Sarah Alexander Rodney Lynn Bingham - Chief Executive Officer, President and Director Jay C. Peterson - Chief Financial Officer, Chief Accounting Officer, Senior Vice President of Finance and Secretary George P. Alexander - Executive Vice President of Global Sales.

Jeffrey D. Hammond - KeyBanc Capital Markets Inc., Research Division Tim Mulrooney R. Scott Graham - Jefferies LLC, Research Division Charles D. Brady - BMO Capital Markets U.S. Steven Ramsey - Thompson Research Group, LLC Jonathan P. Braatz - Kansas City Capital Associates A.J. Strasser.

Good day, ladies and gentlemen, and welcome to the Thermon Third Quarter 2014 Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Sarah Alexander. Ma'am, you may begin..

Thank you, Shannon. Good morning, and thank you for joining us for today's earnings conference call. We issued an earnings press release this morning, which has been filed with the SEC on Form 8-K and is also available on the Investor Relations section of our website at www.thermon.com.

A replay of today's call will be available on our website after the conclusion of this call. This broadcast is the property of Thermon. Any redistribution, retransmission or rebroadcast in any form without the expressed written consent of the company is prohibited. During this call, our comments may include forward-looking statements.

These forward-looking statements are subject to risks and uncertainties, and our actual results may differ materially from the views expressed today. Some of these risks have been set forth in the press release and in our annual reports on Form 10-K that was filed with the SEC last June.

We also would like to advise you that all forward-looking statements made on today's call are intended to fall within the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

These statements may include, among others, our outlook for future performance and revenue growth, leverage ratios, acquisitions and various other aspects of our business.

During this call, we may also discuss adjusted EPS, adjusted EBITDA, adjusted net income, free cash flow per share and return on equity, which are non-GAAP financial measures as defined under the rules of the Securities and Exchange Commission and are intended as supplemental measures of our financial performance that are not required by or presented in accordance with U.S.

Generally Accepted Accounting Principles. These measures should be considered in addition to, not as substitute for, income from operations, net income, net income per share, net cash provided by operating activities and other measures of financial performance reported in accordance with GAAP.

And now it's my pleasure to turn the call over to Rodney Bingham, our President and Chief Executive officer..

oil, gas, power and chemical. We are also continuing to benefit from a rebound in the chemical, petrochemical and power sectors that are related to the shale oil and gas developments in the United States. Thermon's updated pipeline is very robust with over 500 project opportunities and approximately $1 billion in estimated value.

This is an increase over last quarter. Our management team would like to thank our employees throughout our global organization for their hard work and dedication. We would also like to thank our customers, investors and advisors for their support and confidence. Thank you again for joining us today.

Jay Peterson, our CFO, will now address the details of our financial performance for Q3..

Thank you, Rodney. Good morning. Today, I will discuss our third quarter results starting with orders and top line revenue. Orders for the quarter totaled $70 million and that's a decline of 1% relative to Q3 of last year. Our revenue this past quarter totaled $71.5 million, a decrease of 7% relative to the prior year's quarter.

I would like to accentuate the fact that excluding the Kearl Lake project, we have actually grown orders, gross margins and backlog during this last quarter and fiscal year, diminishing our financial reliance on this megaproject.

During this quarter, our MRO revenue grew by 22% to a record level of $54 million; whereas Greenfield revenue declined by 47%. Our fastest-growing geographies in the quarter were the U.S. and Europe, growing 5% and 23%, respectively.

And note that our revenue was negatively impacted by FX in the amount of $1.2 million, and that was primarily due to the weakness in the Canadian dollar. Our backlog of firm orders ended December at $90.5 million, and that's essentially flat with September of 2013.

And note that FX has negatively impacted our backlog by approximately $2.2 million over the last 12 months. Now turning to gross margins, margin dollars this quarter totaled a record $36.1 million. And relative to the prior year, our margins increased by 500 basis points to nearly 51%.

This margin increase was due to the strong mix of MRO/UE at 76% of revenues and, to a lesser extent, material cost reductions, specifically copper and resins. Now for operating expense and headcount.

Our core operating expenses for the quarter, that is SG&A, and this excludes D&A and any transaction-related expenses, totaled $14.7 million, and that's a 9.2% year-on-year decrease. And this reduction was due to personnel-related costs and bad debt expenses.

Our OpEx, as a percent of revenue this past quarter, was a very competitive 20.6%, again excluding D&A. Our full-time employees at the end of December totaled 831, virtually flat with September and the start of the fiscal year. Now discussing below-the-line highlights, including interest expense and taxes.

Earlier this year, we refinanced our 9.5% long-term bonds with a 5-year banknote, currently with an interest rate of 3.6%. And this refinancing will add approximately $0.16 a share in earnings over the next 12 months. The rate will vary depending on our leverage ratios. However, the rate will not fluctuate with any movements in LIBOR.

And note that over the last 3 years, we have reduced our interest expense by nearly $16 million a year. And as previously disclosed, we were able to declare a permanent reinvestment position with the earnings from most of our foreign affiliates, reducing our tax rate from the mid-30s, down to the mid-20s.

And this event will save the company in excess of $1 million a year, in both cash and earnings. And now turning to earnings. GAAP net income for the quarter totaled $12.6 million. Our GAAP EPS for the quarter totaled a record $0.39 a share and $0.37 a share after a onetime favorable tax adjustment.

The $0.02 adjustment to GAAP earnings relates to a tax accrual dating back to the 2010 CHS acquisition of THR that will not require payment. And an explanation of this adjustment can be found in our earnings press release and our 10-Q.

And also note that our GAAP EPS was negatively impacted by approximately $0.015 due to the combined effects of FX translation and transaction adjustments. And also note that our GAAP EPS is negatively impacted by $0.09 a share per quarter due to the noncash amortization expense from the 2010 purchase of the company by our former sponsor.

Our free cash flow EPS was at an all-time high in Q3 and it totaled $0.58, and this is nearly double the $0.31 a share in the prior period. Our adjusted EBITDA totaled a record 2.2 -- I'm sorry, $22 million this past quarter, and that's up from $19 million in the prior year period.

And EBITDA, as a percent of revenue, was a healthy 31% in Q3, and that's up from 25% from 1 year ago. And finally, our balance sheet. Our cash balance grew to a record level of $67 million in Q3, and that's an increase of nearly $24 million in the last 12 months.

And leverage at the end of December, and this is on a net-debt basis, fell to a low of 0.8, down from the approximately 4x in 2010. And we are positioned to reduce our leverage further in the future. And lastly, our business continues to be highly capital efficient.

For the last 9 months, CapEx, and this includes both growth and maintenance capital, amounted to a total of $2.4 million or approximately 1% of revenue. And our conversion ratio, and this is defined as EBITDA less CapEx, divided by EBITDA, totaled a very strong 94% on a year-to-date basis. And I would now like to turn the call back over to Shannon..

[Operator Instructions] Our first question is from Jeff Hammond of KeyBanc Capital..

So just on the Greenfield, I mean, is this something maybe you guys were anticipating or there are some timing issues? Or you started to see some real slowness? And maybe just kind of flush out what's really changed on the Greenfield side?.

This is George. And as Rodney mentioned, we have some softness in Asia, we have a very tough comp from 1 year ago. The good news is that the backlog from Asia, as it relates to the EPC market there, is strong, as well as the quotations activity in that market. So we do see strength going forward.

In Canada, that's another area that was soft in Q3, we are coming off of the megaprojects in Canada. So we are seeing some slowdown, in general, in Canada, mostly because of the influence of the shale gas and oil activity in the U.S., we think. But again, the fundamentals of the business in Canada remain very strong.

The MRO business, based on our installed base, remain very strong. But there's no doubt that there is some softness in the Greenfield activity. But our quotation level is high. Our backlog remains steady and strong. So that gives us some reason for optimism going forward..

Okay.

So when does the Kearl project kind of wrap up and -- or start to ramp down? And what's kind of the visibility around other megaprojects or other orders in Canada replacing that?.

We're starting to deliver the last phase of the Kearl project now and will continue through Q4. There will probably be a little bit that goes into FY '15. But we are in the final phases of that.

In terms of the business going forward, like we've talked about on previous calls, most of the activity that we are involved with in Canada is around the SAGD processes and there still is a lot of activity there. They are -- they do not represent the same magnitude as the upgraders or the megaprojects.

But again, our activity in Canada is still strong. But without an upgrader, without a megaproject in the mix, we do expect some slowdown in the Greenfield billings in Canada..

Okay. And just -- I know you're still kind of going through your budget.

But as you look at kind of quoting activity in Canada's project ramping down, I mean, does that make it difficult to grow Greenfield into fiscal '15?.

It will represent a challenge, yes, to grow it. But again, our quoting activity globally is strong. So we have some reason for optimism there. But yes, it will represent a challenge..

Okay. And then just real quick on the MRO side.

Can you just talk about the sustainability of strength into January, February here with the cold weather and how likely that is to be strong again as we finish the year?.

Yes. So we've -- our MRO activity, we believe, will continue to be strong through the winter, through the heating season. And as you guys know, there is some seasonality to our business. We are appreciative of the cold winter in North America, certainly. It does help the business.

But the driver for our growth in MRO though is largely the increased install base that we have, and the global footprint, the serviceability that we provide to our install base..

Our next question is from Tim Mulrooney of William Blair..

Just staying on MRO for a second. I know you said it was up in all regions.

But I'm wondering if any particular end market or oil and gas or petrochem stood out and provided such a large boost to the MRO revenue?.

Yes, Tim, this is Jay. From a geographic perspective, the growth was pervasive. I don't have the breakdown by end markets. But I will tell you that across the 4 major geographies, all 4 geographies had double-digit growth. So we're real happy with that performance in the quarter..

Okay, Jay. And then last quarter, you guys highlighted that Europe was strengthening a little bit.

Is that something you're still seeing, or did things pull back at all in the third quarter? Can you just talk about what you're seeing in that region specifically?.

Yes, as we've reported in the past, Europe's coming off of some slowdown. But particularly in Q3, we saw a very good rebound in Europe, which is promising. And also, it was -- it wasn't concentrated in any one particular area. It was pretty much across all regions in Europe. So we're very happy about that, very encouraged about that.

And in addition to that, there -- again, the level of quotation activity in Europe is also up..

Our next question is from Scott Graham of Jefferies..

I think it was Jay that started go over the sales by region, U.S.

up 5%, Europe up 23%, was that the full business or was that just the MRO piece?.

That was the inclusive of Greenfield and MRO..

Okay, great.

Could you then tell us what the sales were in the other regions?.

Yes. Canada was down 17%, and that's specifically due to Kearl. Asia-Pac, due to a very strong comp in the prior year, I believe that was with Korea from a couple of very large projects with EPCs in Korea, was down 38%. And the exact numbers on this, Scott, you can find in our Q, that will be coming out later today..

That's great. The Greenfield number of down 47%, I was just -- I think an earlier question alluded to this. Maybe you can just unbundle that for us a little bit more. I certainly understand that there are project roll offs and what have you. But I guess, we kind of knew this coming into the quarter.

So can you maybe unbundle the minus 47% a little bit more? And then maybe tell us what caught you by surprise?.

Well, in Canada specifically, the issue is -- one of the issues is the age-old subject of scheduling of projects. And when we get the information to complete the engineering and thus deliver the -- particularly the buyouts we let -- not the heating cable, but the control systems, the switch racks and that sort of thing.

There were some of that, that relates to Kearl. And again, there was some softness in terms of our overall billings in Greenfield projects in Canada and that just has to do with when orders are awarded and when we are released to start construction on the project..

Okay, fair enough. My next question is on the orders, which I think you indicated, were down 1 year-over-year. And if my notes are correct, the comparison on that is a minus 15 from the year-ago period. So is this -- I know that the orders and the bookings, a lot of that is Greenfield.

So could you help us understand why orders were kind of down 1 on what was a fairly easy comparison?.

Yes, I got the year-to-date numbers, Scott, at my disposal. If you -- Kearl is the main driver there. If you strip out Kearl for the year, we're up almost double-digit, 9% in order activity. And 6% for the specific Q3 performance..

Okay.

And when is the Kearl sort of comp issue behind us, Jay?.

Well, we will have to go another 3 or 4 quarters till Kearl becomes virtually fully eradicated from the backlog and from invoicing. So we've got a couple, 3 more quarters in front of us, at least..

Okay.

So it would be fair to say that if the dynamics of the markets don't change, that we could be looking at another flat year of sales next year?.

A little early to make that statement. As you know, we've got an international footprint and we're seeing some favorable dynamics in Europe, in the U.S. and some of the other geographies that we've got a strong install base. So we're not ready to declare that.

But we will be able to provide further guidance once we go through our budgeting process, which literally has started over the last week or so and will conclude late in March..

Our next question is from Charley Brady of BMO Capital Markets..

I dropped off for a little bit, so I apologize if you've covered this. But just on the margin, the gross margin.

Given the meaningful shift, Greenfield, MRO, as you look out not only to Q4, but even if we look out into 20 -- fiscal '15, I know you don't want to give guidance there, but I think we're just trying to get a handle on, obviously, that gross margin shift makes a pretty meaningful impact on the earnings picture for Thermon.

So do you expect, even if the revenues are starting to taper off maybe a little bit less than what you kind of envisioned a few months ago.

Because some project, the Greenfield stuff, the fact that the MRO mix seems to be up pretty strong across the board, that would drive a gross margin higher than, obviously, historical average you talked about, and therefore, mitigate some of the downside on the revenue..

Yes, in a vacuum that, in fact, would happen. However, when we look out to fiscal year '15, we believe that our revenue complexion will go back to our normal mix of 60% MRO, 40% Greenfield. And that will temper margins a little bit. But again, that's a good thing because of the growing install base..

And I guess, that makes me ask the question of what gives you confidence that it would revert back.

Given that you have Greenfield slowing and you have MRO up significantly, why would that revert back so significantly to historic average?.

One of the reasons is the backlog that we have and the timing of those scheduled shipments for the Greenfield projects that are in the backlog as we've talked about before. Our backlog is largely contained up with Greenfield projects. The margin difference for comparing a Greenfield project than an MRO is there's a significant difference.

That's attributed to the fact that there's a product mix issue. And again, our backlog, in some of the markets like Korea, as we've talked about, is strong.

And the timing of those shipments are such that when they ship, they are going to have a bit of a downward effect on margins, to the extent that we think it will return to the more traditional levels.

But certainly through the winter, through the heating season, when MRO is expected to be a higher percentage of our total, we think that the margin strength that we have right now will continue through the winter..

Do you expect Greenfield shipments over the next 12 months to be equal to the prior 12 months? Or is it up or down versus that?.

Well, we're going through our budgeting process as we speak, so I can't speak to specifics for fiscal year '15 at this point in time. But we do believe that Thermon will grow over time. But I can't speak specifically to the next 12 years until we complete our budgeting -- 12 months, sorry..

Our next question is from Kathryn Thompson of Thompson Research..

This is Steven Ramsey filling in for Kathryn.

My first question, could you give any kind of update on utilization rates from your expanded manufacturing facilities?.

Well, as we said earlier in the call, we had -- we came very well through our peak demand period, which we are still in right now.

And the utilization rates, over the last several months being the heating season, had been very high, as we would expect they were but -- again, the most important, or germane fact is that we had no order delays, scheduling issues or any canceled orders, which is very key that time of the year for freeze protection revenue streams, particularly the MRO business.

When its cold, they need the product. You got to have it on hand. And you've got to be able to refill your market distribution channel, which that expansion that we did a year and a half ago has allowed us to do now. So very positive impact for us..

Great. And my last question, CapEx this year so far has been lower, much lower relative to last year.

Do you expect the current pace of capital expenditures over the next few quarters to continue at this pace? Or do you have any significant investments planned for the next few quarters?.

For this balance of this fiscal year, we believe the 1%-ish number, maybe a little bit higher than that, 1.25%. For next year, however, we're looking at an expansion of our production capabilities for our 2 bundle product. And in that fiscal year, our CapEx for both expansion and maintenance capital will be closer to 2%.

But in the next 90 days, very similar to the percentage we've seen over the last 9 months..

Our next question is from Jon Braatz of Kansas City Capital..

Returning back to the install base, you indicated that maybe the harsh weather this winter has helped business a little bit. I wonder if you can maybe clarify that a little bit or maybe quantify it. And more importantly, as you've spoken about the installed bases is rising, you're seeing, you got a lot more business out there.

Is there an opportunity to see -- as you look forward, to see double-digit growth in that business consistently over the 3- to 5-year time horizon?.

To answer your first question about the effects of harsh winters, that is definitely related to the preparedness of the customer base in the region. So the further south you go in North America, generally speaking, the more likely a plant would be less prepared to deal with a severe winter.

So whenever we have these -- when we have snow in Texas, like we did this morning, that's a good thing because most of the user base is not necessarily prepared for a harsh winter.

That's not true in the colder climates, whether it's harsh or not, it's still cold and it still requires attention to detail as it relates to preventive maintenance for flow control and for freeze protection.

The second part of your question, we do believe that there is an annual annuity, if you will, on installed base, we think about 7%, 5% to 7% of the installed base.

The capital spend gets replaced every year due to maintenance that's performed on in-line equipment like pumps and valves and moving mechanical equipment in the pipeline, so we do expect that number to grow year-over-year as our install base grows..

Okay. Going back to the first part of the facilities in the southern part of the United States that they are less prepared.

So when you have some harsh weather like we've had right now, are there some like corporate emergency services that you provide, I mean, where they without freeze protection?.

Yes, that's also directly related to what Rodney mentioned as it relates to our capacity, our ability to respond to emergency needs, to be able to deliver product tomorrow. Because, again, whenever plants do experience freeze-ups, it is -- it can be an emergency situation in terms of potentially having to shut a plant down.

So yes, we do provide those services and the availability of product is crucial..

Is -- and those emergency services is -- can that be done at a higher margin?.

Absolutely..

Okay.

So you have some enhanced margins when you have that -- some harsh weather like we've seen?.

Yes..

Yes, this is Rodney. Also too in the Southeast and Gulf Coast parts of the United States. We also have infrastructure in place to actually provide services to go overshoot [ph] and install a product, as well as the product supplied [ph]..

Our next question is from A.J. Strasser of Cooper Creek Partners..

Just going back, and I know it's been asked a couple of ways now, just to give us a sense of how kind of sustainable this gross margin is, maybe you could just comment a little bit on the current quarter to the extent that we're still in the heating season, which we are, and the dynamics that we're at play in Q3 should continue to Q4, why wouldn't we continue to see gross margin kind of stay at the 50% range?.

Yes, just one thing from a financial perspective, and then I'll ask George to comment on the specifics of what we're seeing of late.

And that is you mentioned the strong profitability, one of the inherent niceties, if you will, of our business model is that we can throw off very, very strong gross margins, both dollars, percentage and EPS, when we have a predominantly high mix of MRO.

So even though we would like to have more Greenfield sales when they do dip, and when they dip significantly, like they did last quarter, we can still throw off very strong earnings. And in terms of the dynamics of this particular quarter, I'll turn that back to George..

We are still in the heating season, so there is some reason to believe that our strong margins will continue into -- throughout the heating season and until the end of the heating season.

But again, just to reiterate, once our Greenfield project activity and backlog start to reach the point where we're shipping that material, which does have a product mix of buyouts that are at much lower margins, that will have an impact.

But certainly, through the heating season, which will go into Q4, we do expect some strength in the margins to continue..

We have a follow-up question from Scott Graham with Jefferies..

I wanted to just see if anything in the SG&A line, if there's anything there like a reversal of an accrual or an incentive or anything like that, that would've given rise to that, the SG&A number that we saw?.

Yes, there's a lot of dynamics in SG&A, Scott, as I'm certain you can appreciate. When we have less Greenfield activity or revenues might be down, ostensibly there could be less commissions. We did have a small bad debt reversal in the quarter of a couple of 100k.

And since we have not hit certain milestones from our short-term incentive plan, there would be either less accrual or even a recapture of a prior accrual in terms of incentive. So there's a lot of different things that could come in and play in a given quarter..

Okay. And I guess this is more of a question for you, George. And certainly glad to hear about the identification of more projects and higher dollars around the world.

It seems, however, that given where the backlog is, given where the bookings have been, that the leveraging of the facilities' expansion has really maybe been a little bit, I don't want to put words in your mouth, but certainly a little slower than I would've expected in terms of booking some projects, even smaller projects around the world that you are now capable of executing under.

So I guess, when we talk now about the Kearl project being a bit of a hangup on the comps, I guess I would've thought that we would've had more replacement business there.

And I was just -- maybe wanted you to comment on my view if your view is equal to my view, that maybe this facility expansion is -- that we haven't leveraged it to the extent that we would've thought about 1 year ago?.

Well, Scott, the comps that megaprojects create for us are ones that -- we don't want to plug-in projections that relate to the impact of megaprojects that are out there in front of us because of the fact that we don't have any control over their schedules.

As it relates to the number of projects that we're quoting that are not megaprojects, as I've said, that activity is up. So it does give us a reason for optimism there.

But certainly, we do have to take into account that we've got to win more of those, we've got to capture more of those and execute more of those than to equal the comp that's created by a rolling off of a megaproject. So I guess, I'm kind of -- I feel like there is still reason to be positive about the Greenfield activity on a global scale.

We do have a challenge in terms of matching the performance in the Greenfield activity in Canada..

Our next question is a follow-up from Jeff Hammond of Keybank Capital..

Jay, you mentioned a tax rate in the mid 20s, and I think that's the trend.

Can you just give us an update on how we think the tax rate looks for the March quarter and into the out-years?.

Yes. Based on all the tests we've done in terms of being able to sustain U.S. operations, including debt service, we believe that our permanent reinvestment position that we declared earlier this year is something that is sustainable going out into the future, so that's good news.

Going forward, somewhere in the 26% range, maybe 26.5%, is what we are modeling internally. That's this year, next year and thereafter..

Okay, great. And then can you just comment on what you're seeing in the acquisition pipeline, you continue to build cash.

You mentioned your debt-to-EBITDA ratio being at all-time lows, probably too low for your type of a company, and how you're maybe thinking about returning some of that cash to shareholders?.

Yes, the -- our capital allocation strategy has not changed, Jeff. We will continue -- #1 priority would be to reinvest in our business. We're certainly looking at acquisitions harder today than we ever had due to some talent we recently brought into the business. So prudent M&A transactions would be also high in the list.

We do have some modest amortization of our banknote, about $13.5 million a year. And then, could we do a dividend down the road? It's possible, but I think a lot of that's predicated on what the M&A horizon looks like. And then there's, obviously, the possibility of, somewhere down the road, some sort of security repurchase program.

But I'd tell you that the first 2 are really the drivers that we're looking at..

So you mentioned spending more time on the M&A.

I mean, are you seeing more come into your pipeline, are you starting to look at adjacencies or outside of the core? Is anything in the pipeline that looks closer to the finish line than that?.

Jeff, it's Rodney. Currently at this time we don't have any closer to the finish line than we have in the past. However, the pipeline is significantly more populated with opportunities as a result of the senior VP that we brought in several months ago. And the priority levels have been ratcheted up several notches in terms of what we're doing.

And we do have a significant increase in the number of identified M&A opportunities that are available to us. And we are looking both obviously inside the core, as well as 1 or 2 valences outside that inner core..

Our next question is a follow-up from Charley Brady of BMO Capital Markets..

I was just going to follow up on the M&A, and you may have partially answered it.

But -- so you're -- could you maybe give a little more granularity outside of traditional heat-tracing equipment? What would be something that you think would still fall within the umbrella of Thermon? And second, you talked about spending some of the capital on reinvesting back in the business. Obviously, the CapEx is pretty skinny.

So maybe some more granularity on what you mean by reinvesting back in the business, is it just a ramp-up of R&D spend or is that something else there?.

Let me go backwards on you. In terms of CapEx, in terms of spending, we're looking at -- obviously, R&D is appropriate as it relates to our inner core and developing new products for existing customers and existing opportunities. So that is a part of that mix, but also to, reinvesting in our business model.

A large component of our business is the service component, whether it's speed studies, engineering, analysis, the engineering deliverables, field service or even turnkey construction. So you need personnel on site. In emerging markets, you need sales and marketing people upfront leading it.

So that's investment that we're talking about, reinvesting in the business as well as the 2-bundle expansion we talked about earlier.

So was there still one question I didn't answer on that?.

I was just kind of -- I was -- I'm looking for some more granularity kind of on the M&A front, you talked about looking outside the traditional Thermon areas.

I don't know if you could comment on a little more specifically on kind of what you see fitting into the criteria that you're looking at?.

Okay. Our core is industrial, electric heat-tracing. So when we start looking outside the core and besides vertical integration, acquisitive opportunities, you're also looking at anything that would involve heating. It could be something -- other heaters beside heat-tracing cables, process heaters. It could be steam tracing, that's an adjacent market.

It could be commercial, electric tracing. For institutional buildings, rail, industry, et cetera. So those are a couple of examples..

Thank you. I'm showing no further questions at this time. I would like to turn the conference back over to Rodney Bingham for closing remarks..

First of all, I thank everybody for attending the call today. And again, thank you for your continued interest in Thermon. We feel like we had a very good quarter, would like to have some little more uptick in revenue.

However, as we said several times before in the past, we still believe this is a good business to be in and we still believe it's a good time. So thank you very much, and we look forward to the next earnings call..

Ladies and gentlemen, this concludes today's conference. Thank you for participation and have a wonderful day..