Thermon Group (THR -0.89%) delivered its fiscal 2025 fourth-quarter results on May 22, reporting 5% year-over-year revenue growth to $134.1 million, an adjusted EBITDA margin of 22.7%, and record annual free cash flow of $53 million. Management at the industrial process heating specialist highlighted a 29% year-over-year backlog increase as of March 31 (the quarter’s end), strategic expansion into high-growth markets, and outlined the tariff headwinds it expects for fiscal 2026, as well as its plans for rigorous mitigation efforts.
Backlog Acceleration and Diversification Drive Competitive Resilience
As of fiscal 2025’s end, the company’s backlog was up by 29% year over year, with organic backlog up by 20%. It’s benefiting from gains in the liquid natural gas (LNG) segment and from its exposure to diversified end markets. The backlogs point to sustained order strength despite a 37% annual decrease in revenue from large capital projects. Its book-to-bill ratio has remained above 1.0 for four consecutive quarters, supported by rebounding oil and natural gas activity and strategic wins in the LNG business after the U.S. moratorium on permits for new LNG export projects was lifted in January.
“As a result, our backlog as of March 31 increased 29% from last year, with the organic backlog up 20%, driven by momentum in diversified verticals coupled with a rebound in certain oil and gas markets.”
— Bruce Thames, CEO
LNG and Strategic M&A Expand Addressable Market
The lifting of the U.S. moratorium on permits for new LNG export projects catalyzed increased project bidding, and Thermon secured five major awards. The January 2024 acquisition of Vapor Power contributed to a 25% sales pipeline expansion. Later, in fiscal 2025, it acquired heating solutions specialist Fati, and demand from Thermon’s legacy customers has approximately doubled Fati’s backlog. Thermon management sees $80 million in potential opportunities for its offerings in the LNG space.
“We built a strong portfolio of products targeting the LNG market, have secured five major awards, and are well-positioned to capitalize on numerous other opportunities in our pipeline. … The addition of Vapor Power has expanded our addressable market, increasing our sales pipeline by 25%, even though the business represents just 11% of total revenue today.”
— Bruce Thames, CEO
Thermon’s proactive portfolio and M&A strategies are solidifying its competitive position in high-growth, high-barrier industries, directly supporting multiyear organic expansion and recurring revenue base shifts.
Tariff Headwinds Quantified and Countermeasures Deployed
Management’s guidance factors in an expected annualized gross tariff headwind of $16 million to $20 million, with the net impact after mitigation estimated at $4 million to $6 million, primarily affecting its first-half margins. Management has raised prices, reconfigured supply chains, and enacted production shifts in its effort to offset the cost inflation caused by those new import taxes. Its planned $5 million investment in its Enterprise Resource Planning (ERP) system will be excluded from adjusted EBITDA and EPS, as well as from the guidance figures.
“Based upon these assumptions, we’re expecting an annualized impact of roughly $16 [million] to $20 million on a gross basis prior to mitigating actions, which are already underway. … We believe on a net impact, it’s somewhere in the $4 [million] to $6 million range within the current fiscal year.”
— Bruce Thames, CEO
Looking Ahead
Management’s guidance for fiscal 2026 is for $495 million to $535 million in revenue (3.5% growth at midpoint) and adjusted EBITDA of $104 million to $114 million, with a brief margin dip expected in the first half due to tariff lag, but with margins recovering as the company’s pricing actions take effect in the second half. Management is neutral to cautious on its demand expectations, given the elevated levels of macroeconomic and trade policy risks, but is reinforcing aggressive capital allocation priorities in M&A, share repurchases, and organic growth investments.
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