Executive Summary
Thermon reported a solid QQ2 2025 performance driven by the contribution of recently acquired Vapor Power and ongoing cost discipline, against a backdrop of a softer large-project environment. Revenue of 178.38 million included Vapor Power revenue of 12.1 million, with organic revenue excluding Vapor Power down about 17% year over year due to weakness in large project activity, while OpEx revenues showed resilience and higher margins. The quarter delivered Adjusted EBITDA of 23.8 million (margin 20.8%), and net income of 9.49 million (net margin 5.3%), reflecting a favorable mix shift toward recurring OpEx revenues that historically carry higher gross margins. Backlog rose 29% year over year to 214.9 million, with organic backlog up 3%, and orders advanced 13% to 131.1 million (organic +3%). Management emphasized continued diversification away from oil and gas, with diversified end-market orders above 70% and a pipeline exceeding 1.2 billion, including roughly 320 million of decarbonization opportunities. The company strengthened its growth trajectory with the close of the F.A.T.I. acquisition (Italy) and the ongoing integration of Vapor Power. In line with strategic objectives, Thermon reaffirmed capital discipline and released full-year 2025 guidance: revenue of 495–515 million, Adjusted EBITDA of 105–110 million, and Adjusted EPS of 1.77–1.89. Freely available cash flow remained robust at 6.7 million in the quarter and over 15 million in the first half of fiscal 2025, with net leverage of about 1.3x. Looking ahead, management pointed to nuclear and data-center related opportunities and a broader energy-transition/infra spend tailwind, while noting continued sensitivity to large-project timing. Overall, Thermon’s results support a view of a durable, high-margin aftermarket/MRO-centric business complemented by strategic acquisitions and a growing pipeline of large, multi-year projects that could unlock meaningful upside as capital spending normalizes.
Key Performance Indicators
QoQ: -5.54% | YoY:-29.89%
QoQ: 11.55% | YoY:-35.55%
QoQ: 12.00% | YoY:-36.36%
Key Insights
Revenue: 178.384 million in QQ2 2025; Gross profit: 50.912 million; Gross margin: 28.54%; Operating income: 15.203 million; Operating margin: 8.52%; EBITDA: 21.340 million; EBITDA margin: 11.96%; Adjusted EBITDA: 23.8 million; Adjusted EBITDA margin: 20.8%; Net income: 9.494 million; Net margin: 5.32%; Earnings per share (EPS): 0.28; Weighted average shares (basic/diluted): 33.79m / 34.14m; Backlog: 214.9 million (up 29% YoY); Organic backlog growth: 3%; Orders: 131.1 million (up 13% YoY; organi...
Financial Highlights
Revenue: 178.384 million in QQ2 2025; Gross profit: 50.912 million; Gross margin: 28.54%; Operating income: 15.203 million; Operating margin: 8.52%; EBITDA: 21.340 million; EBITDA margin: 11.96%; Adjusted EBITDA: 23.8 million; Adjusted EBITDA margin: 20.8%; Net income: 9.494 million; Net margin: 5.32%; Earnings per share (EPS): 0.28; Weighted average shares (basic/diluted): 33.79m / 34.14m; Backlog: 214.9 million (up 29% YoY); Organic backlog growth: 3%; Orders: 131.1 million (up 13% YoY; organic +3%); Vapor Power contribution: 12.1 million of QQ2 revenue; Large project revenue: 17.5 million (down 51% YoY); OpEx revenues (recurring) vs. large projects: OpEx revenues 97.2 million (up 10% YoY; ex Vapor Power down 3.5%); Free cash flow: 6.7 million in the quarter; Free cash flow (TTM first half) ≈ 15 million; Cash at end of period: 52.698 million; Net debt: 142.221 million; Net leverage: 1.3x; Net working capital: 31.7% of sales; Capex: 1.862 million; Debt repayment: 3.0 million in the quarter; Backlog mix: Large project ~20% of total; OpEx revenues dominate trailing-12-month revenue (>80%); Geographic mix: US and LAM weakness, Canada up 2%; Liquidity and capital structure: cash and liquidity ≈ 129.8 million; Guidance: Revenue 495–515 million; Adj EBITDA 105–110 million; Adj EPS 1.77–1.89; Acquisition impact: Vapor Power and F.A.T.I. contribute to revenue and mix; Growth drivers: diversified end-markets, decarbonization pipeline (~320 million within a 1.2 billion opportunity set).
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
178.38M |
44.25% |
54.95% |
| Gross Profit |
50.91M |
-6.51% |
8.24% |
| Operating Income |
15.20M |
-29.89% |
-5.54% |
| Net Income |
9.49M |
-35.55% |
11.55% |
| EPS |
0.28 |
-36.36% |
12.00% |
Key Financial Ratios
operatingProfitMargin
8.52%
operatingCashFlowPerShare
$0.25
freeCashFlowPerShare
$0.2
Management Commentary
- Strategy and acquisitions: Bruce Thames highlights strategic acquisitions as core to growth: Vapor Power integration “is going well and we’re pleased with the strong level of market demand”; F.A.T.I. acquisition completed to expand geographic footprint in Europe and the Eastern Hemisphere. Quote in transcript: “Since the start of the calendar year, we’ve acquired Vapor Power… Just last month we announced the acquisition of F.A.T.I., significantly expanding our geographic footprint in the Eastern Hemisphere.” Significance: Broadens Thermon’s end-market exposure, improves the mix toward electrification/decarbonization, and enhances capacity in Europe.
- Orders, backlog, and mix: Organic orders +3% and total orders +13% in QQ2 2025; backlog up 29% YoY to 214.9m; organic backlog up 3%; decarbonization bookings +6% YoY; quotes: “orders up nearly 13% on a reported basis… organic book-to-bill of almost 1.17x… backlog increased 29%… organic backlog up 3%.” Significance: Improves revenue visibility and supports margin resilience through a stable OpEx revenue base.
- Diversification and end-market exposure: Thermon reiterated a goal of at least 70% of revenues from diversified end markets by FY2026; more than 70% of orders from diversified end markets in QQ2 2025; decarbonization opportunities valued at roughly 320m within a 1.2b pipeline. Significance: Reduces cyclicality and provides downside protection in oil/gas cycles.
- Large-project dynamics and market outlook: Despite a softer large-project environment, Thermon observed movement in some projects (e.g., a large transit order >$8m; carbon capture/petrochemical project in the pipeline). Management cautioned that timing remains extended into 2026, with backlog transitioning from engineering to execution. Quote: “some signs of movement in large capital projects… a large multi-year transit order in excess of $8 million… decarbonization opportunities.” Significance: Indicates potential upside in late 2025–2026; execution risk remains a near-term headwind.
- Operational efficiency and cost discipline: Rail/transit production consolidation delivering near-term savings; forecast annualized savings of $5.7 million with >$4 million realized in fiscal 2025. Quote: “consolidation… on track to achieve our targeted $5.7 million in annualized savings. We continue to expect just over $4 million in realized savings during fiscal 2025.” Significance: Supports profitability in a weak large-project cycle.
- Nuclear energy market and energy transition: Nuclear market as a growth vector with a large electrode boiler example and potential SMR opportunities; Thermon frames nuclear/refurbishment opportunities as a growth vector within the decarbonization agenda. Significance: Opens a new near- to mid-term market segment beyond traditional oil/gas and petrochem.
- Financial discipline and liquidity: CFO Jan Schott emphasized strong liquidity and free cash flow generation; net leverage ~1.3x; runway for acquisitions and share repurchases; quarterly free cash flow of $6.7 million and H1 free cash flow of ≈$15 million; backstopped by a disciplined balance sheet. Quote: “Free cash flow was 6.7 million in the quarter, an improvement of $6.1 million versus last year… net leverage is down to 1.3x.” Significance: Supports the investment thesis in acquisitions and buybacks while maintaining a strong liquidity posture.
“Since the start of the calendar year, we've acquired Vapor Power, which increased our exposure to more diverse end markets and electrification. This integration is going well and we're pleased with the strong level of market demand that we're seeing for these products.”
— Bruce Thames
“The pipeline of opportunities has now grown to over 1.2 billion, with roughly 320 million in decarbonization opportunities… we are well-positioned to benefit as large project spending trends improve.”
— Bruce Thames
Forward Guidance
Management updated full-year 2025 guidance to reflect ongoing large-project timing delays. Forecasts: Revenue of 495–515 million (including acquisitions), Adjusted EBITDA of 105–110 million, and Adjusted EPS of 1.77–1.89. The company highlighted continued emphasis on operational excellence, cost-of-revenue management, and a plan for modest incremental debt paydown of $20–$30 million in fiscal 2025 along with opportunistic share repurchases. Assessment: The guidance is plausible given the backlog growth (backlog 214.9m, organic +3%), a diversified end-market base (>70%), and the Vapor Power capacity to contribute roughly $55–$57 million in annual revenue (expected range). Risks to guidance include: (1) slower-than-expected conversion of backlog into revenue due to continued project delays or execution risk in the Vapor Power expansion, (2) integration costs and potential margin drag from F.A.T.I. in the near term, (3) macro headwinds in oil/gas exposure (~about 30% of revenue historically) and potential policy shifts affecting capex cycles, (4) geopolitical and supply-chain disruptions that could affect lead times. Key monitoring points for investors: capacity expansion for Vapor Power, pace of large-project awards, decarbonization project win rates, and the evolution of the oil/gas mix as policy and economics evolve.