Cash and cash equivalents increased to $190.4 million, debt was $374.5 million, and inventory decreased by $32.2 million compared to March 31, 2025.
Gross margin was 46.7%, consistent with the prior year quarter despite higher input and labor costs, with North America gross margin at 49.7% and Europe at 36.2%.
Net income totaled $103.5 million or $2.47 per fully diluted share, compared to $97.8 million or $2.31 per share last year.
Net sales for Q2 2025 were $631.1 million, up 5.7% year-over-year, with North America net sales increasing 6.4% to $492.7 million and Europe net sales increasing 2.7% to $133.4 million.
Operating expenses increased 6.5% to $154.4 million, driven by higher personnel costs, variable compensation, and software/hardware costs.
Operating margin was 22.2%, flat with the prior year, and consolidated adjusted EBITDA increased 4.8% to $159.6 million, with a margin of 25.3%.
Strong cash flow from operations of $124.7 million enabled capital expenditures of $39.9 million, dividends of $11.8 million, and $35 million in share repurchases.
Volumes were relatively flat year-on-year, with North American volumes exceeding U.S. housing starts by approximately 240 basis points over the last 12 months.
Strategic Supply Chain Diversification and Tariff Mitigation Efforts
The company successfully mitigated the impact of tariffs, reducing China exposure from 24% in 2024 to 10% by the end of 2025.
Diversification strategies included sourcing from more favorable regions, renegotiating supplier agreements, and bringing some manufacturing back to the U.S.
Tariff impact increased from 180 basis points last quarter to 290 basis points due to settled tariffs at 30%, but management remains confident in mitigation plans to offset future impacts.
Impact of U.S. Tariffs on Swiss Imports and Guidance Revision
U.S. administration announced a significant increase in tariffs on Swiss imports to 39%, which would negatively impact FY2025 EPS guidance by approximately $0.40.
The gross impact of tariffs on the company is estimated at around $95 million annually, with efforts underway to fully offset these costs by next year.
Management emphasized ongoing mitigation actions and confidence in their ability to offset tariff impacts, despite the dynamic and uncertain trade environment.
Strategic Focus on High-Margin Revenue Mix and Tariff Mitigation
Thermon's strategic shift toward higher-margin OpEx revenues across diverse end markets has contributed to a 30 basis point gross margin improvement despite volume declines.
Tariff mitigation measures, including prebuying materials, sourcing shifts, and price increases, began to take effect late in Q1, supporting margin expansion.
Management emphasized that operational discipline and proactive tariff strategies are key to maintaining profitability amid global trade uncertainties.
While revenue was impacted by delays, the company expects these to translate into future revenue recognition, indicating a focus on long-term margin stability.
Dafinchi
