Thermon Group Holdings, Inc.

Greetings and welcome to the Thermon first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the call, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. At this time, I would like to hand the call over to Yvonne Salon, Vice President of FP&A and Investor Relations. Thank you. You may begin.

Thank you. Thank you, Dara. Good morning, and thank you for joining today's fiscal 2024 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 on our IR website on the news and events IR calendar earnings conference call Q1, 2024. 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-gap measures should be considered in addition to and not a substitute for measures of financial performance reported in accordance with that. I would 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 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 Bruce Thames, our President and Chief Executive Officer, for his opening remarks.

Bruce Thames Thank you, Yvonne. Good morning, everyone, and thank you for joining us today. I'll start today with a quick overview of Thurmond. 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 almost 1,400 employees have an industry-leading safety record and are dedicating to creating value for our customers and shareholders by executing our strategic long-term plan, which I'll cover in more detail on the next slide. In order to create long-term value for our shareholders, we're guided by our three strategic pillars. First, profitably growing our installed base. Second, decarbonization, digitization, and diversification to drive additional growth. And third, disciplined capital allocation. As the global leader at the forefront of applying innovative process heating technology, To solve critical thermal engineering problems for our customers, we benefit from a very large installed base. This enables us to capture recurring revenues and drive growth across our traditional end market verticals, while our culture of continuous improvement supports margin expansion. In addition to capturing share across our traditional end markets, We're also pursuing three new areas to drive additional growth around decarbonization, digitization, and diversification. We're expanding our sales and marketing efforts in these areas that utilize our core heating technologies to diversify our end markets with a goal of having approximately 65% to 70% of our revenues come from end markets outside of oil and gas by the end of fiscal 2026. Our digitization strategy is progressing well as we continue to expand our range of digital solutions that help our customers to optimize monitoring and maintenance across their facilities. We're also enabling the energy transition as we supply our customers with products and solutions that help them achieve their sustainability goals around electrification and decarbonization. Finally, Our commitment to a disciplined capital allocation strategy underpins our first two strategic pillars. Our robust balance sheet enables us to drive organic growth through reinvestment in our business to meet our fiscal 2026 goals. We're also well positioned to pursue inorganic growth through highly strategic bolt-on acquisitions that meet our financial objectives. Turning now to slide five on thermon solutions for energy transition. This quarter, we'd like to share with you some of the ways that thermon's products and solutions enable the energy transition. On slide five, you can see the range of thermon's current electric heating products that can be used in both green and blue ammonia applications. These include electric immersion heaters, electric heat tracing systems, and electrically heated tubing bundles. Hydrogen is an important piece of a sustainable energy future, but it's difficult to transport via pipeline or other traditional means due to a phenomenon called hydrogen corrosion cracking, or HCC. HCC can embrittle and weaken steel, resulting in shorter asset life or unanticipated failures. By adding nitrogen to hydrogen, ammonia is created, which is much easier to transport via pipeline or other means. As a result, ammonia plants are an important part of enabling the use of hydrogen as a sustainable energy source. Green ammonia uses renewable energy, such as wind or solar power, to produce hydrogen via electrolysis. Blue ammonia is produced when natural gas is cracked to generate hydrogen and CO2, where the CO2 is then captured and sequestered. In either case, produced hydrogen is then combined with nitrogen to create ammonia. The global ammonia market is estimated to grow at a 5.8% compounded annual growth rate through 2032. Electric heaters play a crucial role in various stages of heating within ammonia plants. They're used to provide indirect heat at various stages of the process, be it heat transfer fluids such as molten salts or hot oils. They can also be used to directly heat reactants or to provide process heating for ammonia synthesis. In addition to their environmental benefits, electric heaters can also provide cost savings for ammonia plants. They offer precise and efficient heating, reducing energy consumption, and minimizing downtime. With their compact size and easy installation, electric heaters also have a smaller footprint than traditional heating systems allowing for more efficient use of space. Thermon's existing range of electric heating solutions, combined with our expertise in industrial process heating, make us an ideal partner for ammonia producers looking to improve their sustainability and efficiency. Turning now to slide six on new Thermon technology. Here we see the newest addition in our CalorieTech immersion heater line called the Quantum TrueFlow Heater. Our investments in research and development have yielded this patent-pending design that represents a step change in heating technology. The design has been validated in partnership with an industry-leading heat transfer institute using advanced modeling software and lab testing to achieve optimal heat transfer and energy efficiency. The higher efficiency, reduced overall size, and lower total cost of ownership make conversion from traditional hydrocarbon heaters to electric even more economically compelling across a wide range of end markets. Turning now to slide seven, Thermon's Genesys network and digital solutions provide our 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 to the controller. This facilitates increased operational efficiency and reliability with fewer maintenance hours and lower total costs. Adoption continues to grow as customers recognize the significant benefits provided by the Genesys network, with 15 percent more new circuits added in the first quarter of fiscal 2024. Based on our pipeline of opportunities, we anticipate the number of circuits doubling this fiscal year. On slide eight, you can see that we're continuing to progress our in-market diversification strategy. Thermon's products and solutions can be used across a wide range of industries, and we're seeing growth across several of these sectors. During the quarter, our bookings from rail and transit were up by 39% year-over-year, Commercial was up by 29 percent, and food and beverage was up 120 percent. Our order intake from high-tech sectors continued to grow as well, with bookings from data centers up over 600 percent, and bookings from semiconductor in the market up over 90 percent, accelerated by the CHIPS Act. Importantly, we are also seeing growth in sectors related to the energy transition. Our bookings from electric power were up 489%, and our bookings from biofuels and green diesel were up 89% during the quarter. We're encouraged by the steady incremental growth across these end markets as we capture additional market share. On slide nine, I'd like to once again highlight the progress we have made around our end market diversification strategy. This chart shows end market mix for the trailing 12-month period ending June 30, 2023. Since last quarter, we've increased the percentage of our revenue that comes from, for example, the commercial and renewables in markets. CapEx spending in LNG and petrochemicals has been a significant road driver as well. We're also seeing growing demand related to projects in the specialty chemicals and gases, particularly related to semiconductor fabrication. There's also a growing pipeline of opportunities around alternative fuels, such as biofuels, hydrogen and ammonia, and another round of investment to winterize and harden the US power infrastructure across the South. Overall, with approximately 60% of our revenue generated from non-oil and gas in markets, we continue to make steady progress toward our goal of fiscal 26 diversification goals. Turning now to slide 10 and our first quarter fiscal 2024 results. The Thermon team achieved another quarter of outstanding performance. As a quick reminder, our business is highly seasonal, with our first quarter typically being the weakest and the third and fourth quarters being the strongest due to colder weather in the northern hemisphere. As a result, year-over-year comparisons are more appropriate than sequential quarterly comparisons when measuring performance. We delivered record revenue of $106.9 million, up 12% year-over-year over a prior year record, largely due to healthy growth in North America and Asia Pacific. Importantly, we saw meaningful growth in year-over-year revenue from resilient maintenance for OPEX activity. We saw even stronger operating leverage with adjusted EBITDA of $22.1 million, up 33% year-over-year, driven by higher volume, price realization, and productivity gains. Free cash flow was negative in the quarter due to timing of certain payments after fiscal year-end. Adjusted EPS was $0.40 per share, an increase of 58% over the prior year period. Finally, our book-to-bill ratio showed double-digit order growth at 1.12 times, demonstrating continued strong demand from our customers. With that, I'd like to turn the call over to Kevin Fox for a more in-depth review of our financial results. Kevin?