, respectively	$	64,325	$	67,274

Incremental Term Loan A due September 2026, net of deferred debt issuance costs of $531 and $692 of September 30, 2024, and March 31, 2024, respectively	95,719		99,308
Total term debt	$	160,044	$	166,582
Less current portion	(16,875)		(14,625)
Total long-term debt	$	143,169	$	151,957

Senior Secured Credit Facilities

On September 29, 2021, Thermon Group Holdings, Inc. as a credit party and a guarantor, Thermon Holding Corp. (the “US Borrower”) and Thermon Canada Inc. (the “Canadian Borrower” and together with the US Borrower, the “Borrowers”), entered into an Amended and Restated Credit Agreement with several banks and other financial institutions or entities from time to time and JPMorgan Chase Bank, N.A., as Administrative Agent, ("the Agent") which was further amended on November 19, 2021, and March 7, 2023.

The Credit Agreement is an amendment and restatement of that certain Credit Agreement dated October 30, 2017, by and among Borrowers, the lenders party thereto and JPMorgan Chase Bank, N.A. as administrative agent (the “Prior Credit Agreement”), and provides for the following credit facilities described below (collectively, the “Facilities”).

•Revolving Credit Facility: A USD $100,000 five-year secured revolving credit facility made available to the U.S. Borrower. The Revolving Credit Facility includes sub-limits for letters of credit and swing-line loans (the “Revolving Credit Facility”).

•U.S. Term Loan Facility: A USD $80,000 five-year secured term loan A (the “U.S. Term Loan”) made available to the U.S. Borrower (the “U.S. Term Loan Facility”); and

•Canadian Term Loan Facility: A CAD $76,182 five-year term loan A (the “Canadian Term Loan” and, together with the U.S. Term Loan, the “Term Loans”) made available to the Canadian Borrower (the “Canadian Term Loan Facility,” and together with the U.S. Term Loan Facility, the “Term Loan Facilities”).

Proceeds of the Facilities were used at closing to repay and refinance the Borrowers’ existing indebtedness under the Prior Credit Agreement and pay all interest, fees and expenses related thereto, and thereafter are expected to be used for working capital and general corporate purposes.

On December 29, 2023, the Company and the Borrowers entered into an Amendment No. 3 to Credit Agreement, Amendment No. 2 to the Guarantee and Collateral Agreement and Amendment No. 2 to the Canadian Guarantee and Collateral Agreement (collectively, the “Amendment”) with the Lenders and the Agent.

The Amendment provides for, among other things, changes to the Credit Agreement to (a) provide the US Borrower with a new incremental term loan facility as further described below (the “2023 Incremental U.S. Term Loan Facility”), (b) reset the accordion feature in the Credit Agreement for the incurrence of additional incremental term loans and incremental revolving commitments to an amount not to exceed USD $100,000, (c) permit the Canadian Borrower to borrow under the existing Revolver Facility (as defined in the Credit Agreement) in Canadian dollars, (d) permit Letters of Credit (as defined in the Credit Agreement) to be issued for the account of the Canadian Borrower, (e) replace the Canadian Dollar Offered Rate

with the Canadian Overnight Repo Rate Average as the benchmark rate applicable to Term Benchmark Loans (each as defined in the Credit Agreement) denominated in Canadian dollars and implementing corresponding technical changes, and (f) expand the definitions of “Specified Cash Management Agreement” and “Specified Swap Agreement” (each as defined in the Credit Agreement) to provide for the inclusion of obligations arising under Swap Agreements (as defined in the Credit Agreement) and cash management agreements between any subsidiary of the US Borrower to be included in the Obligations (as defined in the Credit Agreement) that are secured and guaranteed under the Loan Documents (as defined in the Credit Agreement).

Certain principal terms of the 2023 Incremental U.S. Term Loan Facility are as follows:

•A USD $100,000 secured term loan A made available to the US Borrower on substantially the same terms as the existing U.S. Term A Loans (as defined in the Credit Agreement), but with a pricing increase across the grid of 0.375% above the pricing applicable to the existing U.S. Term A Loans.

•Loans made to the US Borrower under the 2023 Incremental U.S. Term Loan Facility (the “2023 Incremental U.S. Term Loans”) shall rank pari passu in right of payment and security with the existing U.S. Term A Loans and shall be secured and guaranteed under the Loan Documents on a pro rata basis with the existing U.S. Term A Loans.

•The 2023 Incremental U.S. Term Loans shall mature on September 29, 2026 (same as the existing U.S. Term A Loans) and shall amortize with installment payments due on the first day of each fiscal quarter (commencing with the fiscal quarter commencing on April 1, 2024) with the same percentage of principal being due on each payment date as the percentage of principal of the existing U.S. Term A Loans due on such date.

•Proceeds of the 2023 Incremental U.S. Term Loans were used at the closing of the transactions contemplated by the Amendment to (a) finance the Vapor Acquisition (as defined in the Amendment), (b) refinance certain indebtedness of the Target (as defined in the Amendment), and (c) pay fees and expenses incurred by the US Borrower in connection with the foregoing.

The Amendment also provides for certain conforming changes relating to the expanded definitions of Specified Cash Management Agreement and Specified Swap Agreement in the Credit Agreement to (x) the Guarantee and Collateral Agreement, dated as of October 30, 2017, by and among the Company, the US Borrower and the Agent (the “US Security Agreement”) and (y) the Canadian Guarantee and Collateral Agreement, dated as of October 30, 2017, by and between the Canadian Borrower and the Agent (the “Canadian Security Agreement”, and together with the US Security Agreement, the “Security Agreements”), and also provides for changes in each Security Agreement to the waterfall for application of proceeds of collateral set forth therein so that Obligations (as defined in such Security Agreement) arising under Specified Cash Management Agreements and Specified Swap Agreements (other than indemnities, fees and similar obligations and liabilities) are paid pro rata with principal Obligations arising under Loans, Reimbursement Obligations and the cash collateralization of Letters of Credit (each as defined in such Security Agreement).

The foregoing summary of the Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Amendment, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 10-Q and incorporated herein by reference.

Maturity and Repayment

Each of the Facilities terminates on September 29, 2026. Each of the Term Loans will amortize as set forth in the table below, with payments on the first day of each January, April, July and October, with the balance of each Term Loan Facility due at maturity.


Installment Dates	Original Principal Amount
January 1, 2023 through October 1, 2024	1.88	%
January 1, 2025 through July 1, 2026	2.50	%

Guarantees

The U.S. Term Loan and 2023 Incremental U.S. Term Loan Facility and the obligations of the U.S. Borrower under the Revolving Credit Facility are guaranteed by the Company and all of the U.S. Borrower’s current and future wholly owned domestic material subsidiaries (the “U.S. Subsidiary Guarantors”), subject to certain exceptions. The Canadian Term Loan is guaranteed by the Company, the U.S. Borrower, the U.S. Subsidiary Guarantors and each of the wholly owned Canadian material subsidiaries of the Canadian Borrower, subject to certain exceptions.

Security

The U.S. Term Loan and 2023 Incremental U.S. Term Loan Facility and the obligations of the U.S. Borrower under the Revolving Credit Facility are secured by a first lien on all of the assets of the Company, the U.S. Borrower and the U.S. Subsidiary Guarantors, including 100% of the capital stock of the U.S. Subsidiary Guarantors and 65% of the capital stock of the first tier material foreign subsidiaries of the Company, the U.S. Borrower and the U.S. Subsidiary Guarantors, subject to certain exceptions. The Canadian Term Loan is secured by a first lien on all of the assets of the Company, the U.S. Borrower, the U.S. Subsidiary Guarantors, the Canadian Borrower and the material Canadian subsidiaries of the Canadian Borrower, including 100% of the capital stock of the Canadian Borrower’s material Canadian subsidiaries.

Financial Covenants

In connection with the Credit Agreement, the Company is required, on a consolidated basis, to maintain certain financial covenant ratios. On the last day of any period of four fiscal quarters ended during a period set forth below, the Company must maintain a consolidated leverage ratio that does not exceed the ratios for such period set forth below (each of which ratios may be increased by 0.50:1.00 for each of the four fiscal quarters following certain acquisitions at the election of the U.S. Borrower):


Fiscal Quarter Ended						Consolidated Leverage Ratio
December 31, 2022, and each fiscal quarter thereafter						3.50:1.00

In addition, on the last day of any period of four fiscal quarters ended on or after September 30, 2021, the Company must maintain a consolidated fixed charge coverage ratio of not less than 1.25:1.00. As of September 30, 2024, we were in compliance with all financial covenants of the Credit Agreement.

Other Covenants

The Credit Agreement contains restrictive covenants (in each case, subject to certain exclusions) that limit, among other things, the ability of the Company and its subsidiaries (including the Borrowers) to incur additional indebtedness, grant liens, make fundamental changes, sell assets, make restricted payments, enter into sales and leasebacks, make investments, prepay certain indebtedness, enter into transactions with affiliates, and enter into restrictive agreements.

The covenants are subject to various baskets and materiality thresholds, with certain of the baskets to the restrictions on the repayment of subordinated or unsecured indebtedness, restricted payments and investments being available only when the Company’s pro forma leverage ratios are less than a certain level.

The Credit Agreement contains certain customary representations and warranties, affirmative covenants and events of default, including, among other things, payment defaults, breach of representations and warranties, covenant defaults, cross-defaults to certain indebtedness, certain events of bankruptcy, certain events under ERISA, judgment defaults, actual or asserted failure of any guaranty or security documents to be in full force and effect and change of control. If such an event of default occurs, the Agent will be entitled to take various actions, including the termination of the commitment for the Revolving Credit Facility, the acceleration of amounts due under the Credit Agreement and certain other actions that a secured creditor is customarily permitted to take following a default.

At September 30, 2024, we had $5,000 in outstanding borrowings under the Revolving Credit Facility. We had $92,774 of available borrowing capacity thereunder after taking into account the borrowing base and $2,226 of outstanding letters of credit and the outstanding borrowings under the Revolving Credit Facility as of September 30, 2024. The Term Loans bear interest at the Secured Overnight Financing Rate ("SOFR") plus an applicable margin dictated by our leverage ratio (as described above). The interest rates on the Term Loan Facilities on September 30, 2024 were 6.55% for the U.S. Term Loan Facility, 6.93% for the 2023 Incremental U.S. Term Loan Facility, and 6.60% for the U.S. Revolving Credit Facility. Interest expense has been presented net of interest income on our condensed consolidated statements of operations and comprehensive income.

10. Commitments and Contingencies

Legal Proceedings and Other Contingencies

We are involved in various legal and administrative proceedings that arise from time to time in the ordinary course of doing business. Some of these proceedings may result in fines, penalties or judgments being assessed against us, which may adversely affect our financial results. In addition, from time to time, we are involved in various disputes, which may or may not be settled prior to legal proceedings being instituted and which may result in losses in excess of accrued liabilities, if any, relating to such unresolved disputes. As of September 30, 2024, we have established an estimated liability associated with the aforementioned disputes. Expenses related to litigation reduce operating income. We do not believe that the outcome of any of these proceedings or disputes would have a material adverse effect on our financial position, long-term results of operations, or cash flows. It is possible, however, that charges related to these matters could be significant to our results of operations or cash

flows in any one reporting period. Refer to Note 8, "Accrued Liabilities" for more information regarding our accruals related to these proceedings.

Letters of Credit and Bank Guarantees

At September 30, 2024, the Company had in place letter of credit guarantees and performance bonds securing certain performance obligations of the Company. These arrangements totaled $13,683. Of this amount, $831 is secured by cash deposits at the Company’s financial institutions and an additional $2,226 represents a reduction of the available amount of the Company's revolving credit facility. In addition to the arrangements totaling $13,683, our Indian subsidiary also has $4,332 in non-collateralized customs bonds outstanding to secure the Company's customs and duties obligations in India.

11. Revenue

Disaggregation of Revenue

We disaggregate our revenue from contracts with customers by geographic location as well as revenue recognized at a point-in-time and revenues recognized over time, as we believe these best depict the nature of our sales and the regions in which those sales are earned and managed.

Revenue recognized at a point-in-time occurs based on when control transfers to the customer and is generally related to our product sales. Moreover, point-in-time revenue does not typically require engineering or installation services. Revenue recognized over time occurs on our projects where engineering or installation services, or a combination of the two, are required. We recognize revenue related to such projects in a systematic way that reflects the transfer of service to the customer.

Disaggregation of revenues from contracts with customers for the three and six months ended September 30, 2024 and 2023 are as follows:


	Three months ended September 30, 2024						Three months ended September 30, 2023
	Revenues recognized at point in time		Revenues recognized over time		Total		Revenues recognized at point in time		Revenues recognized over time		Total
United States and Latin America	$	44,606	$	14,258	$	58,864	$	31,744	$	32,053	$	63,797
Canada	26,433		10,438		36,871		25,625		10,524		36,149
Europe, Middle East and Africa	4,954		4,074		9,028		7,819		5,588		13,407
Asia-Pacific	6,286		3,599		9,885		7,447		2,859		10,306
Total revenues	$	82,279	$	32,369	$	114,648	$	72,635	$	51,024	$	123,659


	Six months ended September 30, 2024						Six months ended September 30, 2023
	Revenues recognized at point in time		Revenues recognized over time		Total		Revenues recognized at point in time		Revenues recognized over time		Total
United States and Latin America	$	89,014	$	29,834	$	118,848	$	61,635	$	55,659	$	117,294
Canada	48,041		27,175		75,216		50,147		21,325		71,472
Europe, Middle East and Africa	9,567		7,303		16,870		13,212		9,876		23,088
Asia-Pacific	12,423		6,417		18,840		12,786		5,908		18,694
Total revenues	$	159,045	$	70,729	$	229,774	$	137,780	$	92,768	$	230,548

Performance Obligations

We have elected the practical expedient to disclose only the value of performance obligations for contracts with an original expected length of one year or more, which was $19,834 as of September 30, 2024. We expect to recognize the remaining revenues associated with unsatisfied or partially satisfied performance obligations within the next 12 months.

Contract Assets and Liabilities

As of September 30, 2024 and March 31, 2024, contract assets were $15,582 and $16,690, respectively. As of September 30, 2024 and March 31, 2024, contract liabilities were $13,402 and $20,531, respectively. We typically recognize revenue associated with our contract liabilities within 12 months.

12. Income Taxes

Our effective income tax rate was 25.0% and 23.8% for the six months ended September 30, 2024 and 2023, respectively. The effective income tax rate for the six months ended September 30, 2024 includes an accrual for withholding tax on expected repatriations of earning from our Canadian subsidiary. Previously, our Canadian earnings were deemed to be permanently reinvested.

Our effective tax rate varies from period to period due to factors including changes in total pre-tax income or loss, the jurisdictions in which our income is earned, the tax laws in those jurisdictions and in our operating structure. During the year, we estimate income taxes based on the laws and rates in effect in the countries in which operations are conducted. Our income tax provisions are primarily driven by income in certain jurisdictions and withholding taxes on intercompany and third-party transactions that do not directly correlate to ordinary income or loss. During interim periods, certain charges or benefits may be recognized as discrete tax expense or benefit when previous estimates or knowledge were unavailable.

As of September 30, 2024, we anticipate that it is reasonably possible that our uncertain tax positions of $1,093, including interest and penalties, may be released in the next twelve months due to expiration of statutes of limitations, settlements and/or conclusions of tax examinations. As of September 30, 2024, the tax years for the fiscal years ended March 31, 2019 through March 31, 2024, remain open to examination by the major taxing jurisdictions.

13. Segment Information

We maintain four reportable segments based on four geographic countries or regions in which we operate: (i) United States and Latin America ("US-LAM"), (ii) Canada, (iii) Europe, Middle East and Africa ("EMEA") and (iv) Asia-Pacific ("APAC"). Within our four reportable segments, our core products and services are focused on the following markets: chemical and petrochemical, oil, gas, power generation, commercial, rail and transit, energy transition/decarbonization and general industries and other, which we refer to as our "key end markets." We offer a full suite of products (heating units, electrode and gas-fired boilers, heating cables, industrial heating blankets and related products, temporary power solutions and tubing bundles), services (engineering, installation and maintenance services) and software (design optimization and wireless and network control systems) required to deliver comprehensive solutions to some of the world's largest and most complex projects. Profitability within our segments is measured by operating income. Profitability can vary in each of our reportable segments based on the competitive environment within the region, the level of including interest and penalties maybe released in the next twelve months due to expiration of statutes of limitations, settlements and/or conclusions of tax examinations overhead, such as the salaries of our senior executives, and the level of research and development and marketing activities in the region, as well as the mix of products and services. For purposes of this note, revenue is attributed to individual countries or regions on the basis of the physical location and jurisdiction of organization of the subsidiary that invoices the material and services.

Total sales to external customers, inter-segment sales, depreciation expense, amortization expense, and income from operations for each of our four reportable segments are as follows:


	Three Months Ended September 30, 2024		Three Months Ended September 30, 2023		Six Months Ended September 30, 2024		Six Months Ended September 30, 2023
Sales to external customers:
United States and Latin America	$	58,864	$	63,797	$	118,848	$	117,294
Canada	36,871		36,149		75,216		71,472
Europe, Middle East and Africa	9,028		13,407		16,870		23,088
Asia-Pacific	9,885		10,306		18,840		18,694
	$	114,648	$	123,659	$	229,774	$	230,548
Inter-Segment sales:
United States and Latin America	$	12,302	$	11,269	$	23,410	$	19,650
Canada	3,520		3,851		7,068		8,583
Europe, Middle East and Africa	480		286		897		675
Asia-Pacific	384		422		815		1,533
	$	16,686	$	15,828	$	32,190	$	30,441
Depreciation expense:
United States and Latin America	$	1,232	$	1,108	$	2,467	$	2,164
Canada	834		937		1,668		1,848
Europe, Middle East and Africa	49		51		98		98
Asia-Pacific	56		40		105		78
	$	2,171	$	2,136	$	4,338	$	4,188
Amortization expense:
United States and Latin America	$	1,653	$	449	$	3,306	$	1,060
Canada	1,716		1,745		3,427		3,488
Europe, Middle East and Africa	22		22		44		44
Asia-Pacific	11		11		22		22
	$	3,402	$	2,227	$	6,799	$	4,614
Income from operations:
United States and Latin America	$	6,578	$	12,009	$	13,042	$	24,290
Canada	8,670		7,520		15,938		11,058
Europe, Middle East and Africa	1,367		2,333		1,709		2,667
Asia-Pacific	622		1,769		1,836		2,676
Unallocated:
Stock compensation	(1,511)		(1,450)		(2,576)		(2,688)
Public company costs	(523)		(497)		(1,011)		(905)
	$	15,203	$	21,684	$	28,938	$	37,098

The following table presents a reconciliation of Income from operations to Income before provision for income taxes:


	Three Months Ended September 30, 2024		Three Months Ended September 30, 2023		Six Months Ended September 30, 2024		Six Months Ended September 30, 2023
Income from operations	$	15,203	$	21,684	$	28,938	$	37,098
Other income/(expenses):
Interest expense, net	(2,790)		(1,925)		(5,637)		(3,509)
Other income/(expense)	563		(267)		706		74
Income before provision for income taxes	$	12,976	$	19,492	$	24,007	$	33,663

14. Subsequent Events

On October 2, 2024, we acquired Fabbrica Apparecchiature Termoelettriche Industriali S.r.L. ("F.A.T.I."), an Italian-based manufacturer of electric heaters for industrial use. F.A.T.I. has been a prominent player in the electric heating industry for nearly 80 years, serving diverse sectors like oil & gas, pharmaceuticals, and renewables.

The acquisition expands our product portfolio and geographical reach, particularly in Europe and Asia, aligning with the company's goals of growth through decarbonization and electrification. The purchase price of €12,500, or approximately $13,800, was funded with cash on hand and includes F.A.T.I.'s manufacturing facility in Milan, which enhances our global production capabilities. The acquisition is expected to strengthen our market position worldwide.

On October 21, 2024, we signed a sale agreement with a third party buyer to sell our facility in Denver, Colorado, pursuant to our cost-cutting and operational excellence efforts previously disclosed. Refer to Note 4, "Restructuring and Other Charges" for more information. The agreed-upon sale price of the facility, which includes manufacturing and back-office space as well as land, is approximately $6,000. The net book value of the related assets are $2,000. As of September 30, 2024, the relevant assets were classified as assets held-for-sale and included in Prepaid expenses and other current assets. We expect the closing of the transaction will occur in December 2024, subject to customary closing conditions.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction and Special Note Regarding Forward-Looking Statements

Management’s discussion and analysis of our financial condition and results of operations is provided as a supplement to the unaudited condensed consolidated financial statements and accompanying notes thereto for the three and six months ended September 30, 2024 and 2023 to help provide an understanding of our financial condition, changes in our financial condition, and results of our operations. In this quarterly report, we refer to the three month periods ended September 30, 2024 and 2023 as "Interim 2025" and "Interim 2024," respectively and the six month periods ended September 30, 2024 and 2023 as "YTD 2025" and "YTD 2024." The following discussion should be read in conjunction with, and is qualified in its entirety by reference to, our unaudited condensed consolidated financial statements and related notes included in Item 1 above.

This quarterly report 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. When used in this discussion, 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 quarterly report.

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. These forward-looking statements include, but are not limited to, statements regarding: (i) our plans to strategically pursue emerging growth opportunities, including strategic acquisitions, in diverse regions and across industry sectors; (ii) our plans to secure more new facility project bids; (iii) our ability to generate more facility maintenance, repair and operations or upgrades or expansions revenue, from our existing and future installed base; (iv) our ability to timely deliver backlog; (v) our ability to respond to new market developments and technological advances; (vi) our expectations regarding energy consumption and demand in the future and its impact on our future results of operations; (vii) our plans to develop strategic alliances with major customers and suppliers; (viii) our expectations that our revenues will increase; (ix) our belief in the sufficiency of our cash flows to meet our needs for the next year; (x) our ability to integrate acquired companies and successfully divest certain businesses, including our Russia business; (xi) our ability to successfully achieve synergies from acquisitions; and (xii) our ability to make required debt repayments.

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; (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 and incidents; (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, filed 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 or incorporated by reference in this quarterly report 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.

Business Overview and Company History

We are one of the largest providers of highly engineered industrial process heating solutions for process industries. For 70 years, we have served a diverse base of thousands of customers around the world in attractive and growing markets, including chemical and petrochemical, oil, gas, power generation, commercial, food and beverage, rail and transit, and other, which we refer to as our "key end markets." We offer a full suite of products (heating units, electrode and gas-fired boilers, heating cables, industrial heating blankets and related products, temporary power solutions and tubing bundles), services (engineering, installation and maintenance services) and software (design optimization and wireless and network control systems) required to deliver comprehensive solutions to some of the world's largest and most complex projects. With a legacy of innovation and continued investment in research and development, Thermon has established itself as a technology leader in hazardous or classified areas, and we are committed to developing sustainable solutions for our customers. We serve our customers through a global network of sales and service professionals and distributors in more than 30 countries and through our 11 manufacturing facilities on two continents. These global capabilities and longstanding relationships with some of the largest multinational oil, gas, chemical processing, power and engineering, procurement and construction ("EPC") companies in the world have enabled us to diversify our revenue streams and opportunistically access high growth markets worldwide. During YTD 2025 and YTD 2024., approximately 50% and 52%, respectively, of our revenues were generated from outside of the United States.

Revenue. Our revenues are derived from providing customers with a full suite of innovative and reliable process heating solutions, including advanced heating and filtration solutions for industrial and hazardous area applications. Revenue recognized at a point in time based on when control transitions to the customer is generally related to our product sales. Point in time revenue does not typically require engineering or installation services. Revenue recognized over time generally occurs on our projects where engineering or installation services, or a combination of the two, are required. We recognize revenue related to such projects in a systematic way that reflects the transfer of goods or services, or a combination of goods and services, to the customer.

We believe that our pipeline of planned projects, in addition to our backlog of written contractual commitments received from customers, provides us with visibility into our future revenue. Historically we have experienced few order cancellations, and the cancellations that have occurred in the past have not been material compared to our total contract volume or total backlog. The small number of order cancellations is attributable in part to the fact that a large portion of our solutions are ordered and installed toward the end of large project construction. Our backlog at September 30, 2024, was $214.9 million, as compared to $186.1 million at March 31, 2024. The timing of recognition of revenue out of backlog is not always certain, as it is subject to a variety of factors that may cause delays, many of which are beyond our control (such as, customers' delivery schedules and levels of capital and maintenance expenditures). When delays occur, the recognition of revenue associated with the delayed project is likewise deferred.

Cost of sales. Our cost of sales includes primarily the cost of raw material items used in the manufacture of our products, cost of ancillary products that are sourced from external suppliers and construction labor costs. Additional costs of sales include contract engineering costs directly associated to projects, direct labor costs, shipping and handling costs, and other costs associated with our manufacturing/fabrication operations. The other costs associated with our manufacturing/fabrication operations are primarily indirect production costs, including depreciation, indirect labor costs, warranty-related costs and the costs of manufacturing support functions such as logistics and quality assurance. Key raw material costs include polymers, copper, stainless steel, insulating material, electronic components and other miscellaneous parts related to products manufactured or assembled. We cannot provide any assurance that we will be able to mitigate potential raw material shortages or be able to pass along raw material cost increases, including the potential impacts of tariffs, to our customers in the future, and if we are unable to do so, our results of operations may be adversely affected.

Operating expenses. Our selling, general and administrative expenses ("SG&A") are primarily comprised of compensation and related costs for sales, marketing, pre-sales engineering and administrative personnel, plus other sales related expenses as well as other costs related to research and development, insurance, professional fees, the global integrated business information system, and provisions for credit losses. In addition, our deferred compensation expense includes a non-qualified deferred compensation plan for certain highly compensated employees where payroll contributions are made by the employees on a pre-tax basis. The expense/income associated with our deferred compensation plan is titled "Deferred compensation plan expense/(income)" on our condensed consolidated statements of operations and comprehensive income.

Key drivers affecting our results of operations. Our results of operations and financial condition are affected by numerous factors, including those described under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024, filed with the SEC on May 29, 2024, and in any subsequent Quarterly Reports on Form 10-Q that we have filed or may file with the SEC, including those described below. These factors include the following:

•Impact of product mix. Typically, our customers require our products as well as our engineering and construction services. The level of service and construction needs affect the profit margin for each type of revenue.

We tend to experience lower margins from our design optimization, engineering, installation and maintenance services, which are typically large projects tied to our customers' capex budgets and are comprised of more than $0.5 million in total revenue. For clarity, we will refer to these as "Over time large projects." Our results of operations in recent years have been impacted by the various construction phases of Over time large projects. We are typically designated as the heating solutions provider of choice by the project owner. We then engage with multiple contractors to address incorporating various heating solutions throughout the overall project. Our largest projects may generate revenue for several quarters. In the early stages of an Over time large project, our revenues are typically realized from the provision of engineering services. In the middle stages, or the material requirements phase, we typically experience the greatest demand for our heating solutions, at which point our revenues tend to accelerate. Revenues tend to decrease gradually in the final stages of a project and are generally derived from installation services and demand for electrical panels and other miscellaneous electronic components used in the final installation of heating solutions, which we frequently outsource from third-party manufacturers.

Projects which do not require installation and maintenance services are smaller in size and representative of maintenance, repairs and small upgrades necessary to improve efficiency and uptime. These small projects are typically tied to our customers operating expense budgets with improved profit margins, and are generally less than $0.5 million in total revenue. We will refer to such projects as "Over time small projects."

The most profitable of our sales are derived from selling our heating products, for which we recognize revenue at a point in time. We also tend to experience lower margins from our outsourced products, such as electrical switch gears and transformers, than we do from our manufactured products. Accordingly, our results of operations are impacted by our mix of products and services.

We estimate that Point in time and Over time revenues have each made the following contribution as a percentage of total revenue in the periods listed:


	Three months ended September 30,			Six months ended September 30,
		2024		2023		2024		2023
Point in time		72	%	59	%	69	%	60	%
Over time:		28	%	41	%	31	%	40	%
Small projects		13	%	13	%	16	%	13	%
Large projects		15	%	28	%	15	%	27	%

Our Over time revenue includes (i) products and services which are billed on a time and materials basis, and (ii) fixed fee contracts for complex turnkey and other solutions such as engineered products. For our time and

materials service contracts, we recognize revenues as the products and services are provided over the term of the contract and have determined that the stated rate for installation services and products is representative of the stand-alone selling price for those services and products.

Our turnkey projects and certain other projects typically offer our customers a comprehensive heating solution from the initial planning stage through engineering/design, manufacture, installation and final proof-of-performance and acceptance testing. Turnkey services also include project planning, product supply, system integration, commissioning and ongoing maintenance. Fixed fee projects, containing multiple deliverables, are customer specific, do not have an alternative use and have an enforceable right to payment, and thus are treated as a single performance obligation with revenues recognized over time as work progresses.

For revenue recognized under fixed fee contracts, we measure the costs incurred that contribute towards the satisfaction of our performance obligation as a percentage of the total cost of production (the “cost-to-cost method”), and we recognize a proportionate amount of contract revenue, as the cost-to-cost method appropriately depicts performance towards satisfaction of the performance obligation. Changes to the original cost amount may be required during the life of the contract and such estimates are reviewed on a regular basis. Sales and gross profits are adjusted using the cumulative catch-up method for revisions in estimated contract costs. Reviews of estimates have not generally resulted in significant adjustments to our results of operations.

Point in time revenue represents goods transferred to customers at a point in time and is recognized when obligations under the terms of the contract with the customer are satisfied; generally this occurs with the transfer of control upon shipment.

•Cyclicality of end-users' markets. Demand for our products and services depends in large part upon the level of capital and maintenance expenditures of our customers and end users, in particular those in the energy, oil, gas, chemical processing and power generation industries, and firms that design and construct facilities for these industries. These customers' expenditures historically have been cyclical in nature and vulnerable to economic downturns. Large projects historically have been a substantial source of revenue growth, and large project revenues tend to be more cyclical than maintenance and repair revenues. A sustained decrease in capital and maintenance spending or in new facility construction by our customers could have a material adverse effect on the demand for our products and services and our business, financial condition and results of operations.

•Acquisition strategy. In recent years, we have been executing on a strategy to grow the Company through the acquisition of businesses that are either in the process heating solutions industry or provide complementary products and solutions for the markets and customers we serve. Refer to Note 2, "Acquisition," for more discussion of our recent acquisitions.

Recent Developments

During the three months ended September 30, 2024, we incurred $0.6 million of Restructuring and other charges related to our cost-cutting initiatives previously disclosed. Refer to Note 4, "Restructuring and Other Charges" for more information.

Results of Operations - Three-month periods ended September 30, 2024 and 2023

The following table sets forth our unaudited condensed consolidated statements of operations for the three months ended September 30, 2024 and 2023 and indicates the amount of change and percentage change between periods.


(Dollars in thousands)	Three Months Ended September 30,				Increase/(Decrease)
	2024		2023		$		%
Condensed Consolidated Statements of Operations:
Sales	$	114,648	$	123,659	$	(9,011)	(7)	%
Cost of sales	63,736		69,201		(5,465)		(8)	%
Gross profit	50,912		54,458		(3,546)		(7)	%
Operating expenses: