Q1 2025 Thermon Group Holdings Inc Earnings Call

Speaker Change: Hello, and welcome to the Thermon Q1 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance, please press star zero. A question and answer session will follow the formal presentation.

Unknown Executive: At this time, all participants are in a listening mode. And if they don't want to require operator assistance, please press star zero.

Operator: If anyone should require operator assistance, please press star zero. It's now my pleasure to turn the call over to Ivonne Salem. Please go ahead, Ivonne. Thank you.

Unknown Executive: A question and answer session will follow the formal presentation. You may be placing the question to any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded.

Speaker Change: You may be placed into question queue at any time by pressing star 1 on your telephone keypad. As a reminder, this conference is being recorded.

Ivonne Salem: It's not my pleasure to turn the call over to Ivonne Salem. Please go ahead, Ivonne.

Ivonne Salem: Thank you, Diego. Good morning, and thank you for joining Thermon Group's Fiscal 2025 First Quarter Results Conference Call. Leading the call today are CEO Bruce Staines and Vice President and Corporate Controller Greg Lucas, and the call will also be available on the Investor Relations section of our website. Additionally, the slides for this conference call can be found on our IR website under News and Events, IR Calendar, Earnings Conference Call Q1 2025. 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. This will then wrap up our prepared remarks and update on our business outlook. At the conclusion of these prepared remarks, we will open the line for questions. With that, I'll turn the call over to Bruce.

Unknown Executive: Thank you, Diego.

Speaker Change: It's now my pleasure to turn the call over to Ivonne Salem. Please go ahead, Ivonne.

Bruce Thames: Good morning. And thank you for joining us. There's this call 2025 first quarter results conference call meeting the call today. Our CEO, Bruce Thames, and vice president of corporate controllers, Greg.

Ivonne Salem: Thank you, Diego. Good morning and thank you for joining Thermon Group's Fiscal 2025 First Quarter Results Conference Call. Leading the call today are CEO Bruce Thames and Vice President and Corporate Controller Greg Lukin.

Bruce Thames: Earlier this morning, we issued an earnings release, press release, which has been filed with the SEC on Form A case. And it's also available on the Investor Relations section of our lesson. Additionally, the slides for this conference call can be found on our IR website. On their news and events, IR calendar earnings conference calls Q1 2025 during the call.

Speaker Change: Earlier this morning, we issued an earnings release, press release, which has been filed with the SEC on Form 8K.

Speaker Change: And it's also available on the Investor Relations section of our website.

Speaker Change: Additionally, the slides for this conference call can be found in our IR website under News and Events, IR Calendar Earnings Conference Call, Q1 2025.

Bruce Thames: We will discuss some items that do not conform to Generally Accepted Accounting Principle. We have reconciled those items to the most comparable gap measures in the tables at the end of the earnings press release. This non-GAAP measures should be considered in addition to, not as a substitute for measures of financial performance recorded in accordance with GAAP.

Speaker Change: 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 price release.

Speaker Change: 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.

Bruce Thames: 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 recent quarterly reports filed with the SEC for more information regarding our forward-looking statement, 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 obligations to publicly update any forward-looking statement, whether as a result of new information, future developments, or other lines, except as might be required by law.

Speaker Change: 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.

Speaker Change: 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.

Bruce Thames: Today's call will begin with remarks from our CEO, Bruce Bane, who will provide a review of our recent business performance, including an update on the progress we have made on our strategic initiatives, followed by a financial update and review from our Vice President and Corporate Controller, Greg Lucas. This will then wrap up our preparing remarks and update on our business outlook.

Speaker Change: 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 the progress we have made on our strategic initiatives.

Speaker Change: Followed by a financial update and review from our Vice President and Corporate Controller, Greg Lucas.

Speaker Change: This will then wrap up our prepared remarks and update on our business outlook.

Bruce Thames: At the conclusion of these preparing remarks, we will open the line for questions. With that.

Speaker Change: At the conclusion of these prepared remarks, we will open the line for questions. With that, I'll turn the call over to Bruce.

Bruce Thames: I'll turn the call over to Bruce. Thank you, Vaughn, and good morning to everyone joining us on the call today. I'm extremely proud of the team's hard work and disciplined execution during the first quarter against a backdrop of a weaker global growth environment, where we were able to deliver top line and adjusted EBITDA growth and strong cash flow. The quarter was highlighted by continued favorable momentum in our diversified end markets, the successful integration and positive contribution from our vapor power acquisition, and discipline financial management leading to solid free cash flow conversion. But most importantly, this quarter demonstrated our successful execution on a couple of our key strategic pillars, namely our focus on growing our installed base, as well as diversifying our revenue and end market exposure.

Bruce Staines: Thank you, Ivonne, and good morning to everyone joining us on the call today. But most importantly, this quarter demonstrated our successful execution on a couple of our key strategic pillars. Starting with slide four.

Bruce Thames: Thank you, Ivonne, and good morning to everyone joining us on the call today.

Bruce Thames: I'm extremely proud of the team's hard work and disciplined execution during the first quarter against a backdrop of a weaker global growth environment where we were able to deliver top line and adjusted EBITDA growth and strong cash flow.

Bruce Thames: The quarter was highlighted by continued favorable momentum in our diversified end markets.

Bruce Thames: But most importantly, this quarter demonstrated our successful execution on a couple of our key strategic pillars, namely our focus on growing our installed base as well as diversifying our revenue and in-market exposure.

Bruce Thames: starting at slide 4.

Bruce Thames: We generated nearly 8% revenue growth during the first quarter, which was driven largely by the contribution from our vapor power acquisition.

Bruce Thames: The implementation of labor power is on track, and we're excited by the revenue synergies we have quickly identified that we're not contemplated in our initial strategy. However, excluding labor power, our revenue has declined roughly 5% on an organic basis. While we're disappointed by the organic revenue decline, it's important to note that our organic revenues declined only modestly despite a 34% decline in our large project revenue during the quarter. This type of performance would not have been possible if not for our focus on diversifying our end market exposure and growing our installed base of customers. In addition, consistent with the trends noted during our last earnings call, our Canadian business grew 9% in the first quarter on a year-over-year basis after a weak, second half of fiscal 24.

Bruce Thames: The integration of vapor power is on track and we're excited by the revenue synergies we have quickly identified that were not contemplated in our initial strategy.

Bruce Thames: However, excluding vapor power, our revenues declined roughly 5%.

Bruce Thames: on an organic basis.

Bruce Thames: While we're disappointed by the organic revenue decline, it's important to note that our organic revenues declined only modestly despite a 34% decline in our large project revenue during the quarter.

Bruce Thames: This type of performance would not have been possible if not for our focus on diversifying our in-market exposure and growing our installed base of customers.

Bruce Staines: In addition, consistent with the trends noted during our last earnings call, our Canadian business grew 9% in the first quarter on a year-over-year basis after a week's second half of fiscal 24, but this was somewhat offset by 22% growth in our point-in-time on material sales and small project revenues, which together we refer to as OPEX revenues, which are generally tied to our customers' annual operating budget. We're proud of this result and believe this demonstrates the benefits of our deep installed base and recurring revenue exposure.

Bruce Thames: In addition, consistent with the trends noted during our last earnings call, our Canadian business grew 9% in the first quarter on a year-over-year basis after a week's second half of fiscal 24.

Bruce Thames: The continued pressure on our large project revenue, which is generally tied to our customers' capital spending budgets, was somewhat offset by 22% growth in our point in time on material sales and small project revenues, which together we refer to as OPEX revenues, which are generally tied to our customers' annual operating budgets. As we detail on slide 5, our materials and small project revenues were $98 million during the first quarter. Revenues associated with OPEX spending represented nearly 85% of our total revenues, while our large project revenues were only 50% of the total compared to a 75% 25% mixed in the prior year.

Bruce Thames: The continued pressure on our large project revenue, which is generally tied to our customers' capital spending budgets.

Bruce Thames: was somewhat offset by 22% growth in our point-in-time or material sales and small project revenues, which together we refer to as OPEX revenues, which are generally tied to our customers' annual operating budgets.

Bruce Thames: As we detail on slide 5, our materials and small project revenues were $98 million during the first quarter.

Bruce Thames: Revenues associated with OPEX spending represented nearly 85% of our total revenues, while our large project revenues were only 50% of the total, compared to a 75%-25% mix in the prior year.

Bruce Thames: Excluding vapor power, our OPEX revenues increased 4% organically. We're proud of this result and believe this demonstrates the benefits of our deep installed base in recurring revenue exposure. Our current mix provides a more stable and predictable revenue strain, as well as a more profitable mix, given our OPEX revenues consistently generate higher gross margins. In addition to benefiting from recurring revenues during the first quarter, we were also aided by our more diversified end-market exposure. An important aspect of our strategy you've heard me discuss has meant our goal to reduce exposure to the oil and gas market.

Bruce Thames: Excluding vapor power, our OPEX revenues increased 4% organically.

Bruce Thames: We're proud of this result and believe this demonstrates the benefits of our deep installed base and recurring revenue exposure.

Bruce Staines: Our current mix provides a more stable and predictable revenue stream as well as a more profitable mix given our OPEX revenues consistently generate higher gross margin. In addition to benefiting from recurring revenues during the first quarter, we were also aided by our more diversified in-market exposure. An important aspect of our strategy you've heard me discuss has been our goal to reduce exposure to the oil and gas market, although oil and gas is an important part of our business. It is no longer the key driver of our results that it once was.

Bruce Thames: Our current mix provides a more stable and predictable revenue stream as well as a more profitable mix given our OPEX revenues consistently generate higher gross margins.

Bruce Thames: In addition to benefiting from recurring revenues during the first quarter, we were also aided by our more diversified in-market exposure.

Bruce Thames: An important aspect of our strategy you've heard me discuss has been our goal to reduce exposure to the oil and gas market.

Bruce Thames: We have a goal of getting our diversified end-market revenue to at least 70% of the total, and as a result of our efforts together with inclusion of vapor power, we've achieved our goal on a trailing 12-month basis, which has been a positive driver to our results given the recent weakness in the oil and gas sector. The oil and gas is an important part of our business. It is no longer the key driver of our results that it once was. Our oil and gas revenues declined 7% during the first quarter, so we're very pleased we were able to generate solid financial results despite the weakness in these markets.

Bruce Thames: We have a goal of getting our diversified in-market revenue to at least 70% of the total and as a result of our efforts.

Speaker Change: Together, with inclusion of vapor power, we've achieved our goal on a trailing 12-month basis, which has been a positive driver to our results given the recent weakness in the oil and gas sector.

Speaker Change: The oil and gas is an important part of our business. It is no longer the key driver of our results that it once was.

Bruce Staines: Our oil and gas revenues declined 7% during the first quarter, so we're very pleased we were able to generate solid financial results despite the weakness in these markets. As we discussed in recent quarters, large capital projects have experienced extended sales cycles driven by customer uncertainty related to the macro environment, the upcoming elections, and the uncertain trajectory of entry. We remain encouraged that our quoting activity continues to be robust, up almost 13 percent, and our total bid pipeline is up 9 percent, both on a year-over-year basis.

Speaker Change: Our oil and gas revenues declined 7% during the first quarter, so we're very pleased we were able to generate solid financial results despite the weakness in these markets.

Bruce Thames: We're very proud of the work we've accomplished to position our business to be more successful across the business cycle. We have built a business that we believe is more durable and one that is equipped to generate stable, more predictable operating results across a range of economic scenarios and spending cycles. All that said, the large project business is still an important derivative where the install base for Thermon and we will well position the benefit as the large project spending trends improve. As we've discussed in recent quarters, large capital projects have experienced extended sales cycles driven by customer uncertainty related to the macro environment, the upcoming elections, and the uncertain trajectory of interest rates.

Speaker Change: We're very proud of the work we've accomplished to position our business to be more successful across the business cycle.

Speaker Change: We have built a business that we believe is more durable and one that is equipped to generate stable, more predictable operating results across a range of economic scenarios and spending cycles.

Speaker Change: All that said, the large project business is still an important driver to grow the install base for Thermon, and we are well positioned to benefit as large project spending trends improve.

Speaker Change: As we've discussed in the recent quarters, large capital projects have experienced extended sales cycles driven by customer uncertainty related to the macro environment, the upcoming elections, and the uncertain trajectory of interest rates.

Bruce Thames: While we don't have a crystal ball and timing is difficult to predict, we do remain cautiously optimistic that large project spending will improve in the second half of our fiscal year as we get some clarity on the November elections and we hopefully start to see some Fed rate cuts in September, as the market currently expects. We remain encouraged that our quoting activity continues to be robust, up almost 13%, and our total bid pipeline is up 9%, both on a year-over-year basis. Unfortunately, project decisions have been delayed, given the market uncertainty, but we believe we are very well positioned when normal spending patterns will zoom.

Speaker Change: While we don't have a crystal ball and timing is difficult to predict, we do remain cautiously optimistic.

Speaker Change: That large project spending will improve in the second half of our fiscal year as we get some clarity on the November elections, and we hopefully start to see some Fed rate cuts in September as the market currently expects.

Speaker Change: We remain encouraged that our quoting activity continues to be robust, up almost 13%, and our total bid pipeline is up 9%, both on a year-over-year basis.

Speaker Change: Unfortunately, project decisions have been delayed given the market uncertainty, but we believe we are very well positioned when normal spending patterns resume.

Bruce Thames: Now turning to slide six and our strategic pillars. I've already spent quite a bit of time on our focus in growing our install base and diversifying our in market exposure. However, I do want to quickly give an update on decarbonization opportunities and our execution on our capital allocation priorities. We continue to see our sales pipeline of decarbonization opportunities grow to now over $320 million, representing roughly 30% of the total. During the quarter, we secured approximately 9 million in orders related to decarbonization, or approximately 7% of the incoming orders in the quarter. As it relates to our capital allocation, Greg will provide more of the details, but suffice it to say we are very pleased with our solid financial discipline, which has enabled us to quickly deliver following the vapor power acquisition.

Bruce Staines: I've already spent quite a bit of time on our focus on growing our installed base and diversifying our in-market exposure. However, I do want to quickly give an update on decarbonization opportunities and our execution on our capital allocation priorities. We continue to see our sales pipeline of decarbonization opportunities grow to now over $320 million, representing roughly 30% of the total. During the quarter, we secured approximately $9 million in orders related to decarbonization, or approximately 7% of the incoming orders in the quarter. We're in a strong financial position, with our leverage ratio of 1.1 times coming in nicely below our targeted range of 1.5 to 2 times.

Speaker Change: Now turning to slide six and our strategic pillars.

Speaker Change: I've already spent quite a bit of time on our focus in growing our installed base and diversifying our in-market exposure. However, I do want to quickly give an update on decarbonization opportunities and our execution on our capital allocation priorities.

Speaker Change: We continue to see our sales pipeline of decarbonization opportunities grow to now over $320 million, representing roughly 30% of the total.

Speaker Change: During the quarter, we secured approximately 9 million in orders related to decarbonization or approximately 7% of the incoming orders in the quarter.

Speaker Change: As it relates to our capital allocation, Greg will provide more of the details but suffice it to say we are very pleased with our solid financial discipline which has enabled us to quickly de-lever following the vapor power acquisition.

Bruce Thames: We're in a strong financial position, with our leverage ratio of 1.1 times coming in nicely below our target range of 1.5 to 2 times. We believe this provides us with more than sufficient capacity to pursue our growth objectives and capital allocation priorities.

Greg Lucas: We're in a strong financial position with our leverage ratio of 1.1 times, coming in nicely below our targeted range of 1.5 to 2 times.

Speaker Change: We believe this provides us with more than sufficient capacity to pursue our growth objectives and capital allocation priorities.

Greg Lucas: With that, I'll turn it over to Greg.

Greg Lucas: We will provide a more detailed review of our first quarter results before I wrap up with some remarks on our financial outlook.

Speaker Change: With that, I'll turn it over to Greg who will provide a more detailed review of our first quarter results before I wrap up with some remarks on our financial outlook.

Greg Lucas: Greg, thank you for this, and good morning everyone. I will provide some additional details on the quarter to give an update on our working capital and free cash flow and conclude with a commentary on our balance sheet and liquidity. Moving now to slide 7 in our first quarter performance. Revenue in the first quarter was 115 million, a year-over-year increase of 8%. Primarily driven by the explosion of vapor power, which contributed 13.9 million of revenue during the first quarter. Excluding vapor power, first quarter organic sales decreased 5%, primarily related to the softness and large capital projects that Bruce has already discussed.

Speaker Change: Greg?

Greg Lucas: Thank you, Bruce, and good morning, everyone.

Greg Lucas: I will provide some additional details in the quarter, give an update on our working capital and free cash flow, and conclude with a commentary on our balance sheet and liquidity.

Greg Lucas: Revenue in the first quarter was $115 million, a year-over-year increase of 8 percent, primarily driven by the inclusion of vapor power, which contributed $13.9 million of revenue during the first quarter. Excluding vapor power, first quarter organic sales decreased 5%, primarily related to the softness and large capex projects that Bruce has already discussed.

Greg Lucas: Moving now to slide seven in our first quarter performance.

Greg Lucas: Revenue in the first quarter was $115 million, a year-over-year increase of 8%, primarily driven by the inclusion of vapor power, which contributed $13.9 million of revenue during the first quarter.

Greg Lucas: Large project revenue was $18 million during the first quarter, down 34% from the same period last year as customers continued to delay decisions on large capital projects as our customers shifted their priorities to maintenance and repair spending. Excluding vapor power, our OPEX revenues increased 4%, demonstrating the benefits of our balanced revenue model and the strength of our long-term customer relationships and deep installed base. Adjusted EBITDA was $23.2 million during the first quarter, up from $22.1 million last year due to the contribution from Vapor Power, as well as the continued investments we have made in our strategic initiatives.

Greg Lucas: Large project revenue was 18 million during the first quarter, down 34% from the same period last year as customers continued to delay decisions on large capital projects. The weakness was more pronounced in our oil and gas end markets, but the weakness was broad-based. While large projects spending was weak, our objects revenues were 98 million during the first quarter, an increase of over 20% compared to last year, as our customers shifted their priorities to maintenance and repair spending. Excluding vapor power, our objects' revenues increased 4%, demonstrating the benefits of our balanced revenue model and the stream of our long-term customer relationships and deep installed base.

Greg Lucas: Excluding vapor power, our OPEX revenues increased 4%, demonstrating the benefits of our balanced revenue model and the strength of our long-term customer relationships and deep installed base.

Greg Lucas: From a geographic perspective, we saw sales improve 9% year over year in Canada, and 7% in APEC. While sales in our U.S. land segment, excluding vapor power, declined 14%, and sales in our AMA region declined 19%. A Joseph Ibadah was 23.2 million during the first quarter, but from 22.1 million last year, due to the contribution from vapor power. A Joseph Ibadah margin was 20.2% during the first quarter, slightly down from 20.7% in the same period last year. Our margins benefited from an increased mix of materials revenue during the quarter, which generally carry higher gross margins.

Greg Lucas: Adjusted EBITDA was $23.2 million during the first quarter, up from $22.1 million last year due to the contribution from labor power.

Greg Lucas: Our margins benefited from an increased mix of materials revenue during the quarter, which generally carry higher gross margins.

Greg Lucas: However, this was offset by certain contracts with higher labor content, which deludes our margins, as well as the continued investments we've made in our strategic initiatives.

Greg Lucas: Last quarter, we discussed our manufacturing rooftop consolidation program, which is a key component of our operational excellence strategy. This program includes the consolidation of our rail and transaction lines from Denver into our sand markets facility. From this effort and the concurrent reduction in forest, we incurred a charge of 2.3 million during the quarter and expected another 0.3 to 0.5 million over the next few quarters as we complete this initiative. This effort is on track, and we expect the cost to implement this reduction in forest and facilities consolidation to be less than our original estimate. As a reminder, we are targeting 5.7 million in annualized savings.

Greg Lucas: Last quarter, we discussed our Manufacturing Rooftop Consolidation Program, which is a key component of our Operational Excellence Strategy. We continue to target just over $4 million in real-life savings during fiscal 2025, and we saw the savings begin to benefit our results during the first quarter. Backlog was $198.5 million compared to $172.1 million as of the first quarter last year. Excluding backlog attributable to vapor power of 44.3 million, backlog declined 10% on an organic basis. It is important to note that over 70% of our incoming orders in the quarter were from diverse end markets.

Greg Lucas: From this effort and a concurrent reduction in force, we incurred a charge of $2.3 million during the quarter and expect another $0.3 to $0.5 million over the next few quarters as we complete this initiative.

Greg Lucas: We continue to target just over 4 million in realized savings during fiscal 2025, and we saw the savings begin to benefit our results during the first quarter. Backlog was 198.5 million compared to backlog of 172.1 million as of the first quarter last year. Excluding backlog attributable to Baker Power, a 44.3 million backlog declined 10% on an organic basis. Older is during the first quarter, or 127.2 million, compared to 114.1 million in the same period last year, and an increase of 12%. On an organic basis, older is declined 5%. It is important to note that over 70% of our incoming orders in the quarter were from diverse end markets.

Greg Lucas: We continue to target just over $4 million in real-life savings during fiscal 2025, and we saw the savings begin to benefit our results during the first quarter.

Greg Lucas: Backlog was $198.5 million compared to backlog of $172.1 million as of the first quarter last year.

Greg Lucas: Excluding backlog attributable to vapor power of 44.3 million, backlog declined 10% on an organic basis.

Greg Lucas: Orders during the first quarter were $127.2 million compared to $114.1 million in the same period last year, an increase of 12 percent.

Greg Lucas: On an organic basis, orders declined 5%.

Greg Lucas: It is important to note that over 70% of our incoming orders in the quarter were from diverse end markets.

Greg Lucas: Moving now to slide 8 for an update on our balance sheet and liquidity. Networking capital was 31.4% of sales during the first quarter. Down from 34.6% last year, as we continue to optimize our supply chain, while also improving lead times and on-time deliveries to our customers. Capix was 3.9 million during the first quarter of 2025, up from 2.8 million last year. As a result of our sound working capital management, free cash flow is 8.8 million in the quarter, and improvement of nearly $11 million versus last year. We expect our continued focus on fiscal discipline, combined with our expectation of solid operating results, to deliver another year of strong free cash flow conversion.

Greg Lucas: Moving now to slide eight for an update on our balance sheet and liquidity. CapEx was $3.9 million during the first quarter of 2025, up from $2.8 million last year. We expect our continued focus on fiscal discipline combined with our expectation of solid operating results to deliver another year of strong free cash flow conversion, our ability to quickly deliver. Assuming no additional acquisitions, we expect to target an incremental debt paydown of $20 to $40 million during fiscal 2025. With that, I will turn the call back over to Bruce.

Greg Lucas: Moving now to slide eight for an update on our balance sheet and liquidity.

Greg Lucas: Networking capital was 31.4 percent of sales during the first quarter, down from 34.6 percent last year as we continue to optimize our supply chain while also improving lead times and on-time deliveries to our customers.

Greg Lucas: We expect our continued focus on fiscal discipline combined with our expectation of solid operating results to deliver another year of strong free cash flow conversion.

Greg Lucas: We pay down roughly 3 million of turn debt during the quarter, bringing our net debt balance to 120 million. Net leverage declined from 1.1 times at the end of the first quarter, down from 1.2 times at the end of the previous fiscal quarter, and down from 1.5 times immediately following the acquisition of Vapor Power. Our ability to quickly be leather following the vapor power acquisition highlights the strong free cash flow capabilities of our business. Based on our total cash and available liquidity of 141.8 million, we remain well-capitalized and have ample flexibility to continue to support our capital allocation priorities.

Greg Lucas: Net leverage declined from 1.1 times at the end of the first quarter down from 1.2 times at the end of the previous fiscal quarter and down from 1.5 times immediately following the acquisition of vapor power.

Greg Lucas: Our ability to quickly de-lever.

Greg Lucas: Assuming no additional acquisitions, we expect the target incremental debt pay down of 20 to 40 million dollars during fiscal 2025.

Greg Lucas: Assuming no additional acquisitions, we expect to target incremental debt paydown of $20 to $40 million during fiscal 2025.

Greg Lucas: In summary, we are pleased with our financial execution during the quarter as we made further progress on operational excellent initiatives, which should drive further margin benefits in the coming quarters. We continue our strict financial discipline, resulting in strong free cash flow performance.

Speaker Change: as we've made further progress on operational excellence initiatives which should drive further margin benefits in the coming quarters, and we continue our strict financial discipline resulting in strong free cash flow performance. With that, I will turn the call back over to Bruce.

Bruce Thames: With that, I will turn the call back over to Bruce. Thanks, Greg. Now, if you turn to slide 9, we will wrap up with our outlook for fiscal 2025. While trends in the large project market remain depressed, so far the year is tracking roughly in line with our expectations. Our opt-x revenues are benefiting from a shift in our customers' priorities to MRO spending, and our more diverse in-market exposure is helping us overcome the weakness in the oil and gas market. We are continuing to execute on our operational excellence priorities, including our supply chain initiatives in the manufacturing rationalization program.

Bruce Thames: Thanks, Greg. Now if you'll turn to slide 9, we'll wrap up with our outlook for fiscal 2025.

Bruce Staines: While trends in the large project market remain depressed, so far, the year is tracking roughly in line with our expectations. Our OPEX revenues are benefiting from a shift in our customers' priorities to MRO spending, and our more diverse in-market exposure is helping us overcome the weakness in the oil and gas market. As a result of these factors, we are maintaining our full year 2025 guidance that calls for revenue in the range of $527 million to $553 million, which includes expected revenue from vapor power of $55 to $59 million, adjusted EBITDA in a range of $112 to $120 million, and adjusted EPS in a range of $1.90 to $2.06 per share.

Speaker Change: While trends in the large project market remain depressed, so far the year is tracking roughly in line with our expectations.

Speaker Change: Our OPEX revenues are benefiting from a shift in our customers' priorities to MRO spending, and our more diverse in-market exposure is helping us overcome the weakness in the oil and gas markets.

Speaker Change: We're continuing to execute on our operational excellence priorities, including our supply chain initiatives and manufacturing rationalization program.

Bruce Thames: These efforts help drive savings in the first quarter, and we expect more progress from these and other operational efficiency programs over the balance of the year. As a result of these factors, we are maintaining our full year 2025 guidance that calls for revenue in the range of 527 million to 553 million, which includes expected revenue from vapor power of 55 to 59 million, adjusted EBITDA in a range of 112 to 120 million, and adjusted EPS in a range of $1.90 to $2.06 per share. Historically, the seasonality in our business has resulted in roughly 55 to 56% of our revenue being generated in the back half of the year.

Speaker Change: These efforts help drive savings in the first quarter, and we expect more progress from these and other operational efficiency programs over the balance of the year.

Speaker Change: As a result of these factors, we are maintaining our full year 2025 guidance that calls for revenue in the range of $527 million to $553 million, which includes expected revenue from vapor power of $55 million to $59 million.

Speaker Change: adjusted EBITDA in a range of $112 to $120 million, and adjusted EPS in a range of $1.90 to $2.06 per share.

Bruce Staines: Historically, the seasonality in our business has resulted in roughly 55 to 56% of our revenue being generated in the back half of the year, and given the expected ramp in our large project revenue through this fiscal year, we have communicated and anticipate revenue to be more heavily back-end weighted to around 57 to 59% in fiscal 2025. The team remains laser-focused on executing to achieve our FY26 goals and objectives. Finally, just to wrap things up on slide 10.

Speaker Change: Historically, the seasonality in our business has resulted in roughly 55 to 56 percent of our revenue being generated in the back half of the year.

Bruce Thames: And given the expected ramp in our large project revenue through this fiscal year, we have communicated and anticipated revenue to be more heavily back-end weighted to around 57 to 59% in fiscal 2025.

Speaker Change: And given the expected ramp in our large project revenue through this fiscal year, we have communicated and anticipate revenue to be more heavily back-end weighted to around 57 to 59 percent in fiscal 2025.

Bruce Thames: The team remains laser focused on executing to achieve our FY26 goals and objectives. Finally, just to wrap up things on slide 10. We were pleased with our first quarter results, which we think demonstrate the progress we've made in developing a business that is more stable, profitable, and durable across a cycle. We're not nearly as reliant on large projects or the capex cycles in the oil and gas markets. Our large and growing installed base of rural customers provides us with a resilient aftermarket franchise, which gives us access to a steady stream of predictable and highly profitable MRO revenues.

Speaker Change: The team remains laser-focused on executing to achieve our FY26 goals and objectives.

Bruce Staines: We were pleased with our first quarter results, which we think demonstrate the progress we've made in developing a business that is more stable, profitable, and durable across a cycle. While the recent macro uncertainty has delayed some of this spending, we don't think that anything has changed to impact these long-term drivers, and we remain confident that this only serves to create pent-up demand when customer confidence improves. Lastly, we benefit from a high-margin, low-capital-intensity business that yields significant cash flow.

Speaker Change: Finally, just to wrap up things on slide 10. We were pleased with our first quarter results which we think demonstrate the progress we've made in developing a business that is more stable, profitable, and durable across a cycle.

Speaker Change: We're not nearly as reliant on large projects or the CAPEX cycles in the oil and gas markets.

Speaker Change: Our large and growing installed base of loyal customers provides us with a resilient aftermarket franchise which gives us access to a steady stream of predictable and highly profitable MRO revenues.

Bruce Thames: We also remain well positioned to benefit from several powerful secular growth drivers. These include the energy transition and decarbonization, ensuring in North America and infrastructure spending. While the recent macro uncertainty has delayed some of this spending, we don't think that anything has changed to impact these long-term drivers, and we remain confident that this only serves to create a pinch-up demand when customer confidence improves. Lastly, we benefit from a high margin, a little capital intensity business that yields significant cash flow. This enabled us to quickly deliver, following the Vapor acquisition and leaves us in a strong financial position.

Speaker Change: We also remain well positioned to benefit from several powerful secular growth drivers. These include the energy transition and decarbonization, onshoring in North America, and infrastructure spending.

Speaker Change: While the recent macro uncertainty has delayed some of this spending, we don't think that anything has changed to impact these long-term drivers and we remain confident that this only serves to create pent-up demand when customer confidence improves.

Speaker Change: Lastly, we benefit from a high margin, low capital intensity business that yields significant cash flow.

Speaker Change: This enabled us to quickly de-lever following the vapor acquisition and leaves us in a strong financial position.

Bruce Thames: We have ample flexibility to pursue our capital allocation priorities, which include investment in growth, both organic and through acquisition, capital returns, and debt paydown, all with a focus on creating long-term shareholder value.

Bruce Staines: We have ample flexibility to pursue our capital allocation priorities, which include investment and growth, both organic and through acquisition, capital returns, and debt paydown, all with a focus on creating long-term shareholder value. That concludes our prepared remarks. We're now ready for the question and answer portion of our call.

Speaker Change: We have ample flexibility to pursue our capital allocation priorities, which include investment and growth, both organic and through acquisition, capital returns, and debt paydown, all with a focus on creating long-term shareholder value.

Unknown Executive: That completes our prepared remarks. We're now ready for the question and answer portion of our call. Thank you, and now we're conducting a question-and-answer session. If you'd like to be placed in the question, please press star one on your telephone key pass. You may press star two if you'd like to move your question from the queue. One moment please. What will you pull for questions?

Speaker Change: That completes our prepared remarks. We're now ready for the question and answer portion of our call.

Operator: Thank you, and now we'll be conducting a question and answer session. If you'd like to be placed in the question queue, please press star 1 on your telephone keypad. You may press star 2 if you'd like to remove your question from the queue.

Speaker Change: Thank you. We will now be conducting a question and answer session. If you'd like to be placed in the question queue, please press star 1 on your telephone keypad. You may press star 2 if you'd like to remove your question from the queue.

Brian Drab: Our first question today is coming from Brian Drab, from William Blair; your line is now live. I'm excited to hear this, here in which there are certain projects that you have line of sight to and what needs to happen for that revenue to come in. Yeah, it's a great question, Brian. So I'll start with our pipeline of sales and project opportunities. That's all the opportunities that are 100,000 and greater. That pipeline is over a billion dollars in revenue opportunities, and it's grown about 9% year over year. And so if I start there, then I'll look at our quoting activity.

Speaker Change: One moment, please, while we poll for questions. Our first question today is coming from Brian Drab from William Blair. Your line is now live.

Unknown Caller: Hi. Good morning. Thanks for taking my question. You know, what needs to happen for that revenue to come in.

Brian Drabb: Hi. Good morning. Thanks for taking my questions.

Brian Drabb: Morning, Brian .

Brian Drabb: Could we just start off by, Bruce, maybe you giving us a little more detail around your visibility to the project revenue recovering later this year?

Speaker Change: Are there certain projects that you have line of sight to and what needs to happen for that revenue to come in?

Speaker Change: Yeah, it's a great question, Brian . So, you know, I'll start with our pipeline of

Speaker Change: Sales and Project Opportunities. That's all the opportunities that are $100,000 and greater. That pipeline is over $1 billion in revenue opportunities, and it's grown about 9% year-over-year.

Bruce Thames: It's up 12 to 13% year over year. So that's been quite strong. And then I look to just our incoming order rates with the positive bill, which this is the first positive bill we've had in a couple of quarters. So some of those trends are leading indicators. We'll need to continue to see book-to-bill be being positive in Q2, but we feel like we have the pipeline of opportunities. The quote volume is there, and our wind rates are flat to improving. So we feel like we're very well positioned to capitalize on these opportunities as these projects move forward.

Speaker Change: And so if I start there, then I'll look at our quoting activity. It's up 12 to 13 percent year over year, so that's been quite strong. And then I look to just our incoming order rates with...

Speaker Change: The Positive Book to Bill, which this is the first positive book to bill we've had.

Speaker Change: in a couple of quarters.

Speaker Change: Some of those trends are leading indicators. We'll need to continue to see.

Speaker Change: Book-to-Bill being positive in Q2, but we feel like we have the pipeline of opportunities, the quote volume is there, and our win rates are flat to improving. So we feel like we're very well positioned to capitalize on these opportunities.

Unknown Executive: Okay, great.

Unknown Caller: Okay, great. Can you? I mean, I'm still trying to sort through all the numbers. So maybe you can just help us reconcile that positive move, you know, the up 9% for the pipeline, and up 13% quoting activity with what you're actually seeing in the backlog.

Speaker Change: as these projects move forward.

Bruce Thames: Can you, I mean, I'm still trying to sort through all the numbers, but maybe you just help us reconcile, you know, that that positive move, you know, the up 9% for the pipeline of 13% quoting activity with what you're actually seeing in the backlog. Yeah, so as I look at backlog, if we look year over year, backlog was down year over year, 10%, but it was up 5% sequentially. And I'll just remind you that as we look at backlog, we're talking about these are the large projects in backlog. Typically, our flow business, our MRO business that we reference in up extending is in and out of backlog very quickly.

Speaker Change: Okay, great. Can you, I mean, I'm still trying to sort through all the numbers, so maybe you just...

Speaker Change: Help us reconcile, you know, that positive, you know, the up 9% for the pipeline, up 13% quoting activity with what you're actually seeing in the backlog.

Greg Lucas: Yeah, so as I look at backlog, if we look year over year, backlog was down 10% year over year, but it was up 5% sequentially. And I'll just remind you that as we look at backlog, we're talking about these are the large projects in backlog. Typically, our flow business, our MRO business that we reference in OPEC spending, is in and out of backlog very quickly. And the fact that we had 85% of our revenues in our first quarter tied to these types of revenues really speaks to the flow and the velocity.

Speaker Change: Yeah, so as I look at backlog, if we look year over year, backlog was down.

Speaker Change: year-over-year 10% but it was up 5% sequentially.

Speaker Change: And I'll just remind you that as we look at backlog, we're talking about these are the large projects in backlog. Typically, our flow business, our MRO business that we reference in op-ex spending is in and out of backlog very quickly.

Bruce Thames: And the fact that we had 85% of our revenues in our first quarter were tied to these types of revenues really speaks to the flow and the velocity. It comes in and out of backlog within the period. So I think two things to know: one is the backlogs have risen sequentially based on the positive look to build; second, the change in mix to more up extending, which were very well positioned with our large and scaled base to be able to capitalize on those two things, are the dynamics that we're looking at as in backlog year over year and sequentially.

Speaker Change: And the fact that we had 85% of our revenues in our first quarter were tied to these types of revenues really speaks to the flow and the velocity. It comes in and out of backlog within the period.

Greg Lucas: It comes in and out of backlog within the period. So I think two things to note. One is that backlogs have risen sequentially based on the positive book-to-bill. Second, the change in mix to more OPEC spending, which we're very well positioned with our large installed base to be able to capitalize on. Those two things are the dynamics that we're looking at in backlog year over year.

Speaker Change: So I think two things to note. One is the backlogs have risen sequentially based on the positive book to bill.

Speaker Change: Second, the change in mix to more OPEX spending, which we're very well positioned with our large installed base to be able to capitalize on. Those two things are the dynamics that we're looking at and backlogged year over year and sequentially. Thank you. Thank you. Thank you.

Unknown Executive: Got it, yeah.

Bruce Thames: So, at the moment when you have a mix like this, the backlog kind of becomes less relevant. It really does. Yes, particularly when we were talking about object revenues.

Speaker Change: Got it, yeah, so at the moment when you have a mix like this the backlog kind of becomes less relevant, it really does. Yes, particularly when we're talking about op-ed revenues.

Bruce Thames: Yeah, maybe just one more question for now, and I may, I may have missed, but did you mention what percentage of orders coming in or what percent of the backlog is tied to decarbonization and renewable, and how is that trending? Yeah, it was nine million in orders during a quarter and seven percent of total bookings. Got it. Okay. The pipeline has grown to a 320 million, up from roughly 250 million at the end of our fiscal 24. Oh, that's good to know. Okay. All right.

Speaker Change: Yeah.

Speaker Change: Maybe just one more question for now, and I may have missed, but did you mention what percentage of orders coming in or what percent of the backlog is tied to decarbonization and renewables, and how is that trending?

Speaker Change: Yeah, it was 9 million in orders during a quarter and 7% of total bookings.

Speaker Change: Yeah.

Speaker Change: The pipeline has grown to $320 million, up from roughly $250 million at the end of our fiscal 24.

Unknown Caller: Oh, that's good.

Unknown Executive: Thanks, Bruce. Thank you.

Speaker Change: Oh, that's good to know. Okay. All right. Thanks, Bruce.

Justin Ages: Next question is coming from Justin Ages from CGS Securities.

Speaker Change: Thank you.

Bruce Thames: How long has that live? Hi, morning, Bruce. Hey, good morning. Can you unpack the diversified end markets a bit? You know, good progress on that. I wanted to get your thoughts on, you know, food and beverage, transport, what what trend you're seeing in those end markets. Yes, the areas we've seen the most activity are really been in chemical, petrochemical, power has been very strong as we look there. Certainly, some of the opportunities that we've seen around infrastructure in rail and transit as we look forward. Those are all significant opportunities. And I did note some of the building pipeline of opportunities we have in decarbonization and electrification opportunities that is really spread across a wide range of end markets.

Speaker Change: Thank you. Next question is coming from Justin Ages from CGS Securities. Your line is now live.

Justin Aegis: Hi, morning, Bruce.

Justin Ages: Hey, good morning.

Justin Ages: Can you unpack the diversified end markets a bit, you know, good progress on that, but wanted to get your thoughts on, you know, food and beverage, transport, what trends you're seeing in those end markets?

Justin Ages: Yes.

Speaker Change: The areas we've seen the most activity have really been in chemical, petrochemical power has been very strong as we look there.

Speaker Change: Certainly, some of the opportunities that we've seen around infrastructure and rail and transit as we look forward, those are all significant opportunities, and I did note

Speaker Change: some of the building pipeline of opportunities we have in decarbonization and electrification opportunities that is really spread across a wide range of end markets.

Bruce Thames: I appreciate that I color and then. One thing to note, we do have a significant number of opportunities in the LNG, local faction facilities in particularly in North America.

Bruce Staines: One other thing to note; we do have a significant number of opportunities for LNG liquefaction facilities, particularly in North America.

Colin: I appreciate that, Colin.

Colin: One other thing to note, we do have a significant number of opportunities in the LNG liquefaction facilities particularly in North America.

Unknown Executive: Okay.

Bruce Thames: And then on capital allocation strategy, can you give us an update on what you're seeing in the M&A market, especially as it pertains to reaching that 600 to 700 million dollar revenue target for fiscal 26. Thanks. Yeah, first of all, we have a really healthy pipeline of in M&A opportunities that we believe are actionable within the next 12, 18 months. So I think that's very positive. Certainly, our balance sheet is in good shape. You know, these things are our binary. So, you know, certainly it's a winter loose scenario, but we think we're very well positioned, and we see a number of opportunities that really fit squarely within our strategic initiatives.

Speaker Change: Okay. And then on capital allocation strategy, can you give us an update on, you know, what you're seeing in the M&A market, especially as it pertains to, you know, reaching that 600 to 700 million dollar kind of revenue target for fiscal 26? Thanks.

Speaker Change: Yeah. Thank you.

Speaker Change: First of all, we have a really healthy pipeline of M&A opportunities that

Speaker Change: We believe, you know, are actionable within the next 12 to 18 months.

Speaker Change: So I think that's very positive. Certainly our balance sheet is in good shape. You know, these things are binary, so...

Speaker Change: Certainly, it's a win-or-lose scenario, but we think we're very well positioned, and we see a number of opportunities that really fit squarely within our strategic initiatives.

Unknown Executive: I appreciate you taking the questions.

Unknown Executive: Thank you.

Speaker Change: I appreciate you taking the questions. Thank you.

Unknown Executive: As a reminder, that star ones be placed to the question to you.

Speaker Change: Thank you.

John Brods: Our next question is coming from John Brods from Kansas City Capitol. Your line is out live.

Speaker Change: Thank you. As a reminder, that's star one to be placed in the question queue. Our next question is coming from Jon Braatz from Kansas City Capital. Your line is now live. Morning, Bruce. Morning, Greg.

Bruce Thames: Morning, Bruce. Morning, Greg. Morning, Bruce.

Bruce Thames: Just back on the, when we look at the big project and the prospects for business in that area, should the spending on the cap X budgets begin to increase, let's say after the election with some interest rate cuts, would you see a, you know, a cut in sort of the operating expense budgets? Is there a given, what kind of give and take between those two budgets are there for, for your clients? I'd really don't believe they're closely related; you know, operating expenditures are much less susceptible to economic cycles. And I, and I really view those as being fairly stable.

Jon Braatz: Morning, Bruce, just back on the when we look at the big project and the prospects for for business in that area.

Jon Braatz: Should the spending on the CapEx budgets begin to increase, let's say after the election, with some interest rate cuts?

Unknown Caller: Would you see a, you know, a cut in sort of the operating expense budgets? I mean, is there a given, what kind of give and take between those two budgets are there for your clients?

Speaker Change: Would you see a, you know, a cut in sort of the operating expense budgets? I mean, is there a given, what kind of give and take between those two budgets are there for your clients?

Bruce Thames: I really don't believe they're...

Speaker Change: closely related. You know, operating expenditures are are much less

Speaker Change: susceptible to economic cycles and I

Bruce Thames: It's one of the reasons we've really focused to have that be a larger part of our incoming revenue stream.

Speaker Change: And I really view those as being fairly stable. It's one of the reasons we really focused to...

Bruce Thames: So I'd start there. As far as the Cap X, as I look at this, the customers that we've spoken with haven't had significant cuts in Cap X budgets. In fact, in most cases, they're flat. And in some cases, they're even projected to increase this year.

Speaker Change: have that be a larger part of our incoming revenue stream. So I'd start there. As far as the CapEx, as I look at this, the customers that we've spoken with

Speaker Change: have not had significant cuts in capex budgets. In fact, in most cases they are flat and in some cases they are even projected to increase this year. But what we have seen particularly in the last two quarters

Bruce Thames: But what we've seen, particularly in the last two quarters, our fourth quarter of 24 and into this quarter, we have seen a slow down in decision making. So we continue to see that pipeline of opportunities grow, but the time between when that's quoted and when we actually receive orders has become more protracted.

Speaker Change: Our fourth quarter of 24 and into this quarter, we have seen a slowdown.

Speaker Change: in decision-making. So we continue to see that pipeline of opportunities grow, but the time between when that's quoted and when we actually receive orders has become more protracted.

Bruce Thames: So our hope would be in the latter part of this year, we get through and maybe get some clarity from the Fed around interest rates as well as around the election that customers would feel more comfortable in moving forward with some of that spending.

Speaker Change: So our hope would be in the latter part of this year we get through and maybe get some clarity from the Fed around interest rates as well as around the election that customers would feel more comfortable in moving forward with some of that spending.

Bruce Thames: Any sense on your part that there was some catch up in the maintenance spending by your clients? No, that's long in the rear view mirror from like two years back.

Speaker Change: Any sense on your part that there was some catch-up in the maintenance spending?

Speaker Change: by your clients.

Speaker Change: No, that's long in the rear view mirror from like two years back. Yep, yep. Okay. Okay, good. And then on vapor, you know, I think that's going to be a very nice acquisition.

Unknown Executive: Okay, good.

Bruce Thames: And then on vapor, I think that's going to be a very nice acquisition. Are you seeing things fall in the place for vapor as you expected? And secondly, maybe there is an expectation that maybe vapor will contribute more and growth at vapor can accelerate a little bit because of these electrification trends that we're seeing? So vapor, it's first of all strategically, it has really, we're beginning to see that it's probably even a little better as far as the opportunities in the marketplace that we're seeing, particularly around electrification. And I would highlight particularly the electrode boiler line as well as our resistance electric boilers and really that shift from hydrocarbon-fired heating and industrial processes to electric.

Unknown Caller: I think that's going to be a very nice acquisition. Maybe there is an expectation that maybe vapor will contribute more and growth of vapor can accelerate a little bit because of these electrification trends that we're seeing?

Speaker Change: Are you seeing things fall into place for vapor as you expect it? And secondly,

Speaker Change: Maybe, is there an expectation that maybe vapor will contribute more and growth of vapor can accelerate a little bit because of these electrification trends that we're seeing?

Speaker Change: So, Weber, it's first of all, strategically, it has really

Weber: We're beginning to see that it's probably even a little better as far as the opportunities in the marketplace that we're seeing, particularly around

Weber: Electrification and you know I would highlight

Weber: particularly the electro-boiler line as well as our resistance electric boilers.

Bruce Thames: So that trend has been positive. I think the other thing that's really surprised us to the upside is just the number of inquiries we've received in our sales organization and our traditional channels, having added vapor to the mix. So we're really getting better market coverage, and we're seeing more opportunities.

Weber: and our sales organization and our traditional channels.

Weber: having added vapor to the mix. So we're really getting better market coverage and we're seeing more opportunities.

Bruce Thames: Quite frankly, right now, our biggest challenge is scaling capacity, and we're focused on implementing the Thermon business system in the vapor power operations, both in Franklin Park and Morstown. And so we're heavy at work trying to unlock capacity there that would give us the ability to deliver upside to the current plan. I can tell you there's, you know, there's work to be done. Our teams are, are busy really working on those opportunities to be bottleneck and improve both the supply chain as well as manufacturing capacity in our facilities.

Weber: Quite frankly, right now, our biggest challenge is scaling capacity, and we're focused on implementing the Thermon business system in the vapor power operations, both in Franklin Park and Morristown.

Weber: And so we're heavy at work trying to unlock capacity there that would give us the ability to deliver upside.

Weber: I can tell you there's work to be done, our teams are

Weber: are busy really working on those opportunities to de-bottleneck and improve both the supply chain as well as manufacturing capacity in our facilities.

Bruce Thames: And so certainly that would be our hope, maybe if not in this year, to see upside in the coming years as we build capacity in that operation.

Weber: And so certainly, that would be our hope, maybe if not in this year, to see upside in the coming years as we build capacity in that operation.

Bruce Thames: Would you envision an increase in your cap spending to support the growth at Vapor? You know, a new facility or expanded facility beyond improving supply chain? and other things. We believe our current estimates for CAPEX include capital to V-Balamic and increase capacity within those operations.

Unknown Caller: Would you envision an increase in your cap spending to support the growth of VAPR, you know, a new facility or expanded facility beyond improving, you know, the supply chain and other things?

Speaker Change: Would you envision an increase in your cap spending to support the growth at VAPOR? You know, a new facility or expanded facility beyond improving, you know, supply chain and other things?

Bruce Thames: But on a go-forward basis, as things evolve, certainly in subsequent years, we might see that there could be additional CAPEX depending on if demand ramps faster than what we had originally contemplated.

Speaker Change: In subsequent years, we might see that there could be additional CapEx, depending on if demand ramps faster than what we had originally contemplated.

Unknown Executive: Okay. All right.

John Brods: Thank you, Bruce. Thank you, John. Thank you.

Unknown Executive: We reshed up our question and suggestion.

Kevin Fox: I'd like to turn the floor back over for any further closing comments. Kevin, thank you. And again, I'd like to thank our Thermon employees around the globe for serving our customers with excellence. Each and every day.

Speaker Change: Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over for any further closing comments.

Bruce Staines: Kevin, thank you. And again, I'd like to thank our Thermon employees around the globe for serving our customers with excellent quality.

Unknown Executive: And I'd like to thank all of you for your time and interest in Thermon.

Unknown Executive: If we don't speak during the quarter, we look forward to speaking to you again on our next quarterly call.

Unknown Executive: Have a good day. Thanks, everybody. Thank you.

Unknown Executive: Does conclude today's telecom for some webcasts. Let me disconnect your line after this time, and have a wonderful day.

Speaker Change: Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.

Unknown Executive: Thank you for your attention.