EPS of $0.25 decreased by 24.2% from previous year
Gross margin of 40.9%
Net income of 8.51M
"We generated nearly 8% revenue growth during the first quarter which was driven largely by the contribution from our Vapor Power acquisition." - Bruce Thames
Thermon Group Holdings Inc (THR) Q1 FY2025 Results: Vapor Power Acceleration Drives Revenue, Diversified End Markets Strengthen Durable Cash Flow
Executive Summary
Thermon Group Holdings delivered a solid QQ1 2025 performance, anchored by the Vapor Power acquisition which contributed approximately $13.9 million of revenue and materially expanded the company’s top-line trajectory. Total revenue rose 8% year-over-year to $115.1 million, aided by Vapor Power, while organic revenue declined about 5% as large-capital projects remained weak. The company continued to pivot its mix toward OpEx (maintenance, repair, and other recurring spend), which accounted for roughly 85% of first-quarter revenue, contributing to a higher-margin revenue profile and more predictable cash flows. Excluding Vapor Power, OpEx revenues grew about 4% organically, underscoring Thermon’s deep-installed base and recurring revenue advantage. Backlog stood at $198.5 million, with organic backlog down about 10% excluding Vapor Power, reflecting a shift in mix toward OpEx-driven work that flows in and out of backlog more rapidly. Adjusted EBITDA was $23.2 million (margin 20.2%), supported by favorable mix toward higher-margin OpEx revenue, offset by higher labor content in certain contracts and ongoing investments in strategic initiatives. Free cash flow generated in the quarter was $8.8 million, and net debt declined to about $120–$133 million with a leverage ratio approximately 1.1x, highlighting Thermon’s rapid deleveraging post-Vapor Power integration. Management framed the results within a strategy of growing the installed base, broadening end-market exposure, and advancing decarbonization opportunities, which now total over $320 million in the sales pipeline (roughly 30% of total opportunities). Looking ahead, the company maintained full-year FY2025 guidance, projecting revenue of $527–$553 million (including Vapor Power revenue of $55–$59 million), adjusted EBITDA of $112–$120 million, and adjusted EPS of $1.90–$2.06, with revenue expected to skew to the back half of the year as large-project decisions normalize. In management commentary, Thermon highlighted a robust project pipeline, improving bid activity (book-to-bill turning positive for the first time in quarters), ongoing cost-savings from the manufacturing consolidation program, and a continued emphasis on MRO and diversified end markets as the core driver of earnings resilience. Investors should monitor the pace of large-capex project conversions, Vapor Power capacity expansion, decarbonization order flow, and the evolution of the M&A pipeline as catalysts for the FY26 target trajectory.
Key Performance Indicators
Revenue
115.13M
QoQ: -9.81% | YoY:7.71%
Gross Profit
47.04M
40.86% margin
QoQ: -3.94% | YoY:-0.58%
Operating Income
16.09M
QoQ: 3.25% | YoY:4.41%
Net Income
8.51M
QoQ: -15.59% | YoY:-22.19%
EPS
0.25
QoQ: -16.67% | YoY:-24.24%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $115.13 million, up 8.0% YoY; organic revenue down 5% ex-Vapor Power.
Large project revenue: $18.0 million, down 34% YoY; OpEx revenues: $98.0 million, up over 20% YoY; Excluding Vapor Power, OpEx revenues up 4% YoY.
Financial and operating metrics (QQ1 2025 vs. QQ1 2024):
- Revenue: $115.13 million, up 8.0% YoY; organic revenue down 5% ex-Vapor Power.
- Large project revenue: $18.0 million, down 34% YoY; OpEx revenues: $98.0 million, up over 20% YoY; Excluding Vapor Power, OpEx revenues up 4% YoY.
- Gross profit: $47.03 million; gross margin 40.9%.
- Adjusted EBITDA: $23.2 million; EBITDA margin 20.2%.
- Operating income: $16.09 million; operating margin 13.98%.
- Net income: $8.51 million; net margin 7.39%; earnings per share (basic/diluted): $0.25.
- Backlog: $198.5 million (ex-Vapor Power backlog $154.2 million; organic backlog down 10%).
- Orders: $127.2 million; YoY orders up 12%; organic orders down 5%.
- Free cash flow: $8.8 million; cash flow from operations: $12.66 million; capex: $3.89 million; free cash flow yield tied to operating cash flow.
- Net debt: approx. $120–$133 million; net leverage around 1.1x (below target 1.5–2x).
- Liquidity: total cash and availability approx. $141.8 million.
- Guidance (FY2025): Revenue $527–$553 million (Vapor Power included $55–$59 million); Adjusted EBITDA $112–$120 million; Adjusted EPS $1.90–$2.06; back-end weighted seasonality (57–59% in H2).
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
115.13M
7.71%
-9.81%
Gross Profit
47.04M
-0.58%
-3.94%
Operating Income
16.09M
4.41%
3.25%
Net Income
8.51M
-22.19%
-15.59%
EPS
0.25
-24.24%
-16.67%
Key Financial Ratios
currentRatio
2.61
grossProfitMargin
40.9%
operatingProfitMargin
14%
netProfitMargin
7.39%
returnOnAssets
1.12%
returnOnEquity
1.79%
debtEquityRatio
0.39
operatingCashFlowPerShare
$0.38
freeCashFlowPerShare
$0.26
priceToBookRatio
2.11
priceEarningsRatio
29.49
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management takeaways from the QQ1 2025 earnings call, grouped by theme:
- Strategy and growth pillars
- Bruce Thames: Revenue growth of nearly 8% driven largely by Vapor Power, with organic revenue down about 5% excluding Vapor Power. The company is leveraging an expanded installed base to drive OpEx revenue, which supports more stable and higher-margin earnings.
- Quote: We generated nearly 8% revenue growth during the first quarter which was driven largely by the contribution from our Vapor Power acquisition.
- Market mix and diversification
- Oil and gas exposure has diminished in importance; OpEx revenues now dominate (85% of revenues), with diversified end markets reaching around 70% of revenue on a trailing 12-month basis.
- Bruce: OpEx revenues rose to $98 million (85% of total), underscoring recurring revenue resilience.
- Quote: Our diversified end market exposure is helping us achieve greater stability across cycles.
- Pipeline, bookings, and backlog dynamics
- Book-to-bill turned positive for the first time in a while; pipeline >$1 billion; backlog rose sequentially but down YoY on organic basis due to Vapor Power backlog adjustments.
- Bruce: Pipeline of opportunities over $1 billion; backlog rose sequentially to $198.5 million (organic backlog down 10%).
- Decarbonization and strategic initiatives
- Decarbonization opportunities pipeline now >$320 million (roughly 30% of total), with $9 million in decarb orders in the quarter.
- Quote: Pipeline of decarbonization opportunities grow to now over $320 million, representing roughly 30% of the total.
- Vapor Power integration and capacity
- Vapor is expanding market coverage, with electrification opportunities (electrode boilers, electric resistance boilers) contributing to upside; capacity constraints are the near-term hurdle.
- Bruce: Capacity constraints are the current bottleneck; we are debottlenecking with Thermon Business System implementations in Vapor facilities.
- Quote: We’re seeing opportunities grow in electrification; scale is the biggest near-term challenge, not demand.
- Financial health and capital allocation
- Leverage declined to 1.1x post-Vapor integration; strong free cash flow supports debt paydown and growth investment; M&A pipeline remains robust (12–18 month actionable window).
- Greg Lucas: Net debt ~$120 million, with total liquidity $141.8 million; targeted debt paydown of $20–$40 million in FY2025.
- Quote: Leverage ratio of 1.1x, coming in nicely below our targeted range of 1.5 to 2x.
- Guidance and outlook
- Despite ongoing softness in large projects, Thermon maintains FY2025 guidance and expects OpEx to cushion revenue cyclicality; H2 revenue is expected to be more heavily weighted.
- Bruce: We remain focused on achieving our FY26 goals, with a back-end weighted revenue mix in FY2025 (57–59% in H2).
We generated nearly 8% revenue growth during the first quarter which was driven largely by the contribution from our Vapor Power acquisition.
— Bruce Thames
The pipeline of decarbonization opportunities grow to now over $320 million, representing roughly 30% of the total.
— Bruce Thames
Forward Guidance
Forecast and rationale for Thermon’s FY2025 and beyond:
- Revenue and margin trajectory: Guidance for FY2025 remains intact with revenue of $527–$553 million (including Vapor Power revenue of $55–$59 million), Adjusted EBITDA of $112–$120 million, and Adjusted EPS of $1.90–$2.06. Given OpEx-driven revenue is expanding, the company expects a more stable gross margin profile driven by higher OpEx mix and ongoing operational efficiency gains.
- Seasonal pattern and project cycle: Historically, 55–56% of revenue occurs in H2; Thermon now anticipates 57–59% in FY2025 as large-project timing normalizes and Insourcing/maintenance spend remains resilient.
- Vapor Power contributions and capacity: Vapor is expected to contribute meaningfully to revenue in FY2025; management recognizes capex may need to scale capacity in subsequent years if demand ramps faster than modeled.
- Decarbonization and end-market exposure: The decarbonization pipeline (> $320M) and LNG opportunities in North America should support long-term growth and margin expansion; as the installed-base expands, recurring OpEx revenue should continue to cushion earnings against oil-and-gas volatility.
- Risks to watch: Macro backdrop, elections, potential rate cuts timing, and project decision delays affecting large-capex spends; supply chain dynamics and Vapor capacity constraints could modulate near-term upside.
- Key factors for investors to monitor: (i) evolution of the large-project pipeline and win rates, (ii) Vapor Power capacity expansion and its impact on revenue/conversion efficiency, (iii) progression of the M&A pipeline and execution, (iv) decarbonization order flow and pricing, and (v) leverage trajectory and free cash flow conversion as a driver of shareholder value.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
THR Focus
40.86%
14.00%
1.79%
29.49%
HURC
21.90%
-3.61%
-0.73%
-23.71%
EPAC
51.40%
21.40%
5.46%
30.13%
NPO
41.20%
12.50%
0.09%
663.33%
OFLX
56.20%
20.10%
5.30%
43.13%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Thermon presents a cautiously constructive investment thesis anchored in a durable, high-margin, low-capital-intensity business with a growing recurring revenue fraction and a strong leverage position to fund growth. The Vapor Power integration accelerates the top-line trajectory, broadens the end-market mix, and enhances the addressable market for electrification and decarbonization solutions. The company’s FY2025 guidance remains achievable given the resilience of OpEx dollars, a diversified end-market mix, and a strong free cash flow profile that supports debt reduction and potential bolt-on acquisitions. Key catalysts include: (1) actualization of Vapor Power capacity enhancements and incremental volumes; (2) execution of decarbonization and LNG opportunities into revenue; (3) stabilization or acceleration of large-project awards leading to higher book-to-bill; and (4) ongoing M&A opportunities aligned with growth targets for FY26. Valuation should reflect the company’s improving mix, robust cash flow, and the optionality around the Vapor-powered expansion, with attention to how the large-project cycle and macro backdrop may influence timing of bookings and earnings in upcoming quarters.
Key Investment Factors
Growth Potential
Diversification into recurring OpEx revenue tied to a broad set of end-markets (chemicals, power, infrastructure, LNG) supports stable growth and better margin resilience. Vapor Power adds electric heating capabilities aligned with electrification and decarbonization trends, with a substantial addressable pipeline and potential for capacity-driven upside as supply chains scale.
Profitability Risk
Concentration in large project cycles and oil-and-gas volatility remains a sensitivity; organic backlog declined 10% YoY excluding Vapor, suggesting project timing risk persists. Capacity constraints at Vapor and potential capex needs could delay upside. Macro uncertainty (elections, rate paths) could delay large project decisions despite a healthy pipeline.
Financial Position
Solid liquidity position with ~$142 million in cash and availability; net debt around $120–$133 million and leverage ~1.1x, well below the targeted 1.5–2x range. This provides ample flexibility for growth via acquisitions and capex while maintaining strong free cash flow generation (4Q FY2025 guidance contemplates continued deleveraging).
SWOT Analysis
Strengths
Diversified end-market exposure reducing oil & gas reliance; diversified recurring OpEx revenue base (~85% of QQ1 revenue)
Vapor Power acquisition expanding addressable market and electrification capabilities