Thermon Group Holdings, Inc.

Greetings and welcome to the Fairmont Earnings Conference Call Q1 Fiscal Year 2026. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If you require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce you to your host, Yvonne Salem, Vice President, FP&A, and IR. Thank you, Yvonne. You may begin.

Good morning, and thank you for joining Thurmond Group's first quarter fiscal 2026 results conference call. Leading the call today are CEO Bruce Thames and Chief Financial Officer Jan Schott. 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 in our IR website under News and Events, IR Calendar, Earnings Conference Call, Q1, 2026. 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 would 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 recently quarterly report file 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. Today's call will begin with remarks from our CEO, Bruce Thames, who will provide a review of our recent business performance, including an update on our strategic initiatives, followed by a financial update and review from our CFO, Jan Schott. Bruce will then wrap up our prepared remarks with an update on our business outlook. At the conclusion of these prepared remarks, we will open the line for questions. With that, I will turn the call over to Bruce.

Well, thank you, Yvonne, and good morning to everyone joining us on the call today. At a high level, I'm pleased to report that the team delivered resilient performance in the first quarter as they navigated a complex and rapidly evolving market landscape. The outcomes we achieve underscore the strength of our long-term vision and strategic initiatives, which are intentionally focused on driving a higher quality, more profitable revenue mix. Combined with proactive tariff mitigation efforts, these actions enabled us to achieve gross margin improvement over prior year, affirming the effectiveness of our operational framework and the agility of our organization. However, the strength in our margin performance was offset by year-over-year decline in revenues that was largely attributable to temporary delays in backlog conversion and project execution timing. Factors we fully expect will translate into realized revenue in the upcoming quarters. Additionally, we experienced some softness in our incoming order rates following Liberation Day, which we anticipated as a risk coming into our fiscal year and factored into our full year guidance. As we tracked our bookings trends through the quarter, we saw a sharp decline in the daily order rate in late April through May, followed by a notable recovery to more normalized levels in June. On a positive note, order momentum has continued to build through the end of July. While the current market dynamics, particularly surrounding global trade, presents near-term unpredictability, Our strategic focus and operational discipline have us well equipped to harness renewed momentum as conditions stabilize. We remain confident in our strategic positioning to benefit from several very long-term secular growth drivers. This positioning, when combined with our robust approach to gross margin enhancement, sets a strong foundation for sustained growth and value creation for our stakeholders. With that as a backdrop, I'll begin my commentary with the first quarter highlights. As I just discussed, our first quarter revenues were impacted by roughly $10 million in delayed backlog conversion, which contributed to the 5% decline from prior year. These delays, which stem from short-term supply chain challenges and an unanticipated production delay caused by a capital improvement project, are not indicative of lost revenue opportunities. They're simply a matter of timing. Our robust backlog, which continues to grow, positions us well to recognize these revenues in the quarters ahead. While our bookings during the first quarter were down 5% versus last year, we remain confident in our growth outlook. Our strength in bookings over the prior several quarters, the backlog at quarter end up 27% from last year, the delayed revenues in Q1 and strong order trends at FATI all combined to provide a clear path to achieve our revenue plan for the year. Additionally, our total bid pipeline was up 43% at quarter end, boosted by the vapor power acquisition, and driven by activity across several key end markets, including chemical, petrochemical, power and nuclear, LNG, and renewables. Based on these factors, we remain confident that we're well-positioned to generate solid long-term organic growth. As noted, I was very pleased with the team's execution to deliver strong gross margin performance during the quarter, which was up 30 basis points from last year, despite the volume declines and impact of tariffs. The gross margin improvement was a direct function of our strategic shift toward higher margin OPEX revenues across diverse end markets, as well as our tariff mitigation measures, which included actions like pre-buying of materials, shifting of sourcing and production, and price increases, which began to take effect very late in Q1. And finally, our disciplined financial management enabled us to maintain our strong balance sheet with leverage of just one times at quarter end, which provides us the flexibility to execute on our growth strategy, both organic and inorganic, while opportunistically returning capital to our shareholders. Our M&A pipeline remains active, and we continue to search for opportunities to deploy capital to augment our strategic growth initiatives. During the quarter, we returned nearly 10 million in capital through our share repurchase program, and we will continue balancing capital allocation between opportunistic share repurchases and growth investments, with a focus on driving returns for our shareholders. Before I turn it over to Jan, I'd like to take some time to discuss several strategic initiatives that we're very excited about and expect will be key contributors to our growth in the coming quarters and years. These include an emerging opportunity in the data center market, rail and transit, and our most recent acquisition, FATI. Turning now to slide six, we believe unprecedented investments in the data center market represent an emerging growth opportunity for Thermon. According to an independent study, the global load bank market was roughly 280 million in 2024, with growth projections to 445 million in 2032, representing a 4.8% compounded annual growth rate. With the advent of AI and liquid-cooled data centers, the demand for liquid load banks to provide both thermal and electrical loads to test critical cooling systems and power infrastructure has rapidly grown. Based upon management estimates, we believe the current market opportunity for liquid load banks will grow from an estimated $84 million in 2024 to 386 million in 2032, which represents a compounded annual growth rate of 21%. To serve this growing market, Thermon launched the new Pontus and Poseidon load banks on July 28th of this year. As data centers shift from air to liquid cooling, we believe that the opportunity for Thermon legacy solutions like heat tracing, environmental heaters, immersion heaters, tubing bundles, and removable heating blankets grows accordingly. It's early, but we're already seeing a growing pipeline of project activity with new prospective customers that we anticipate will translate into meaningful growth in this segment for years to come. Turning now to slide seven, the rail and transit market is another vertical that we're extremely excited about. The Infrastructure Investment and Jobs Act, representing the largest federal investment in public transportation in U.S. history, has provided a very favorable demand environment with higher levels of government funding to modernize public transit and passenger rail systems. We're seeing strong order momentum with rail and transit backlog doubling over the last 12 months. Based on these strong order trends and the longer-term opportunity in this market segment, We're deploying capital and resources to rapidly expand capacity to support this growing opportunity. And finally, the FATI acquisition in October of last year has quickly become our fastest growing acquisition, and we continue to be very excited by the opportunity set for this business. Bati strategically positions us to take advantage of the growing electrification market across Europe. While we've seen a shift in US policy that has stalled investment, the electrification market in Europe is experiencing solid growth. We're seeing strong order momentum with our backlog doubling in just the last six months with a solid pipeline of high probability opportunities going forward. We're extremely encouraged by these opportunities which highlight the strength of our diversification strategy. Looking ahead, our ability to leverage our technologies across high-growth verticals, such as data centers, transit systems, and electrification, positions us to capitalize on dynamic market trends and deliver sustainable shareholder value. This highlights the ingenuity and dedication of our team whose relentless pursuit of excellence allows us to consistently deliver safe, reliable, and innovative thermal solutions for our customers. The successes we see today underscore our differentiated position in the industry and reinforce our confidence in the path forward. With that, I'll turn it over to Jan. who will provide a more detailed review of our first quarter results before I wrap up with some remarks on our financial outlook. Jen?