Bruce Thames : The U.S., we expected to see growth, but it was really quite strong in this first quarter. And we’re seeing some recovery in Asia as well, which I would say it was expected. But as we look at the bookings, I think it’s important not to be lost that bookings this year were up 16% over prior year. Now if you go back to our prior year, that was a record in incoming orders as well and that was up 43% over the prior year. So we just look at the bookings growth, it’s pretty significant, and that’s not to be lost. And so we’re seeing a lot of activity and investments in the U.S. Particularly we’ve had some nice petrochemical wins. There’s a lot of LNG opportunities. Just as a reminder, we’re a little later cycle, so we have won some of those, but we see additional opportunities in the pipeline for both.
And then certainly the opportunities that we’ve seen around renewables, whether that’s carbon capture and storage or the ammonia and hydrogen that we’ve highlighted today, those are driving additional upside and growth above and beyond what we would traditionally see in our space.
Tyler Hutin : Got it. And that’s all I have for today. Congrats on the quarter again and solid work.
Operator: [Operator Instructions] Our next questions come from the line of Jon Braatz with Kansas City Capital.
Jonathan Braatz : Just a point of clarification. I think, in the press release, you mentioned that organic growth was 11%. But if I’m not mistaken, last year you had $7 million — about $8.5 million from a combination of a large — completion of a large contract and some revenue from Russia. Am I correct in that?
Kevin Fox : Yes. So, Jon, maybe to rewind it back a year. We had about a little over $7 million from that large onetime project that would be in the organic number. The [acquisition] was about $1 million of revenue and then Russia was about $1 million as well, so a few pieces on each side of the line there to factor in.
Jonathan Braatz : Okay. So ex those items, Kevin, it looks like you’re, what I would call it, adjusted organic growth rate was near 20%. Do you look at it that way?
Kevin Fox : That’s about right, Jon.
Jonathan Braatz : Okay. So it looked from that — using that as a reference point, going forward into the next 3 quarters, you’re looking obviously for a little bit of a moderation from that. Was there something in the first quarter that was unexpected or somewhat transitory in nature if you want to call it that?
Bruce Thames : Yes, Jon, this is Bruce. No, not really, and I’ll tell you the incoming order rate was quite positive. So that actually gives us some confidence going into the year. It’s early, and certainly, we like to get a couple of quarters under our belt before we call the full year. I’ll tell you, though, it certainly gives us confidence and I’ll point you back to the midpoint of our revenue guide being that $475 million, which is right on our trailing 12-month incoming order rate. So I’d point to that. And then it was a modest move certainly in the EPS guidance, but I think it’s important to note that we see some strength in margins and backlog and, quite frankly, a lot of our continuous improvement efforts that we began probably in the fourth quarter of ’22 are really beginning to yield some very positive results and give us some performance and productivity gains.
So that would be how I would frame our views, but there was nothing just onetime in the first quarter, and we’re cautiously optimistic about the balance of the year.
Jonathan Braatz : Okay, that’s fair. Kevin, the operating expenses were quite heavy in this quarter. And obviously, you’re investing in resources, personnel, and infrastructure to reach these new markets. But let’s say as we look forward, maybe even a year from now, let’s say, does that spending begin to moderate? Do we just see that buildup this year and then maybe some easing next year?
Kevin Fox : Yes, Jon, I think you’re thinking about it the right way. If you look at the SG&A line, call it, maybe close to $4 million, that’s primarily driven by the resources that you’re alluding to. And I think as the business continues to grow, we look at that on a TTM basis as a percentage of revenue, and targeting that in the, call it, mid-to-low 20s is where we’re really going for as we think about the model of getting this business to 23%, 24%, potentially 25% of EBITDA. Given the historical gross margins of the business, that’s a pretty easy math problem to back solve for what we’re shooting for over time. So I think the way you’re thinking about it is right. Will that investment decelerate as the business continues to scale? That’s absolutely the plan.
Operator: Thank you. There are no further questions at this time. I would now like to turn the floor back over to Bruce Thames for closing comments.
Bruce Thames : All right, Darren. Thank you. And thank you all for joining here today. Appreciate your interest in Thermon, and enjoy the rest of your day.
Operator: Thank you. This does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and enjoy the rest of your day.
