Thermon Group Holdings, Inc.

Greetings and welcome to the Thurmond Earnings Conference call for third quarter fiscal year 2023. At this time, all participants are in a listen-only mode. A brief 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. And as a reminder, this conference is being recorded. It is now my pleasure to introduce to you Yvonne Salem, Vice President of FP&A and Investor Relations. Thank you, Yvonne. You may begin.

Thank you, John. Good morning, and thank you for joining today's fiscal 2023 third quarter conference call. Earlier this morning, we issued an earnings press release, which has been filed with the SEC on Form 8K, and it's also available on the investor relations section of our website. Additionally, the slides for this conference call can be found in our IR website under News and Events, IR Calendar, Earnings Conference Call Q3 2023. 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 gap 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 might 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 might differ materially from those contemplated by these forward-looking statements, and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments, or otherwise, except as might be required by law. Now, I would like to introduce you our President and Chief Executive Officer for this opening remarks.

Thank you Yvonne and good morning everyone and thank you for joining us today. I wanted to begin by setting the stage with a quick overview of Thermon for those of you who may be new to the story. As a 68 year old company, we've been tested and proven resilient across many economic cycles. We're a world leader in providing safe, reliable, and innovative mission-critical industrial process heating solutions to customers in 85 countries from facilities on four continents. Our over 1,300 employees have an industry-leading safety record and are dedicated to creating value for our customers and by executing our long-term strategic plan, And I will provide a few examples of our strategy in action during this month's morning's update. I'd like to thank all of our employees for contributing to our very strong performance this quarter and for your ongoing commitment to . I would like to note that in the lower left of the page where you see revenue by type, for clarity and simplicity, beginning this quarter, we've changed how we're showing this data. We previously presented this data as point in time versus over time. Kevin Fox, our CFO, will provide more detail on this revised split of our sales and the rationale for doing so later in the presentation. On slide four, you can see our strategic. In order to create value for our shareholders over the long term, we focused on three key areas. First, our installed base. Second, diversification and decarbonization. And third, capital allocation from a very large global installed base, which provides significant opportunity to capture recurring revenue while driving growth across our traditional in-market verticals. We're driving additional growth through diversification into attractive adjacencies such as commercial, rail and transit, food and beverage, renewables, and other end markets. Our solutions also help enable the transition towards sustainable energy sources. We're expanding our digital solutions with products that utilize the industrial internet of things and support customer demand for productivity, reliability, efficiency, and safety enhancements. I will discuss digitization further on today's call while providing an update on our recent new product introductions, specifically looking at the launch duo. Because we are seeing a opportunity in decarbonization, our strategic priority is developing markets to capitalize on this larger opportunity with our existing technology. We see significant growth over the next few decades in more detail in a few moments. Finally, we're committed to disciplined capital allocation. Our current priorities include inorganic growth through acquisitions with returns weighted average cost of capital by year three and maintaining balance sheet strength through the cycle. We're seeing a large emerging market decarbonization. Energy use generates over 80% of gas emissions. As you can see here, heating represents roughly 50% of the energy consumption of the energy used for heat is from industrial sources. Today, 95% of the heating used in industry is from hydrocarbon-based heating sources with only 5% of as well as thermal energy storage is roughly 1.3 billion, which we believe is addressable with our existing technology. By 2030, we expect this market to more than double to 2.8 billion, growing at an anticipated 9.3% compounded annual growth rate. By 2050, this market is anticipated to grow to more than 15 billion globally. Today, we believe that Thermon has the electric resistance heating products and technology to address 80% of this global market. Going forward, we believe Thermon has the products, technology, and is well poised to capitalize on this rapidly growing market opportunity. Moving to slide six on enabling the energy transition and decarbonization. Here we have a couple of examples of many of the types of opportunities we are seeing in this space. In both examples, we're providing the heating technology for amine re-boilers as part of carbon capture and storage systems to reduce scope at a refinery in Canada and an agricultural project which includes ethanol and other processing plants across the US Midwest. While these represent just a couple of examples through three quarters, we have booked over $22 million in energy transition and decarbonization opportunities this year, up roughly 50% from the full year in FY22, with another quarter to go. Moving on to slide seven with our new product development. I'm very pleased to announce the latest addition of the Genesis Duo to our market-leading digital platform shown here on the right side of this slide. This new two-channel controller has features that have never before been seen in the industry in a controller of this size. It offers advanced control features with the ability to track historical trends, is IIoT-enabled with self-healing mesh communications, has an intuitive touchscreen interface, and a multifunction light ring that provides visual feedback to operators. These units can be pipe-mounted, decentralizing control, and lowering total installed costs for operators. On the left side of the slide, you can see examples of new products launched over the last five years. Our new product development efforts have resulted in a robust Vitality Index representing 28% of year-to-date revenues. This pipeline of new products has created a real competitive advantage for ThermOn with our controls and communications in combination with the most advanced heating technologies for demanding applications. Turning now to slide eight for an update on diversification. You can see here examples of recent wins illustrating our continued momentum across three of our targeted markets for diversification, including commercial, food and beverage, and rail and transit. In commercial, we see city ordinances driving the conversion of hydrocarbon-fired boilers to electric. In rail and transit, we're on pace to achieve 50% year-over-year growth with the introduction of the new hubby hellfire blizzard duty. The recently passed U.S. Inflation Reduction Act is driving investments in the rail and transit sector that we believe will benefit our business going forward. Finally, in the food and beverage market, we want a $2.4 million opportunity in a seed oil plant in North Carolina, and we expect revenues in our food and beverage in-market to more than double in fiscal 2023 versus the prior year. On slide nine, looking at the external environment, I would like to again emphasize the progress that we've made against our in-market diversification strategy. Here we see an updated chart with in-market mix for the trailing 12-month period ending December 31st of 2022. Approximately 57% of our revenue came from non-oil and gas in markets compared to roughly 45% in our fiscal year 17. In fiscal year 23, we are seeing a strong recovery in the oil and gas sector that is largely focused on maintenance. combined with efforts to increase throughput and reliability on the installed base. In fact, 91% of sales to the upstream oil market are recurring product sales to support and maintain the installed base. We're also seeing continued progress in growing our diversity in markets and are working diligently towards our long-term goal of achieving 65% to 70% non-oil and gas revenue by the end of our fiscal year 2026. We continue to see strength across the majority of our end markets. We believe the strong maintenance environment in chemicals and petrochemicals, combined with customer demand for end-use plastics, enables those markets to grow over the longer term. The headwinds from margin pressures and increased European energy prices are partially offset by the cheaper and abundant feedstock in the U.S. In the power sector, we've seen growth moderate after revenues doubled in fiscal year 22 following winter storm Yuri. However, we believe the mid- to long-term drivers remain intact, which include electrification, renewable energy, and the rise of the middle class in Asia. Several of the verticals that make up the strategic adjacencies category continue to experience growth including renewables such as hydrogen, biofuels, and nuclear power. As mentioned earlier, we have secured over $22 million in orders this fiscal year to date, up 50% compared to the full year in fiscal year 22. Overall, while we're not immune to impact from ongoing macroeconomic turbulence, we believe the breadth of our solutions combined with our diversification across a wide variety of geographic and in markets continues to serve us well. Turning now to our results for the third quarter of fiscal year 2023 on slide 10. Thurmond had another quarter of outperformance driven by our team's outstanding execution, despite ongoing macroeconomic challenges and continuing geopolitical uncertainty in Europe. We achieved record third quarter adjusted earnings per share, due to strong performance in North America, which benefited from the ongoing recovery in the oil and gas industry combined with an improving supply chain. We've also been able to offset increased material and transportation costs with strong price realizations while diligently managing controllable costs and continuing to make strategic investments to grow our business over the longer term. For example, The integration of our power blanket acquisition announced during the first quarter of this fiscal year remains on track and produced $8 million of revenue at attractive margins during the quarter. Revenue of $122.1 million was up 21% year-over-year. Adjusted EBITDA increased over 45% year-over-year to $29.8 million with a margin of 24.4% and increase of 390 basis points. Free cash flow of $17.6 million for the quarter was driven by strong earnings and customer collections. Adjusted EPS was a record 52 cents a share, an increase of more than 40% from the prior year period. Given the strength in our backlog and incoming orders, we're raising revenue and adjusted EPS guidance for the full fiscal year. On slide 11, you can see that our orders and backlog continue to remain strong. We're very pleased with the momentum in the business. This quarter, we achieved record incoming orders of $126 million, up 40% year over year, while bookings grew 22% on a trailing 12-month basis. Our book-to-bill was 1.03 times. This represents the ninth quarter of the last 12 where we have achieved a positive book to build. Our backlog of 160.7 million is at record levels and was up 16% year-over-year, excluding FX impacts. With that, I'd like to turn the call over to Kevin, our CFO, for a more in-depth review of our financial results. Kevin?