Executive Summary
Thermon Group Holdings (THR) reported QQ3 2025 revenue of $134.4 million, down 1.5% year over year, as large-capital-ex expenditure (CapEx) projects remained pressurized even as OpEx-revenue and short-cycle work provided resilience. Management emphasized a pivot to a more stable, margin-rich mix driven by OpEx revenue and a growing installed base, which supported an adjusted EBITDA margin of 23.7% (quarter) and an overall EBITDA trajectory that surpassed prior-year levels despite a small top-line decline. Backlog grew meaningfully, reaching approximately $235.6 million at quarter-end, up 48% versus the prior year, with organic backlog up 9% excluding Vapor Power and ThoughtView acquisitions. The company generated $8.5 million of quarterly free cash flow, and year-to-date free cash flow reached about $24 million, enabling debt paydown and a net leverage of roughly 1.1x. Thermon also reinforced a disciplined capital allocation approach, including a $6.2 million share repurchase and roughly $43 million remaining under a $50 million program.
Management maintained full-year 2025 guidance: revenue of $495–$515 million, adjusted EBITDA of $105–$110 million, and adjusted EPS of $1.77–$1.89. Tariffs remain an uncertain variable not baked into guidance, with management noting the importance of being close to customers and a multi-market footprint to hedge against trade frictions. Looking ahead, Thermon outlined a strategic path toward FY26 targets (roughly $600–$700 million in revenue, ~24% adjusted EBITDA margin, and at least 70% of revenue from diverse markets), acknowledging external macro and M&A timing as key variables.
Overall, Thermon’s QQ3 performance reinforces a constructive investment thesis: (1) a higher-margin, recurring-revenue backbone via OpEx-centric sales and MRO exposure; (2) a robust backlog with improving visibility amid broad-based order momentum; (3) a strong balance sheet with ample liquidity and low leverage; and (4) a compelling growth narrative supported by secular themes (onshoring, electrification, decarbonization) and data-center cooling opportunities. Investors should monitor tariff dynamics, large-capex cycle recovery, capacity execution on Vapor Power/ThoughtView, and progress toward the FY26 diversification targets.
Key Performance Indicators
QoQ: -24.68% | YoY:-37.64%
Key Insights
Revenue: $134.4 million in QQ3 2025, down 1.5% YoY; Organic ex acquisitions declined about 11% YoY as large project activity softened.
Gross Profit: $62.12 million; Gross margin ~46.2% (46.2% reported).
Operating Income: $27.69 million; OpInc margin ~20.6%.
EBITDA: $33.18 million; Adjusted EBITDA margin 23.7% (vs 22.5% prior year).
Net Income: $18.54 million; Net margin ~13.8%.
EPS (GAAP): $0.55; EPS (diluted): $0.54.
Orders: $139 million, up 11.4% YoY.
Backlog: $235.6 million, up 48% vs ...
Financial Highlights
Revenue: $134.4 million in QQ3 2025, down 1.5% YoY; Organic ex acquisitions declined about 11% YoY as large project activity softened.
Gross Profit: $62.12 million; Gross margin ~46.2% (46.2% reported).
Operating Income: $27.69 million; OpInc margin ~20.6%.
EBITDA: $33.18 million; Adjusted EBITDA margin 23.7% (vs 22.5% prior year).
Net Income: $18.54 million; Net margin ~13.8%.
EPS (GAAP): $0.55; EPS (diluted): $0.54.
Orders: $139 million, up 11.4% YoY.
Backlog: $235.6 million, up 48% vs Q1 last year; Organic backlog up ~9% excluding acquisitions.
Free Cash Flow: $8.5 million in the quarter; YTD FCF ~$24 million (up $3 million, +14%).
Cash and Liquidity: Cash at end of period ~$40.6 million; total liquidity ~$136 million. Net debt: ~$115–128 million; Net leverage ~1.1x.
Capital Allocation: Capex $1.4 million in QQ3; Share repurchases ~$6.2 million; remaining repurchase capacity ~$43 million under a $50 million program.
Guidance (FY2025): Revenue $495–$515 million; Adj EBITDA $105–$110 million; Adj EPS $1.77–$1.89 per share. Tariffs not baked into guidance.
Market Environment: Tariffs are fluid; LNG/oil & gas activity improving; data-center power demand and liquid-cooled data centers emerging as meaningful long-term growth vectors; diversified end-market exposure now ~70% of revenue by FY26 target.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
134.35M |
-37.64% |
-24.68% |
| Gross Profit |
62.12M |
8.21% |
22.02% |
| Operating Income |
27.69M |
29.08% |
82.11% |
| Net Income |
18.54M |
17.06% |
95.27% |
| EPS |
0.55 |
17.02% |
96.43% |
Key Financial Ratios
operatingProfitMargin
20.6%
operatingCashFlowPerShare
$0.29
freeCashFlowPerShare
$0.25
Management Commentary
- Management emphasized growth in OpEx-related revenue and margin capture, highlighted by an adjusted EBITDA margin of 23.7% in Q3 2025 and backlog expansion, underscoring more stable, profitable revenue streams. (Bruce Thames)
- The company noted solid order momentum with $139M in orders in the quarter, up 11.4% YoY, and backlog of $235.6M, up 48% vs. Q1 of last year, with organic backlog up 9% excluding acquisitions Vapor Power and ThoughtView. (Bruce Thames/Jan Schott)
- Tariffs present a key macro risk; Thermon’s co-location manufacturing footprint helps insulate, but the impact on customer sentiment remains uncertain. (Bruce Thames)
- LNG export permits lift and new administration policies are seen as catalysts for North American heavy-oil/gas and LNG-related CapEx, with potential upside in natural gas-fired and petrochemical projects. (Bruce Thames)
- Data-center cooling opportunities, including liquid-cooled designs, are highlighted as a growth vector, with speakers noting several orders totaling around $10 million in the nascent liquid-cooling market. (Bruce Thames)
- The management stressed disciplined capital allocation and ongoing M&A integration (Vapor Power and ThoughtView) as drivers of earnings quality and portfolio diversification. (Bruce Thames/Jan Schott)
"The third quarter was another period of solid execution by our global team, which resulted in continued strength in our OpEx-related revenue, bookings momentum, strong margin capture, and efficient free cash flow conversion."
— Bruce Thames
"Revenue in the third quarter was $134.4 million, a year-over-year decrease of 1.5%. Vapor Power and ThoughtView combined to contribute $13 million in revenue during the third quarter."
— Jan Schott
Forward Guidance
- FY2025 guidance remains intact: Revenue $495M–$515M, Adjusted EBITDA $105M–$110M, Adjusted EPS $1.77–$1.89. Management does not embed tariff impacts in the guidance, given tariff uncertainty.
- Management reaffirmed a longer-term FY26 plan targeting $600M–$700M in revenue, around 24% adjusted EBITDA margin, and at least 70% of revenue from diverse markets; timing depends on macro momentum and execution of M&A milestones.
- Near-term focus: further optimization of OpEx revenue mix and capacity expansion to convert backlog into revenue; replenish larger-capital-project pipeline as macro visibility improves; monitor tariff developments and potential onshoring benefits.
- Key monitoring factors for investors: (1) the pace of large CapEx project re-acceleration (oil & gas, LNG, petrochem, power/generation), (2) the contribution and ramp of Vapor Power and ThoughtView, (3) the trajectory of OpEx versus CapEx mix in revenue, (4) progress toward the FY26 70% diverse-market objective, and (5) tariff-related impact on customer sentiment and global supply chains.