Thermon Group Holdings, Inc.

Hello and welcome to the Thermon Q4 2023 earnings conference call and webcast. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may press star one at any time to be placed into question queue. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to your host, Yvonne Salem, Vice President, FP&A and Investor Relations. Please go ahead, Yvonne.

Thank you, Kevin. Good morning, and thank you for joining today's fiscal 2023 fourth 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 on the news and then IR calendar earnings conference call Q4 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 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 recorded in accordance with GAAP. I would like to remind you that during this call, we may take 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 it might be required by law. Now, I would like to introduce Bruce Sainz, our President and Chief Executive Officer, for his opening remarks.

Well, thank you, Yvonne. Good morning, everyone, and thank you for joining us today. Before we talk about a record quarter and year, I'd like to start today by setting the stage with a brief overview of Thermon. 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 mission critical industrial process heating solutions to customers in 85 countries from facilities on four continents. Our almost 1,400 employees have an industry leading safety record and are dedicated to creating value for our customers by executing our long-term strategic plan. And I'd like to thank all of them for contributing to our record performance in fiscal 2023. I'm looking forward to seeing what we can achieve together in the years to come. On slide four, you can see our strategic pillars. In order to create long-term value for our shareholders, we remain focused on three key areas. First, profitably growing our installed base. Second, diversification, digitization, and decarbonization. And third, disciplined capital allocation. In our first pillar, we benefit from a very large global installed base, which provides a significant opportunity to capture recurring revenues while driving growth across our traditional market verticals. In our second strategic pillar, We're driving additional growth through expansion into attractive adjacencies across diverse end markets. Our solutions are also enabling decarbonization through electrification and the long-term transition towards sustainable energy sources. In addition, we're expanding our digital solutions with products that utilize the industrial internet of things and support customer demand for enhanced productivity, reliability, efficiency, and safety. Underpinning our first two strategic pillars is our commitment to disciplined capital allocation. Given the strength of our balance sheet, our current priorities include inorganic growth through bolt-on acquisitions with returns that exceed WAC by year three and, when appropriate, returning capital to shareholders. Turning to slide five and an update on our diversification efforts. As you can see, we continue to make solid progress on the strategic diversification of our end markets, with ongoing wins across key markets, such as rail and transit, where we saw growth of 29 percent in the year. Commercial was also up 29 percent, and food and beverage grew 110 percent in the year. In addition, we're seeing traction in other selected markets linked to long-term secular growth trends. In the alternative energy space, our revenue from nuclear power is up 16%, and our revenue from biofuels and green diesel is up 245%. We've made inroads in the semiconductor end market with revenue up 15%, and our revenue from biotechnology end market is up over 200%. While the individual contributions from each of these market sectors is small today, in aggregate they represent over 20 million of revenue in fiscal 2023, and we believe that the breadth of the total addressable market combined with our ability to grow share represents a solid growth opportunity in the years ahead. Moving now to slide six on our digitization strategy. Last quarter, we introduced you to the Genesis Duo, the latest addition to our market-leading digital platform, the Genesis Network. The platform provides customers with full operational awareness and supervisory control over their heat trace systems using industry-leading wireless mesh technology that connects all heat trace controllers back to the control room. This enables greater operational efficiency through increased uptime with fewer maintenance hours and costs. This quarter, as we look back at the results of fiscal 2023, it's readily apparent that the benefits of this innovative digital platform are resonating with our customers. Adoption is increasingly accelerating with a 350% year-over-year increase in new circuits in fiscal 2023 and a growing pipeline of opportunities. Using customer feedback, we continue to innovate the Genesys network to provide expanded functionality for our customers with the latest software update released in April. Turning now to slide seven on enabling the energy transition. Here you can see the rapid growth of our pipeline of opportunities and wins for projects that help enable the energy transition. This is an increasingly important part of our business, representing 8% of incoming orders in fiscal year 23, as our products and solutions support our customers in achieving their sustainability goals and contribute to overall decarbonization. On the right side of the slide, we have selected examples of our recent wins. Our innovative products and solutions are used across a variety of applications, from renewable fuels to lithium ion batteries, and from carbon capture to thermal energy storage. On slide eight, reviewing the external environment, I'd like to emphasize again the progress that we made against our in-market diversification strategy. Here we see an updated chart with in-market mix for the trailing 12-month period ending March 31st of 2023. Approximately 61 percent of our revenue came from non-oil and gas in markets compared to roughly 45 percent in fiscal year 17. excluding our most recent acquisition, Power Blanket. Turning now to our full year results for fiscal year 2023 on slide nine. Thermon achieved record revenue, adjusted EBITDA, and EPS in fiscal 2023, driven by our team's continued outstanding execution despite ongoing macroeconomic volatility. Revenue of $440.6 million was up approximately 24% year-over-year driven by strong demand in North America, as well as a recent rebound in growth in Asia Pacific. More importantly, revenue from customer OPEX spending grew significantly compared to revenue from capital projects. This is indicative of greater exposure to growth of the recurring revenues from the install base and less exposure to large upstream CapEx projects, which we believe helps decrease the cyclicality of our business going forward. Our profitability metrics were also robust during fiscal year 2023, driven by volume and improved gross margins. Record adjusted EBITDA increased approximately 60 percent year-over-year to 93.3 million, with a margin of 21.2 percent. Adjusted EBITDA margins expanded 480 basis points in fiscal 2023 due to price, volume, and operational excellence initiatives. As a result, free cash flow doubled to $48.3 million in a year. Finally, we achieved record adjusted EPS of $1.56 a share, a year-over-year increase of approximately 90%. Moving to slide 10 in our fourth quarter fiscal 2023 results. Thurmond delivered another quarter of outperformance with record revenue of $122.5 million. up 19% year-over-year due to sales growth across all geographies. Record Q4 adjusted EBITDA increased 37% to $25.1 million, driven by cost management and volume growth. Adjusted EBITDA margin expanded by approximately 260 basis points to 20.5% on improved gross margins and controlled spending. Free cash flow of 21.9 million was up 66%. Adjusted EPS was 41 cents a share, an increase of more than 30% from the prior year period. If we look now to slide 11, you can see that our orders and backlog continue to remain strong. We are very pleased with the momentum we're seeing in the business. This quarter, we achieved a record 132 million in incoming orders, up 17% year-over-year, while bookings on a trailing 12-month basis grew to $457 million, up 15%, an all-time high. Our book-to-bill was 1.08 times. This represents the 10th quarter of our last 13 where we've achieved a positive book-to-bill. Our backlog of $163 million was up 8% year-over-year, excluding FX impacts. With that, I'd like to turn the call over to Kevin for a more in-depth review of our financial results. Kevin?