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Thermon Group Holdings, Inc. (THR)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY25 delivered resilient topline with higher-quality mix: revenue $134.4M (-1.5% y/y) while adjusted EBITDA rose to $31.8M and margin expanded 120 bps to 23.7% on stronger OpEx mix and productivity; GAAP EPS $0.54, Adjusted EPS $0.56 .
  • Demand indicators strengthened: orders +11.4% to $138.6M, book-to-bill 1.03x, and backlog +48% to a record $235.6M (+9% organically), supporting improved visibility into FY26 as larger projects move from engineering to execution .
  • Guidance maintained: FY25 revenue $495–$515M, Adj. EBITDA $105–$110M, Adj. EPS $1.77–$1.89; management flagged potential tariff impacts are not included and reiterated confidence in margin profile even if revenue tracks low end on project timing .
  • Stock reaction catalyst: narrative turning to reacceleration potential as LNG, power (incl. data centers) and petrochem pipelines build; management cited wins in nascent liquid-cooled data center load-bank applications (~$10M across 3 orders) and improving oil & gas/Canada activity .

What Went Well and What Went Wrong

  • What Went Well

    • Mix-driven margin expansion: Adjusted EBITDA margin hit 23.7% (highest in ~2 years) on OpEx revenue strength and productivity; gross margin improved to 46.2% (+410 bps y/y) .
    • Order momentum and visibility: Orders +11.4%, book-to-bill 1.03x; backlog $235.6M (+48% reported, +9% organic) signaling future revenue acceleration as project execution ramps .
    • Strategic progress: Diversification to OpEx/short-cycle shows durability (OpEx sales +12.6%; 86% of sales TTM ~85%), while M&A adds capabilities; CEO: “third quarter Adjusted EBITDA margin of 23.7% demonstrates the opportunity in our business” .

  • What Went Wrong

    • Large project softness: Over Time – Large project revenue fell ~45% y/y to ~$18.6M on delayed customer decisions, pressuring organic sales (-11.2% excluding acquisitions) .
    • Acquisition conversion shortfall at Vapor Power: Projects slipped out of the quarter due to capacity constraints; mgmt focused on debottlenecking to convert ~$45M backlog .
    • Tariff uncertainty overhang: Management flagged fluid U.S./Canada tariff landscape and potential indirect impact on customer sentiment, though direct COGS exposure to U.S.-Canada tariffs ~10% and limited Mexico/China exposure (~5% of revenue) .

Financial Results

Income statement summary (oldest → newest)

MetricQ3 FY24Q2 FY25Q3 FY25
Revenue ($M)136.4 115.0 134.4
Gross Profit ($M)57.4 N/A62.1
Gross Margin %42.1% N/A46.2%
Adjusted EBITDA ($M)30.7 23.8 31.8
Adjusted EBITDA Margin %22.5% 20.8% 23.7%
GAAP EPS ($)0.46 N/A0.54
Adjusted EPS ($)0.59 N/A0.56

Notes: Adjusted metrics exclude amortization, restructuring/other, ERP and transaction costs per reconciliation .

Revenue mix and segment detail

Revenue Mix ($M)Q3 FY24Q3 FY25
Point-in-Time85.5 99.6
Over Time – Small Projects17.3 16.2
Over Time – Large Projects33.7 18.6
OPEX Sales (Point-in-Time + OT-Small)102.8 115.8
OPEX as % of Sales75.3% 86.2%

Note: Over Time – Large was $18.6M in Q3 FY25 per CFO; reconciled table shows $18.553M (rounding) .

Geographic revenue (Q3 FY25)

RegionQ3 FY25 Revenue ($M)
Canada43.5
EMEA13.8
APAC9.8
U.S. & Latin America67.2

KPIs and balance sheet

KPI / Balance SheetQ3 FY24Q2 FY25Q3 FY25
Orders ($M)124.4 131.1 138.6
Book-to-Bill (x)N/AN/A1.03x
Backlog ($M)158.8 214.9 235.6
Free Cash Flow ($M)22.1 6.7 8.5
CapEx ($M)2.2 1.8 1.4
Net Debt ($M)N/A129 114.7
Net Leverage (x)1.5x 1.3x 1.1x
Cash ($M)55.4 N/A38.7
Total Debt ($M)213.3 N/A153.4
Working Capital ($M)190.3 N/A177.2

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($M)FY25$527–$553 (Q1 guide) $495–$515 (Q2 updated; maintained in Q3) Lowered (Q2); Maintained (Q3)
Adjusted EBITDA ($M)FY25$112–$120 (Q1) $105–$110 (Q2; maintained Q3) Lowered (Q2); Maintained (Q3)
Adjusted EPS ($)FY25$1.90–$2.06 (Q1) $1.77–$1.89 (Q2; maintained Q3) Lowered (Q2); Maintained (Q3)
GAAP EPS ($)FY25Not provided (Q1/Q2)$1.46–$1.58 (Q3 PR) New disclosure

Management reiterated that potential tariff impacts are not contemplated in FY25 guidance .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 FY25)Current Period (Q3 FY25)Trend
OpEx/recurring revenue mixOpEx resilient; 80%+ of revenue TTM; strategy to diversify and grow installed base OpEx +12.6%; 86% of sales; margin uplift from mix and productivity Positive/stable
Large CapEx project timingDelays across end markets; pipeline ~$1.2B; bookings improving; execution skewing to FY26 Large projects -45% y/y; backlog +48%; engineering load high; expect reacceleration in coming quarters Improving setup
Tariffs/macroWatching policy/elections; clarity post-election should aid timing Tariff uncertainty could affect sentiment; direct exposure limited (COGS ~10%) Mixed risk
End markets: LNG, power/data centers, petrochemNuclear and electrification opportunities; decarb pipeline ~$320M LNG surge post-permit pause lifted; power demand from data centers/EVs; 3 liquid-cooling orders totaling ~$10M Strengthening
Canada regionRecovery after weak FY24 back half; +2% in Q2; higher-margin mix Canada +6% y/y in Q3; supports gross margin Improving
M&A integration (Vapor Power, F.A.T.I.)F.A.T.I. acquired; Vapor capacity ramp; leverage trending down F.A.T.I. solid; Vapor revenue short on conversion; focus on capacity to convert ~$45M backlog Integration ongoing
SG&A/OpExQ2: Organic SG&A down 3% y/y; Vapor added costs Near-term SG&A flat at Q3 run-rate dollars Cost discipline

Management Commentary

  • “Adjusted EBITDA margin of 23.7%…demonstrating the opportunity in our business as we progress towards our long-term profitability targets.”
  • “Backlog increased nearly 48%…up 9% organically…slower backlog burn has been a headwind to near-term revenue growth…but gives increased visibility” .
  • “Large project revenue was $18.6 million…down 45%…customers continue to delay decisions on large capital projects.” .
  • “We’re maintaining our full year 2025 guidance…Revenue $495–$515M…Adjusted EBITDA $105–$110M…Adjusted EPS $1.77–$1.89” (tariffs not contemplated) .
  • On data centers: “We’ve won 3 orders that have totaled around $10 million…very large market opportunity…liquid-cooled data centers 40–50% of new builds in 2025” .

Q&A Highlights

  • Margin sustainability and guidance positioning: If project mix remains soft, revenue could skew to low end, but gross margins “quite strong,” supporting EPS near midpoint of the range .
  • CapEx cycle outlook: LNG momentum post-permit restart; potential pickup in combined-cycle gas and renewed nuclear interest; small modular reactor engineering award in Europe highlighted .
  • Vapor Power conversion: Miss in Q3 on order conversion due to capacity; expectation to catch some revenue in Q4; focus on factory/supply-chain debottlenecking to convert ~$45M backlog .
  • SG&A cadence: Expected to remain roughly flat near-term at Q3 dollar levels despite growth investments and M&A absorption .
  • Tariff risk: Direct cost exposure manageable; bigger unknown is customer sentiment and project timing .

Estimates Context

  • S&P Global consensus data for Q3 FY25 (revenue and EPS) was unavailable due to API rate limits at the time of this analysis, so vs-consensus comparisons cannot be shown. We will update when access is restored (S&P Global consensus unavailable at time of request).

Key Takeaways for Investors

  • Quality over quantity: Mix shift toward OpEx and productivity lifted margins despite modest revenue decline; this supports earnings resilience through macro/project timing noise .
  • Backlog-led reacceleration setup: Orders/book-to-bill strength and record backlog (organic +9%) indicate improving execution runway into FY26 as engineering converts to shipments .
  • LNG, power/data centers as incremental growth vectors: Concrete wins in liquid-cooled data center load-bank applications and LNG activity provide tangible non-O&G catalysts .
  • Execution watchlist: Vapor Power capacity conversion is the near-term swing factor; management is addressing bottlenecks to unlock ~$45M backlog .
  • Guidance anchored by margin confidence: Even if revenue trends low-end on project timing, margin profile and cost discipline underpin EPS around the midpoint; tariffs excluded from outlook .
  • Regional and end-market mix support GM: Canada strength and higher-value products underpin gross margin; continued monitoring of U.S.-LAM large projects .
  • Trading implications: Positive narrative momentum (orders/backlog, maintained guidance, new vertical wins) versus execution/tariff timing risks; stock likely to react to signs of Vapor conversion and evidence of large projects moving to shipment.

Appendix: Additional Data Points

  • Q3 FY25 cash/total debt: $38.7M / $153.4M; net leverage 1.1x .
  • Free cash flow: $8.5M in Q3; $23.9M YTD, +$3.2M y/y .
  • Share repurchase: $6.2M repurchased YTD; $43.5M authorization remaining .
  • Non-GAAP adjustments include amortization of intangibles, restructuring/other (incl. Denver facility gain), ERP, and transaction costs, net of tax effects .

If you would like, I can refresh S&P Global consensus once access is restored and add a beat/miss table versus estimates.