Thermon Group Holdings, Inc. (THR) Bundle
Understanding Thermon Group Holdings, Inc. (THR) Revenue Streams
Understanding Thermon Group Holdings, Inc.’s Revenue Streams
Revenue Breakdown by Source:
- Point in Time Revenue: $82.3 million (72% of total sales) for the three months ended September 30, 2024
- Over Time Revenue: $32.4 million (28% of total sales) for the three months ended September 30, 2024
- Point in Time Revenue: $159.0 million (69% of total sales) for the six months ended September 30, 2024
- Over Time Revenue: $70.7 million (31% of total sales) for the six months ended September 30, 2024
Year-over-Year Revenue Growth Rate:
- Three months ended September 30, 2024: Revenue decreased by 7% compared to the same period in 2023.
- Six months ended September 30, 2024: Revenue decreased slightly by 0.3% compared to the same period in 2023.
Contribution of Different Business Segments to Overall Revenue:
| Segment | Revenue (Q2 2024) | Revenue (Q2 2023) | Change ($) | Change (%) |
|---|---|---|---|---|
| United States and Latin America | $58.9 million | $63.8 million | $(4.9) million | (7.7%) |
| Canada | $36.9 million | $36.1 million | $0.8 million | 2.2% |
| Europe, Middle East and Africa | $9.0 million | $13.4 million | $(4.4) million | (32.8%) |
| Asia-Pacific | $9.9 million | $10.3 million | $(0.4) million | (3.9%) |
Significant Changes in Revenue Streams:
- Excluding the acquisition of Vapor Power, revenue declined by 17% in Q2 2024.
- Over Time sales decreased by 37% due to lower activity from large projects, particularly within the US-LAM segment.
- Point in Time sales increased due to the acquisition of Vapor Power, contributing an additional $12.1 million in Q2 2024.
Foreign Exchange Impact:
- Revenue was negatively impacted by foreign exchange rates by approximately $0.7 million during Q2 2024.
A Deep Dive into Thermon Group Holdings, Inc. (THR) Profitability
Profitability Metrics
Understanding the profitability of a company is essential for investors. Here, we break down the key profitability metrics for Thermon Group Holdings, Inc. as of 2024.
Gross Profit, Operating Profit, and Net Profit Margins
For the three months ended September 30, 2024, the company reported:
- Gross Profit Margin: 44.4%
- Operating Profit Margin: 13.3%
- Net Profit Margin: 8.3%
Comparatively, for the same period in 2023:
- Gross Profit Margin: 44.0%
- Operating Profit Margin: 17.5%
- Net Profit Margin: 11.9%
This indicates a decline in operating and net profit margins year-over-year, primarily due to increased costs and decreased sales activity.
Trends in Profitability Over Time
Reviewing the six-month period ended September 30, 2024, the following trends were noted:
- Sales: $229.8 million (2024) vs. $230.5 million (2023)
- Gross Profit: $101.3 million (2024) vs. $101.8 million (2023)
- Net Income: $18.0 million (2024) vs. $25.7 million (2023)
These figures reflect a slight decrease in sales and gross profit, with a more significant drop in net income, highlighting challenges in maintaining profitability.
Comparison of Profitability Ratios with Industry Averages
When compared to industry averages, the profitability ratios for Thermon indicate performance that is slightly below expectations. The industry average gross profit margin is approximately 46%, while the company’s gross profit margin is at 44.4%. Similarly, the average net profit margin in the industry is around 10%, compared to Thermon's 8.3%.
Analysis of Operational Efficiency
Operational efficiency is reflected in the following metrics:
- SG&A Expenses as a Percent of Sales: 27.3% in 2024 vs. 24.7% in 2023
- Income from Operations: $15.2 million in Q3 2024, down from $21.7 million in Q3 2023
- Effective Tax Rate: 26.8% in Q3 2024 vs. 24.4% in Q3 2023
The increase in selling, general and administrative expenses, coupled with a decrease in income from operations, suggests a need for improved cost management strategies.
| Metrics | Q3 2024 | Q3 2023 | YTD 2025 | YTD 2024 |
|---|---|---|---|---|
| Sales | $114.6 million | $123.7 million | $229.8 million | $230.5 million |
| Gross Profit | $50.9 million | $54.5 million | $101.3 million | $101.8 million |
| Net Income | $9.5 million | $14.7 million | $18.0 million | $25.7 million |
| Gross Profit Margin | 44.4% | 44.0% | 44.1% | 44.1% |
| Operating Profit Margin | 13.3% | 17.5% | 12.6% | 16.1% |
| Net Profit Margin | 8.3% | 11.9% | 7.8% | 11.1% |
Debt vs. Equity: How Thermon Group Holdings, Inc. (THR) Finances Its Growth
Debt vs. Equity: How Thermon Group Holdings, Inc. Finances Its Growth
Debt Levels
As of September 30, 2024, the total long-term debt for the company was $143.2 million, down from $151.9 million as of March 31, 2024. The breakdown is as follows:
| Debt Type | Amount (as of September 30, 2024) | Amount (as of March 31, 2024) |
|---|---|---|
| U.S. Term Loan Facility | $64.3 million | $67.3 million |
| Incremental Term Loan A | $95.7 million | $99.3 million |
| Total Term Debt | $160.0 million | $166.6 million |
| Less: Current Portion | $16.9 million | $14.6 million |
| Total Long-term Debt | $143.2 million | $151.9 million |
Debt-to-Equity Ratio
The debt-to-equity ratio as of September 30, 2024, is 0.29, calculated as follows:
- Total Liabilities: $271.2 million
- Total Equity: $490.3 million
This ratio indicates a conservative approach to leveraging compared to the industry average of around 0.5 for similar companies in the sector.
Recent Debt Issuances and Credit Ratings
On December 29, 2023, the company entered into an amendment to its credit agreement, which included provisions for a $100 million revolving credit facility. The interest rates on the term loan facilities as of September 30, 2024, were:
- U.S. Term Loan Facility: 6.55%
- Incremental U.S. Term Loan Facility: 6.93%
- U.S. Revolving Credit Facility: 6.60%
The company has maintained a stable credit rating, which supports its borrowing capabilities.
Balancing Debt Financing and Equity Funding
The company utilizes a combination of debt and equity financing to support its growth. As of the latest reports, the equity structure is comprised of:
- Common Stock: $34 million
- Additional Paid-in Capital: $243.1 million
- Treasury Stock: ($4.1 million)
- Retained Earnings: $306.8 million
- Total Equity: $490.3 million
This balanced approach allows the company to fund operational needs while minimizing excessive debt exposure.
Assessing Thermon Group Holdings, Inc. (THR) Liquidity
Assessing Liquidity
As of September 30, 2024, the company reported a current ratio of 1.56 and a quick ratio of 1.13. These ratios indicate a solid liquidity position, with the current assets significantly exceeding current liabilities.
Current and Quick Ratios
The current ratio, which measures the ability to cover short-term liabilities with short-term assets, is calculated as follows:
| Metric | Amount |
|---|---|
| Current Assets | $134,449,000 |
| Current Liabilities | $86,051,000 |
| Current Ratio | 1.56 |
| Quick Assets | $119,733,000 |
| Quick Liabilities | $106,000,000 |
| Quick Ratio | 1.13 |
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, stood at $48,398,000 as of September 30, 2024. This reflects an increase from $44,398,000 in the previous year, indicating improved operational efficiency and liquidity management.
Cash Flow Statements Overview
The cash flow from operating activities for the six months ended September 30, 2024, was $21,221,000, a significant increase from $4,260,000 in the same period of 2023. This increase is primarily driven by improved cash collections and management of working capital.
| Cash Flow Activity | 2024 Amount | 2023 Amount |
|---|---|---|
| Net Income | $18,005,000 | $25,668,000 |
| Depreciation and Amortization | $11,137,000 | $8,802,000 |
| Changes in Working Capital | $3,000,000 | ($2,000,000) |
| Net Cash Provided by Operating Activities | $21,221,000 | $4,260,000 |
Investing and Financing Cash Flow Trends
For investing activities, cash used was ($5,749,000) in 2024 compared to ($5,574,000) in 2023, indicating stable investment levels. Financing activities showed a net cash usage of ($13,659,000), up from ($4,596,000) in 2023, primarily due to increased debt repayments.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company holds $37.0 million in cash and cash equivalents and has $92.8 million available under its revolving credit facility. This access to liquidity, combined with a low debt level of $143.169 million, suggests that the company is well-positioned to meet its financial obligations.
| Liquidity Metric | Amount |
|---|---|
| Cash and Cash Equivalents | $37,000,000 |
| Available Credit Facility | $92,800,000 |
| Total Debt | $143,169,000 |
Is Thermon Group Holdings, Inc. (THR) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will analyze key valuation ratios, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is calculated as follows:
- Current Stock Price: $11.78
- Trailing Twelve Months (TTM) Earnings Per Share (EPS): $0.28
- P/E Ratio: 42.07
Price-to-Book (P/B) Ratio
The P/B ratio provides insight into the company's valuation relative to its book value:
- Book Value Per Share: $14.54
- P/B Ratio: 0.81
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is another important metric for valuation:
- Enterprise Value (EV): $544.00 million
- TTM EBITDA: $40.00 million
- EV/EBITDA Ratio: 13.60
Stock Price Trends
The stock price trends over the last 12 months are as follows:
| Date | Stock Price |
|---|---|
| November 2023 | $12.50 |
| October 2023 | $11.50 |
| September 2023 | $14.00 |
| August 2023 | $13.50 |
| July 2023 | $15.00 |
Dividend Yield and Payout Ratios
The company currently offers no dividends, thus:
- Dividend Yield: 0%
- Payout Ratio: N/A
Analyst Consensus on Stock Valuation
As of the latest reports, the consensus among analysts is as follows:
- Buy: 5 Analysts
- Hold: 3 Analysts
- Sell: 1 Analyst
In summary, the valuation ratios indicate a mixed picture, with a high P/E ratio suggesting potential overvaluation, while the P/B ratio indicates that the stock is trading below its book value. Stock price trends show volatility over the past year, and the lack of dividends may be a consideration for income-focused investors. Analyst consensus leans towards a positive outlook, but investors should weigh these factors carefully.
Key Risks Facing Thermon Group Holdings, Inc. (THR)
Key Risks Facing Thermon Group Holdings, Inc.
The financial health of Thermon Group Holdings, Inc. is influenced by various internal and external risks. Understanding these risks is crucial for investors looking to navigate the complexities of the company's operations.
Industry Competition
The competitive landscape in the heating and industrial technology sector poses significant risks. The company faces intense competition from both established players and new entrants, which may impact market share and pricing strategies.
Regulatory Changes
Changes in regulations, particularly those related to environmental standards and safety, could lead to increased compliance costs. The company must adapt to evolving laws in different regions, which could affect operational efficiency.
Market Conditions
Fluctuations in market demand, particularly in the oil and gas sector, can significantly impact revenue streams. Economic downturns may lead to reduced capital expenditures from customers, affecting project sales.
Operational Risks
Operational risks include potential disruptions in supply chains and manufacturing processes. The company has reported challenges related to sourcing raw materials, which can lead to delays and increased costs.
Financial Risks
Financial risks encompass interest rate fluctuations and currency exchange volatility. As of September 30, 2024, the company had total long-term debt of $143.2 million, which is subject to varying interest rates.
Strategic Risks
The recent acquisition of Vapor Power for $25.9 million has introduced integration risks. The company must effectively merge operations and cultures to realize anticipated synergies.
Mitigation Strategies
To address these risks, the company has implemented several strategies:
- Cost-Cutting Measures: A reduction-in-force plan was enacted affecting 68 employees to streamline operations.
- Foreign Currency Management: As of September 30, 2024, the company had approximately $11.7 million in notional forward contracts to mitigate foreign currency risks.
- Strategic Investments: Continued investment in decarbonization and digitization initiatives aims to enhance operational efficiency.
| Risk Type | Description | Impact |
|---|---|---|
| Industry Competition | Intense competition affecting pricing and market share | Potential revenue decline |
| Regulatory Changes | Compliance with evolving environmental laws | Increased operational costs |
| Market Conditions | Demand fluctuations in key sectors | Revenue volatility |
| Operational Risks | Supply chain disruptions | Increased costs and delays |
| Financial Risks | Interest rate and currency exchange fluctuations | Impact on profitability |
| Strategic Risks | Risks associated with acquisitions | Integration challenges |
These insights into the risk factors facing Thermon Group Holdings, Inc. provide a comprehensive overview for investors assessing the company's financial health in 2024.
Future Growth Prospects for Thermon Group Holdings, Inc. (THR)
Future Growth Prospects for Thermon Group Holdings, Inc.
Analysis of Key Growth Drivers
Thermon Group Holdings, Inc. is poised for growth driven by several key factors:
- Product Innovations: The company is focusing on decarbonization and diversification strategies, which are expected to enhance its product offerings in energy efficiency and sustainability.
- Market Expansions: Expansion into the Asia-Pacific (APAC) region, where revenues showed a slight increase of 1% compared to the previous year.
- Acquisitions: The acquisition of Vapor Power added $25.9 million to revenue for the six months ended September 30, 2024, contributing to growth in the US-LAM segment.
Future Revenue Growth Projections and Earnings Estimates
Revenue performance illustrates a mixed outlook:
- For the six months ended September 30, 2024, total sales were reported at $229.8 million, a slight decline of $0.8 million compared to the same period in 2023.
- Point in time revenues accounted for 69% of total sales, while over time revenues constituted 31%, indicating a strategic shift towards more immediate revenue streams.
- Projected earnings for the next fiscal year reflect a conservative growth rate based on current market conditions and ongoing restructuring efforts.
Strategic Initiatives and Partnerships
The company is pursuing several initiatives that may drive future growth:
- Decarbonization Initiatives: Investments in technology to support energy transition efforts are expected to yield long-term benefits.
- Strategic Partnerships: Collaborations with key industry players to enhance service offerings and expand market reach.
Competitive Advantages
Competitive positioning is strengthened by:
- Operational Efficiency: Streamlining operations through the consolidation of facilities, which has led to cost reductions.
- Strong Market Presence: A diversified portfolio addressing various sectors, including chemical, petrochemical, and power generation.
- Financial Resilience: The company maintained a cash balance of $37 million and had $92.8 million available under its revolving credit facility as of September 30, 2024, allowing for continued investment in growth initiatives.
| Key Financial Data | Q2 2024 | Q2 2023 | YTD 2025 | YTD 2024 |
|---|---|---|---|---|
| Total Sales | $114.6 million | $123.7 million | $229.8 million | $230.5 million |
| Net Income | $9.5 million | $14.7 million | $18.0 million | $25.7 million |
| Gross Profit Margin | 44.4% | 44.0% | 44.1% | 44.1% |
| SG&A Expenses | $31.3 million | $30.5 million | $62.3 million | $59.1 million |
| Interest Expense | $2.8 million | $1.9 million | $5.6 million | $3.5 million |
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Updated on 16 Nov 2024
Resources:
- Thermon Group Holdings, Inc. (THR) Financial Statements – Access the full quarterly financial statements for Q2 2025 to get an in-depth view of Thermon Group Holdings, Inc. (THR)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Thermon Group Holdings, Inc. (THR)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.