Thermon Group's Q3 2025: Contradictions in Project Timelines, Decarbonization, and Margins

These are the key contradictions discussed in Thermon Group Holdings' latest 2025 Q3 earnings call, specifically including: Large Project Activity and Timing, Decarbonization Pipeline, and Gross Margin Expectations:



Revenue and Order Trends:
- Thermon Group reported a decline in revenue by 2% during the third quarter, with large project sales down 45% from last year.
- However, OpEx revenues increased by 13%, indicating stable MRO spending and diversification efforts.
- The decline in revenue was due to delayed decisions in large capital projects, while order trends improved due to solid momentum in petrochem, transit, and oil and gas sectors.

Backlog Growth and Financial Performance:
- Thermon's backlog increased nearly 48% on a reported basis, with a 9% organic increase.
- This growth was driven by order trends and extended backlog conversion.
- Despite a 2% revenue decline, adjusted EBITDA margin reached 24%, reflecting operational efficiency and cost savings.

Tariff Impact and Strategic Manufacturing:
- The aggressive tariff approach has introduced uncertainty, with Thermon's total cost of goods sold exposed to U.S.-Canada tariffs being roughly 10%.
- The company's in-country manufacturing strategy aims to mitigate the impact of tariffs by being close to customers, reducing potential disruptions in supply chains.
- The outcome of trade negotiations will significantly affect customer behaviors and business operations.

Power and Data Center Opportunities:
- Thermon's power business continues to show favorable trends, driven by increasing demands on the grid and the growth in population, data centers, and EVs.
- The company is positioned to benefit from the $500 billion funding for computing infrastructure, which includes liquid cooled data centers, representing a new market opportunity.
- Participation in these projects, particularly in data centers, can provide long-term growth potential, leveraging their technical capabilities and customer relationships.