Thermon Group Holdings, Inc. (THR) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed picture. Financial performance shows some strengths like a strong balance sheet and increased backlog, but orders are down. Guidance indicates modest growth but declining margins due to tariffs. The Q&A reveals resolved production delays and potential in new products, yet lacks specifics on timelines, causing uncertainty. The market cap suggests moderate volatility. Overall, the sentiment is neutral, with no strong catalysts for significant short-term stock price movement.
Key Financial Performance
Revenue $108.9 million, a year-over-year decrease of 5%. Excluding revenue contributed from F.A.T.I., first quarter organic revenue decreased 11%. The decline was attributed to delayed backlog conversion and reduced customer demand amid ongoing market uncertainty related to tariffs.
OpEx Revenues $93.3 million, a decrease of 4% compared to last year. Excluding the contributions from F.A.T.I., OpEx revenues decreased 11% from the same period last year due to the delayed backlog conversion as well as the impact of tariff uncertainty. OpEx revenues represented 86% of total revenues for the quarter.
Large Project Revenue $15.6 million, down 11% from last year. The decline was due to project schedules shifting to the right, with execution anticipated to begin in quarter 2.
Gross Profit $48 million, a decrease of 5% compared to the first quarter last year. The revenue decline was partially offset by a more favorable revenue mix and tariff mitigation measures, including pricing benefits. Gross margin was 44.1%, up from 43.8% last year.
Adjusted EBITDA $21.2 million, down from $23.2 million last year, a decrease of 9%. The decline was due to the revenue decline combined with continued investments in growth initiatives. Adjusted EBITDA margin was 19.5%, down from 20.1% last year.
GAAP Earnings Per Share (EPS) $0.26, up 4% from $0.25 in the prior year. Adjusted EPS was $0.36, down 5% from $0.38 last year. The decline in adjusted EPS was primarily driven by lower sales volumes and increased SG&A expenses, partially offset by improved gross margins and reduced interest expense.
Orders Decreased 5% on a reported basis and were down 19% organically. Orders were down across each geography, particularly in APAC due to tariff impacts. However, backlog increased 13% organically due to the positive book-to-bill in the quarter, combined with project execution timing.
Free Cash Flow $8.3 million, down modestly from $8.7 million last year. The decline was attributed to higher inventory as the company built stock for the fall heating season and purchased materials in advance of tariffs.
Net Debt $102.8 million, with a net leverage ratio of 1.0x. The company maintained a strong balance sheet and ended the quarter with total cash and available liquidity of $130.8 million.
You have reached the limit. Sign up to access full content
Get started
Operating Highlights
Launch of Pontus and Poseidon load banks: Thermon launched the new Pontus and Poseidon load banks on July 28, 2025, targeting the growing liquid load bank market for data centers. This market is projected to grow from $84 million in 2024 to $386 million in 2032, with a CAGR of 21%.
Data center market opportunity: Thermon is targeting the data center market, which is shifting from air to liquid cooling. This shift is expected to increase demand for Thermon's legacy solutions like heat tracing and immersion heaters.
Rail and transit market growth: The Infrastructure Investment and Jobs Act has created a favorable demand environment for public transit and passenger rail systems. Thermon's rail and transit backlog has doubled over the last 12 months.
F.A.T.I. acquisition impact: The F.A.T.I. acquisition has positioned Thermon to capitalize on the growing electrification market in Europe. The backlog for F.A.T.I. has doubled in the last six months.
Gross margin improvement: Gross margin improved by 30 basis points year-over-year to 44.1%, driven by a strategic shift toward higher-margin OpEx revenues and tariff mitigation measures.
Revenue delays and backlog: First-quarter revenues were impacted by $10 million in delayed backlog conversion due to supply chain challenges and production delays. However, the backlog grew by 27% year-over-year.
Diversification strategy: Thermon is focusing on high-growth verticals such as data centers, transit systems, and electrification to leverage dynamic market trends and deliver sustainable shareholder value.
You have reached the limit. Sign up to access full content
Get started
Risk or Challenges
Revenue Decline: Year-over-year revenue declined by 5%, primarily due to temporary delays in backlog conversion and project execution timing. This poses a risk to achieving financial targets if delays persist.
Order Rate Softness: Incoming order rates experienced softness following Liberation Day, with a sharp decline in daily order rates in late April through May. Although recovery was noted, this fluctuation introduces unpredictability in revenue generation.
Supply Chain Challenges: Short-term supply chain challenges and an unanticipated production delay caused by a capital improvement project contributed to delayed backlog conversion, impacting revenue realization.
Tariff Uncertainty: Ongoing tariff uncertainties and recent announcements on August 1 create challenges in predicting input costs and customer behaviors, potentially affecting margins and demand.
Geographic Revenue Declines: Revenue in U.S.-LAM and Canada declined by 17% and 8%, respectively, due to delayed backlog conversion and reduced customer demand amid market uncertainty related to tariffs.
Large Project Delays: Large project revenues decreased by 11%, with many projects still in the engineering phase and execution schedules shifting to later quarters, delaying revenue recognition.
APAC Market Weakness: APAC revenue declined from $9 million to $6.6 million year-over-year, reflecting softer demand in the region, which could impact overall growth.
Margin Risk from Tariffs: While tariff mitigation efforts have been effective, there is ongoing margin risk for the balance of the year as the full impact of tariffs is felt.
You have reached the limit. Sign up to access full content
Get started
Guidance & Outlook
Emerging Data Center Market Opportunity: Thermon launched the new Pontus and Poseidon load banks on July 28, 2025, to serve the growing demand for liquid load banks in data centers. The market for liquid load banks is expected to grow from $84 million in 2024 to $386 million in 2032, representing a 21% CAGR. This shift is driven by the transition from air to liquid cooling in data centers, with Thermon anticipating meaningful growth in this segment.
Rail and Transit Market Growth: The Infrastructure Investment and Jobs Act has created a favorable demand environment for public transit and passenger rail systems. Thermon has seen its rail and transit backlog double over the last 12 months and is deploying capital to expand capacity to support this growth.
F.A.T.I. Acquisition and Electrification Market: The F.A.T.I. acquisition positions Thermon to capitalize on the growing electrification market in Europe. The backlog for F.A.T.I. has doubled in the last six months, and the company sees a solid pipeline of high-probability opportunities in this market.
Revenue Guidance for Fiscal 2026: Thermon expects revenue in the range of $495 million to $535 million for fiscal 2026, supported by a robust backlog and strong order trends.
Adjusted EBITDA Guidance for Fiscal 2026: The company projects adjusted EBITDA in the range of $104 million to $114 million for fiscal 2026.
Order and Backlog Trends: Thermon's backlog at the end of Q1 fiscal 2026 was up 27% year-over-year, and the total bid pipeline increased by 43%, driven by activity in key markets such as chemical, petrochemical, power and nuclear, LNG, and renewables.
Gross Margin and Tariff Mitigation: Gross margin improved to 44.1% in Q1 fiscal 2026, up from 43.8% in the prior year. The company implemented tariff mitigation measures, including prebuying materials, shifting sourcing and production, and price increases, to offset tariff impacts.
You have reached the limit. Sign up to access full content
Get started
Shareholder Return Plan
Share Repurchase Program: During the quarter, we returned nearly $10 million in capital through our share repurchase program. We will continue balancing capital allocation between opportunistic share repurchases and growth investments with a focus on driving returns for our shareholders. In May, we refreshed our repurchase authorization back to $50 million, with $44.5 million remaining under the current authorization. Since the start of fiscal 2025, we have repurchased $30 million in shares.
You have reached the limit. Sign up to access full content
Get started
Key Q&A
Q:What caused the production delays and when will the delayed orders ship?
A:The production delays were caused by a capital improvement project that took longer than anticipated and supply chain disruptions. The capital project is now fully operational, and the supply chain issues have been resolved. The delayed revenues are expected to convert in Q2 and the balance of the year.
Q:What portion of the $10 million in delayed revenue is associated with the capital improvement delay?
A:Approximately 60% of the $10 million in delayed revenue is associated with the supply chain disruptions and the capital improvement project. The remaining 40% is related to project execution and timing.
Q:Can you describe the liquid load bank product and its market opportunity?
A:The liquid load bank product is based on boiler technology and is used to test the cooling systems and electrical power distribution systems in liquid-cooled data centers. The product addresses the shift from air-cooled to liquid-cooled systems. The company expects to build a 20%-25% market share in this growing market, with the pipeline of opportunities still in the early stages.
Q:What are the gross margin expectations for the next quarter and the rest of the year?
A:Gross margins are expected to face headwinds in Q2 but improve in the back half of the year as new pricing takes effect. The company aims to offset tariff impacts and maintain gross margins around 44.8% by year-end.
Q:What is driving strong demand at F.A.T.I., and how has the backlog changed?
A:Strong demand at F.A.T.I. is driven by electrification opportunities in Europe and the Middle East, as well as LNG export facilities. The backlog has doubled since October 2 of the previous year, with Q1 bookings exceeding $17 million.
Q:What are the capital allocation priorities, and is there any update on M&A or share buybacks?
A:The company is focused on M&A opportunities that complement its strategy, with an active pipeline. Share buybacks will continue if no attractive M&A opportunities arise. Debt reduction is a lower priority due to a low debt-to-EBITDA ratio of 1.0x.
Q:What is the pipeline for large heat trace projects, and how is the backlog performing?
A:The pipeline for large heat trace projects is robust, with backlog up 27% year-over-year (13% organically). The company has secured orders in rail, transit, LNG, and downstream oil. Revenue distribution is expected to be more typical, with 44%-45% in H1 and 55%-56% in H2.
Q:What is the timeline and go-to-market strategy for the liquid load bank product in data centers?
A:The liquid load bank product is expected to generate revenues in the back half of the year and build backlog into fiscal '27. The company is going direct globally but is also exploring partnerships in the rental and technology space.
Q:Who are the potential customers for the liquid load bank product, and how is it used?
A:Potential customers include data centers, HVAC contractors, and rental channels. The product can be installed permanently for ongoing testing or used temporarily during start-up and commissioning phases. Data centers may require hundreds of units.
Q:What is the competitive landscape for the liquid load bank product?
A:The market for liquid load banks is nascent, with few global competitors. Traditional resistive and inductive load banks focus on power distribution testing, while the liquid load bank also tests thermal loads, addressing the needs of liquid-cooled data centers.
Q:When will meaningful revenues from the liquid load bank product be realized?
A:Meaningful revenues are expected in the back half of the year, with the company planning to highlight progress as the pipeline develops and orders are closed.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the exact timing of when meaningful revenues from the liquid load bank product would be realized, only stating that it would begin in the back half of the year and build into fiscal '27. Additionally, while discussing the M&A pipeline, no specific opportunities or timelines were disclosed, and the response remained general.
You have reached the limit. Sign up to access full content
Get started
Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Capital
Conference
FATI acquisition
FATI revenue
Inc
Investor Relations
LLC Research
LNG
President FPA
Research Division
SGA
Schott
Slide
Unidentified
action
authorization
backlog conversion
backlog month
center market
contribution FATI
decrease decline
delay
electrification market
enhancement
geography
heater
load bank
margin improvement
market Europe
material
mitigation measure
mix tariff
opportunity FATI
positioning
project timing
reminder
schedule
tariff mitigation
THR Transcript
Thermon Group Holdings, Inc. (THR) Q3 2026 Earnings Call Transcript
Positive2-5
The earnings call summary and Q&A reveal strong financial performance, optimistic guidance, and strategic growth initiatives. The company reported record revenue, improved margins, and increased backlog, indicating robust business momentum. Positive developments include raised revenue and EBITDA guidance, strong market positioning in data centers and medium voltage heaters, and healthy cash flow. The Q&A section highlights management's transparency and strategic focus on growth, with no negative surprises. Given the company's small-cap status, these positive factors are likely to result in a stock price increase of 2% to 8% over the next two weeks.
Thermon Group Holdings, Inc. (THR) Q2 2026 Earnings Call Transcript
Positive11-6
Thermon's earnings call highlights strong financial performance with a 15% revenue increase, improved margins, and robust backlog growth. The company is capitalizing on emerging markets like data centers and LNG, with a 41% increase in large project revenue. The share repurchase plan further boosts shareholder confidence. Although there's some uncertainty in project timing, the overall outlook is positive, supported by strategic growth initiatives and financial flexibility. Given Thermon's small-cap status, the stock is likely to react positively, with a predicted movement of 2% to 8% over the next two weeks.
Thermon Group Holdings, Inc. (THR) Q1 2026 Earnings Call Transcript
Unknown8-8
The earnings call presents a mixed picture. Financial performance shows some strengths like a strong balance sheet and increased backlog, but orders are down. Guidance indicates modest growth but declining margins due to tariffs. The Q&A reveals resolved production delays and potential in new products, yet lacks specifics on timelines, causing uncertainty. The market cap suggests moderate volatility. Overall, the sentiment is neutral, with no strong catalysts for significant short-term stock price movement.
Thermon Group Holdings, Inc. (NYSE:THR) Q4 2025 Earnings Call Transcript
Positive5-23
The earnings call revealed strong financial performance with EPS and revenue beating expectations, a significant backlog increase, and a positive book-to-bill ratio. Despite challenges such as tariff impacts and a decline in large capital projects, the company maintained optimistic guidance. The share repurchase program and debt repayments further bolster shareholder confidence. While some uncertainties remain, particularly regarding tariffs, the overall sentiment is positive. Considering the small-cap market cap, a positive stock price movement of 2% to 8% is anticipated.
THR Slides
THR Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
How soon is the transcript available after the earnings call ends?
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
Is the transcript edited or altered in any way?
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
