Thermon Group Holdings, Inc.

Greetings, and welcome to the Thurmond Group Holdings first quarter fiscal 2022 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Kevin Fox, Chief Financial Officer. Please go ahead.

Thank you, Brock. Good morning, and thank you for joining today's fiscal 2022 first quarter conference call. Earlier this morning, we issued an earnings press release, which has been filed with the SEC on Form 8K and is also available on the investor relations section of our website. Additionally, the slides for this conference call can be found under our IR website, at news events, IR calendar, earnings conference call Q1 2022. During the call, we will discuss some items that do not conform to generally accepted accounting principles. We have reconciled those items to the most comparable GAAP measures in the tables at the end of the earnings press release. These non-GAAP measures should be considered in addition to and not as a substitute for measures of financial performance reported in accordance with GAAP. I'd like to remind you that during this call, we may make certain forward-looking statements regarding our company. Please refer to our annual report and most recent quarterly report filed with the SEC for more information regarding our forward-looking statements, including the risks and uncertainties that could impact our future results. Our actual results may differ materially from those contemplated by these forward-looking statements, and we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as may be required by law. With that, we will turn to the opening comments from Bruce Thames, our President and Chief Executive Officer.

Thank you, Kevin, and good morning. We hope everyone listening is staying safe and in good health. We appreciate you joining our conference call and for your interest in Thermon. Kevin Fox, our CFO, is here to provide additional details on our Q1 financial performance following my remarks. Turning now to the first quarter results. Overall, we're very pleased with the first quarter results the team delivered to start the fiscal year. We were particularly pleased with a strong order growth of 19% year over year in the quarter, which was reflected in the top line growth of over 25% over Q1 fiscal year 2021. We're also pleased to see the results of our efforts to realign the cost structure to the incoming level of business with SG&A down 16% on an adjusted basis in the quarter and 22 percent on a trailing 12-month basis. Gross margins in the quarter fell below expectations for a number of reasons. First, we've seen labor shortages and supply chain disruptions negatively impact volume and absorption in the quarter. Secondly, we have seen higher costs due to material price inflation and material and or supplier substitutions as the team has tactfully managed in a dynamic and often unpredictable environment. These issues combine to negatively impact gross margins by approximately 390 basis points in the quarter. As a positive note, we have seen real progress on the labor front and have put supply chain strategies in place to address the disruptions we've seen and can anticipate. We believe these actions, combined with price increases that were enacted in late Q1 will begin to have a material impact late in Q2 and fully offset these costs in the second half of this year. Despite the lower gross margins, the team delivered $9.7 million in adjusted EBITDA, up almost 600% from prior year on $71.2 million in revenue, demonstrating very strong operating leverage in the quarter. Adjusted EPS was $0.07 per share in the quarter, up 18 cents a share or 164 percent from the prior year quarter. Just as a note here, we continue to invest in our strategic initiatives to drive growth. I'll cover this in more detail later in the presentation. Turning now to a discussion of our end markets. We're seeing positive momentum in our end markets that began late in Q4 of fiscal year 21 and is cause for cautious optimism. While we have not yet returned to pre-COVID levels of activity, we experienced a solid 35 percent improvement in our Q1 quick-turn business over the prior year quarter as maintenance spending is showing positive signs of recovery, particularly in North America. As we look to the chart on page four of the presentation, I would like to reinforce a couple of key points. First, roughly 52 percent of our end markets are outside of the oil and gas sector. Second, greater than 55% of our end markets are tied to the chemical, petrochemical, natural gas, and power markets. With natural gas as a bridge fuel, the chemical, petrochemical, and power markets being driven by the emergence of the middle class in developing economies, the growth outlook across these sectors is much more robust than upstream oil, which now represents just 16% of our revenues. While expectations for capital spending this fiscal year have been low, we are seeing positive quotation activity with a number of capital projects moving toward final investment decisions, particularly in the downstream and petrochemical sectors. With numerous projects in various stages of planning and execution, we are also well positioned to capitalize on a downstream shift to biofuels as evidenced by over 4 million in capital projects currently in our backlog. In addition, we see significant opportunities in more diverse end markets with favorable growth potential, such as rail and transit, commercial, and food and beverage in the coming years. At this time, approximately 13% of our backlog is related to multi-year transit projects in North America. We expect the infrastructure bill currently in Congress, if passed, to create a tailwind in this sector. Moving on to slide five of the presentation. While down 14 percent from the prior year period on a trailing 12-month basis, we have reached an inflection point with orders up 19 percent in the quarter over the prior year period and a positive book to bill, resulting in backlog growth of 5 percent year over year. As a note, we have had a positive book to bill in five of the last six quarters. Increases in quotation activity, particularly in larger capital projects, is a very positive sign that a capital cycle could be building that will likely translate into bookings later in the fiscal year with execution beginning in fiscal year 23. We are also seeing some positive effects following winter storm Uri in Texas and along the Gulf Coast. as customers in the power and natural gas sectors move beyond initial emergency repairs and begin to address winterization in advance of the next heating season. With the passage of Texas State Senate Bill 3 into law, now mandating winterization of the state power and natural gas infrastructure, we expect a positive impact to maintenance activities this fall and for years to come. I would now like to hand it over to Kevin Fox, our CFO, provide a more detailed review of the quarter and year financial results. Kevin?