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Thermon Group Holdings, Inc. (THR)·Q1 2026 Earnings Summary

Executive Summary

  • Thermon delivered resilient Q1 FY26 despite tariff-driven order softness and delayed backlog conversion; revenue fell to $108.9M (-5.4% YoY) while gross margin rose 30 bps to 44.1% and adjusted EBITDA margin was 19.5% .
  • Versus Wall Street: revenue materially missed consensus ($108.9M vs $122.5M), while adjusted EPS matched ($0.36 vs $0.36) and EBITDA was below consensus; guidance for FY26 revenue ($495–$535M) and adjusted EBITDA ($104–$114M) was reiterated. Bolded highlights: Revenue miss vs consensus, EPS in-line, guidance maintained* *.
  • Management cited ~$10M of revenue pushed out of Q1 due to supply chain and a capital project delay; pricing and sourcing mitigations are expected to offset tariff headwinds by H2 .
  • Emerging catalysts: newly launched liquid load banks for AI-driven liquid-cooled data centers, doubling backlog in rail/transit and at F.A.T.I.; continued share repurchases ($9.8M in Q1) and strong liquidity ($130.8M) support capital allocation and M&A .

What Went Well and What Went Wrong

What Went Well

  • Gross margin expanded despite lower volumes and tariffs, driven by mix shift to higher-margin OpEx, pricing actions, and productivity; “gross margin increasing 30 basis points over the prior year” .
  • Strategic growth adjacencies gaining traction: “unprecedented investments in the data center market” and launch of liquid load banks; management targeting 20–25% share as market grows rapidly with AI adoption .
  • Backlog and pipeline strength: backlog up 27% YoY to $252.2M with book-to-bill 1.11x; bid pipeline up 43% across chemical, petrochemical, power/nuclear, LNG, and renewables .

What Went Wrong

  • Revenue declined 5.4% YoY and orders fell 5.1% as tariff uncertainty dampened demand, particularly in APAC; organic orders down 18.9% .
  • ~$10M in delayed backlog conversion tied to supply chain and a capital project taking “twice as long as anticipated,” pushing revenue out of Q1 into Q2/H2 .
  • Near-term margin risk: management expects gross margin headwinds in Q2 before pricing offsets fully flow through in H2; adjusted EBITDA margin fell to 19.5% from 20.1% YoY .

Financial Results

Income Statement, EPS, Margins (oldest → newest)

MetricQ3 2025Q4 2025Q1 2026
Revenue ($USD Millions)$134.353 $134.080 $108.898
GAAP Diluted EPS ($)$0.54 $0.50 $0.26
Adjusted EPS ($)$0.56 $0.56 $0.36
Gross Margin %n/an/a44.1%
Adjusted EBITDA ($USD Millions)$31.8 $30.5 $21.2
Adjusted EBITDA Margin %23.7% 22.7% 19.5%

Consensus vs Actual (S&P Global)

MetricQ3 2025Q4 2025Q1 2026
Revenue Consensus Mean ($USD Millions)*138.906*133.650*122.529*
Actual Revenue ($USD Millions)134.353 134.080 108.898
Primary EPS Consensus Mean ($)*0.553*0.505*0.36*
Actual Adjusted EPS ($)0.56 0.56 0.36
EBITDA Consensus Mean ($USD Millions)*31.830*28.778*22.026*
Actual Adjusted EBITDA ($USD Millions)31.8 30.5 21.2

Values retrieved from S&P Global.*

Segment/Revenue Mix (oldest → newest)

Metric ($USD Millions)Q3 2025Q4 2025Q1 2026
Point-in-Time Sales99.562 94.466 78.298
Over Time – Small Projects16.238 17.337 14.996
Over Time – Large Projects18.553 22.277 15.604
OPEX Sales (Point-in-Time + Small)115.800 111.803 93.294
OPEX Sales % of Total86.2% 83.4% 85.7%

KPIs and Balance Sheet (oldest → newest)

KPIQ3 2025Q4 2025Q1 2026
Orders ($USD Millions)$138.6 $138.8 $120.7
Book-to-Bill (x)1.03x 1.04x 1.11x
Backlog ($USD Millions)$235.6 (FY25 Q3) $240.3 $252.2
Free Cash Flow ($USD Millions)$8.5 $29.0 $8.3
Net Leverage (Net Debt/Adj. EBITDA)1.1x 0.9x 1.0x
Cash & Available Liquidity ($USD Millions)n/a$137.0 $130.8
Share Repurchases ($USD Millions)n/a$14.0 in Q4 $9.8 in Q1

Guidance Changes

MetricPeriodPrevious Guidance (Q4 FY25)Current Guidance (Q1 FY26)Change
Revenue ($USD Millions)FY26$495 – $535 $495 – $535 Maintained
Adjusted EBITDA ($USD Millions)FY26$104 – $114 $104 – $114 Maintained
GAAP EPS ($)FY26$1.35 – $1.57 $1.35 – $1.57 Maintained
Adjusted EPS ($)FY26$1.77 – $1.99 $1.77 – $1.99 Maintained
CAPEX (% of Revenue)FY262.5% – 3.0% 2.5% – 3.0% Maintained
D&A ($USD Millions)FY26~23 ~23 Maintained
Effective Tax Rate (%)FY26~26% ~26% Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 FY25)Previous Mentions (Q4 FY25)Current Period (Q1 FY26)Trend
Tariffs/MacroNoted tariff risks; strong OPEX resilience Detailed tariff assumptions; gross impact $16–$20M; net $4–$6M; H1 headwinds then pricing offsets Tariff mitigation delivered GM improvement; expect Q2 margin headwinds; assess Aug 1 tariff changes Stabilizing with mitigations; H2 offset expected
Data Centers / AIIdentified load bank/data center opportunity (electric boilers, commissioning) Monitoring opportunity; more updates ahead Launched liquid load banks; pipeline building; target 20–25% share Accelerating; product launch and GTM underway
Supply Chain / Backlog ConversionBacklog growth; delays in large projects Engineering workload at all-time high; expect burn in H2 ~$10M revenue delayed; 60% due to supply chain and capital project; conversion expected Q2/H2 Near-term delays resolving; revenue catch-up expected
Regional TrendsDiversified end-market resilience; O&G down slightly Strength in US-LAM OPEX; EMEA up (incl. F.A.T.I.); Canada soft APAC demand weaker; EMEA strong; US/Canada impacted by tariffs Mixed; EMEA strength offsets NA/APAC softness
Rail & Transitn/aBacklog ~$36M; execution plan Backlog doubled YoY; capacity expansion underway Strong secular tailwind
Electrification / F.A.T.I.M&A expansion in EU; pipeline +70%; decarb revenue +80% YoY FY25 F.A.T.I. backlog doubled; European/Middle East electrification F.A.T.I. bookings momentum; backlog doubled in 6 months Robust growth in EU/ME

Management Commentary

  • “Gross margin increasing 30 basis points over the prior year… we remain confident in our team’s ability to successfully mitigate the cost headwinds created by the tariffs” — Bruce Thames, CEO .
  • “Our backlog at quarter end up 27% from last year… delayed revenues in Q1 and strong order trends… provide a clear path to achieve our revenue plan for the year” — Bruce Thames .
  • “Adjusted EBITDA margin was 19.5%… due to the revenue decline combined with continued investments in growth initiatives” — Jan Schott, CFO .
  • “We returned nearly $10 million in capital through our share repurchase program… balancing capital allocation between share repurchases and growth investments” — Bruce Thames .

Q&A Highlights

  • Backlog conversion: ~$10M delayed revenue, with ~60% attributable to supply chain disruptions and a capital improvement project; operations now back to normal throughput; shipment expected in Q2/H2 .
  • Gross margin outlook: expect Q2 headwinds; pricing actions to “fully offset” tariff impacts in H2; aiming to sustain ~44–45% GM trajectory by year-end .
  • Data center liquid load banks: product explanation (thermal/electrical loads for testing); pipeline building post-launch; potential to reach 20–25% share over time .
  • Rail/transit and LNG: rail/transit backlog doubled; LNG bookings strengthening with key awards; backlog up 27% YoY, engineering load high, revenue conversion expected through Q2–Q4 .
  • Capital allocation: active M&A pipeline; continued opportunistic buybacks (authorization $44.5M remaining); net leverage 1.0x .

Estimates Context

  • Q1 FY26: Revenue missed consensus ($108.9M vs $122.5M), adjusted EPS matched ($0.36 vs $0.36), adjusted EBITDA slightly below ($21.2M vs $22.0M*) *.
  • Prior quarters: Q3 FY25 revenue modestly below, EPS above; Q4 FY25 revenue slightly above, EPS above; underscores stable EPS delivery via margin/mix despite project timing volatility * *.
  • Potential estimate revisions: Expect near-term margin conservatism for Q2, with H2 pricing offsets; revenue cadence shifted toward back half as delayed projects convert; EMEA/F.A.T.I. and rail/transit strength may support H2 estimates .
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Revenue miss was timing, not demand: ~$10M delayed backlog conversion likely to flow into Q2/H2; backlog +27% and book-to-bill 1.11x support FY26 guidance credibility .
  • Margin management intact: YoY gross margin up despite tariffs; temporary Q2 headwinds but pricing/sourcing measures expected to offset by H2; watch GM trajectory and pricing realization cadence .
  • Growth adjacencies are ramping: Liquid load banks address AI-driven liquid-cooled data centers; rail/transit and EU electrification (F.A.T.I.) show strong backlog/order momentum—incremental multi-year growth drivers .
  • Capital allocation remains supportive: $130.8M liquidity, net leverage 1.0x, continued buybacks ($9.8M in Q1), and active M&A pipeline provide downside support and optionality .
  • Trading implications: near-term volatility possible around Q2 margin headwinds; maintaining FY26 guidance amid revenue miss is constructive; monitor tariff policy developments and H2 price realization, plus early data center wins for upside catalysts .
  • Estimate posture: expect revenue phasing toward H2 and cautious near-term margins; consensus likely to recalibrate Q2, with potential H2 uplift as mitigations and backlog conversion materialize .