Thermon Group Holdings Inc (THR) 2018 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Thermon Fiscal 2018 Earnings Conference Call. (Operator Instructions) As a reminder, this conference call may be recorded. It is now my pleasure to hand the conference over to Ms. Sarah Alexander, General Counsel. Ma'am, you may begin.

Thank you, Brian. Good morning, and thank you, all, for joining today's 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 also be available via webcast 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 quarterly and annual reports filed with the SEC.

We would also 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, revenue growth, profitability, leverage ratios, acquisitions, acquisition synergies and various other aspects of our business.

During the call, we will also discuss some items that do not conform to generally accepted accounting principles. We have reconciled those items to the most comparable GAAP measures in the tables at the end of the earnings press release. These non-GAAP measures should be considered in addition to, and not as a substitute for, measures of financial performance reported in accordance with GAAP.

And now it's my pleasure to turn the call over to Bruce Thames, our President and Chief Executive Officer.

Thank you, Sarah. Well, good morning, everyone, and thank you for joining our conference call and for your continued interest in Thermon. Today, we have Jay Peterson, our CFO, joining me on the conference call. Jay will follow me and present the financial details of our fiscal 2018 fourth quarter and our full fiscal year.

I'd like to just take a moment here to reflect back on some key accomplishments in fiscal 2018. In Q1, we began production in our operation in Russia to provide access to a large, growing market for industrial process heating. We continue to invest in research and development, to lead the industry with products that differentiate our solutions in the marketplace. During the year, we added key talent to the team and built robust process to accelerate the pace and improve the overall success rate of new product launches. We also invested in processes, systems and tools to build a scalable business globally that improved operations, productivity and project execution, all of which had a positive impact to profitability in the year.

Finally, we acquired CCI Thermal, now known as Thermon Heating Systems, to grow our addressable market, enhance the solution set we provide to our customers and create an expanded platform for growth. All of these investments are beginning to show a very positive impact on the overall performance of the company.

We were very pleased with the overall operating results the team delivered in Q4. We saw revenues of $102.6 million exceed our expectations for the quarter, and increase 51.8% year-over-year. Organically, this represented the second consecutive quarter of double-digit growth, with revenues of $77.6 million, up 15.1% year-over-year. Margins also improved by 380 basis points year-over-year on a Greenfield mix of 42% versus MRO/UE of 58%.

Inorganic margins had 130-basis point positive impact in the quarter. As a result, we saw a very strong operating leverage in the overall business, with adjusted EBITDA of $22.6 million in the quarter, an increase of 117%, and adjusted EPS of $0.22 a share, up 120% year-over-year. Amortization was $5.7 million and $0.12 a share in the quarter. After deducting amortization and onetime transaction-related expenses, adjusted EPS was $0.34 a share for the quarter, up 110% year-over-year. Given the strong cash flows from the business, we were able to retire $25 million in debt during the quarter. At the end of October, following the acquisition, we had a net debt-to-EBITDA of 3.4. Just 5 months later, that has now been reduced to 2.6. We will continue to focus on debt reduction to ensure the business is well-positioned to capitalize on future investment opportunities.

For the full year, Thermon generated $308.6 million in revenue, up 16.8% over the prior year. Organically, after a very slow start to fiscal 2018, we saw backlog begin to convert, which translated into solid growth during the second half of the year. Revenues for the year finished at $267.6 million, up 1.3% year-over-year, and essentially flat after adjusting for currency. However, revenues in H2 were up 17% year-over-year, 12% on a constant currency basis, as our end markets began to recover.

Inorganically, Thermon Heating Systems had a very positive contribution to our success in the year, generating an additional $41 million in revenues over a 5-month period, which was on the upper end of our range. We also saw margin improve by 100 -- or 420 basis points during the year due to a return of maintenance spending in Canada, better project execution and a better mix. Organically, margins were also up 420 basis points to 46.6 for the year. As a result, we saw strong leverage on the business, with adjusted EBITDA of $64.8 million, up 49.6% year-over-year, and adjusted EPS of $0.63 a share, up 46.6% year-over-year.

Adjusted EBITDA margins were 21%, up 460 basis points year-over-year. Fully burdening the acquisition with debt and amortization, but excluding onetime transaction-related expenses, Thermon Heating Systems contributed $0.04 a share in adjusted EPS for 5 months of contribution in the fiscal year.

Overall, we are seeing positive trends in the operational performance in the business, the new acquisition and our end margins. We see this positive momentum carrying into fiscal 2019.

Margins and backlog are also improving, but we are experiencing headwinds due to raw material cost increases that will likely slow or mute further margin expansion in the coming year. We do expect price increases to offset material inflation during the year.

Bookings were down 16% consecutively but grew 6% year-over-year on a pro forma basis. After 5 consecutive quarters of generating a positive book-to-bill, we saw shipments exceeding coming orders. Although the book-to-bill was 92%, the backlog of $160 million was up 20% year-over-year on a pro forma basis. From a market perspective, upstream activity is improving, with the exception of the Canadian oil sands. Both chemical and petrochemical sectors remain active as the project pipeline in North America improves. And combined cycle power projects are relatively flat particularly in the U.S.

Geographically, North America showed strength in the second half of fiscal 2018. Going into fiscal 2019, we anticipate the growth in Canada to stall, with the lack of pipeline takeaway capacity limiting further investments. In the U.S. and Latin America, we expect growth to continue into fiscal 2019.

In the Eastern Hemisphere, we began to see larger projects in backlog move forward in the second half of fiscal 2018, and we expect this to continue into the first half of the coming fiscal year. We're expanding our R&D team to accelerate development of our product and technology roadmaps. These roadmaps will result in expanded portfolio solutions to differentiate Thermon in the marketplace, create value for our customers, and unlock new revenue streams for the business. We have 5 new product introductions planned in the coming year.

Our M&A pipeline remains robust, but our near-term capital allocations will be dedicated to debt reduction as the first priority. We continue to execute on our plans to grow our addressable market by 2 to 3x by the end of fiscal 2021. Our near-term goal is to reach $500 million in revenue and $125 million in EBITDA by the end of fiscal 2021, that will ultimately translate to double-digit compounded annual growth for our shareholders.

During the economic cycle, we'll continue to make targeted investments in key geographies with growth potential. We've also built a strong management team, established an operating presence in Eurasia to improve our market access while increasing our investment in research and development to differentiate our solution set. The acquisition of CCI Thermal has expanded the solutions we bring to the industry and grown our addressable market by approximately 50%. All of these investments position Thermon to generate growth exceeding the pace of the market recovery.

Looking forward, we are pleased to begin fiscal 2019 with a more robust backlog and higher level of confidence. The positive momentum that we have seen in the second half of the year is anticipated to continue into fiscal 2019. Revenues are forecast within a range of $360 million to $370 million for the year, up 17% to 20%. We anticipate organic growth in the range of 3% to 5% for fiscal 2019 and revenues of $85 million to $90 million for Thermon Heating Systems.

No M&A is comprehended in these revenue projections.

Our fiscal 2019 plans include continued expansion of our market channels and further increasing R&D spending to approximately 2% of revenue.

Given the seasonality of our business, we anticipate revenues of 45% in the first half versus 55% in the second half of the 2019 fiscal year. Organically, Q1 is anticipated to have a much stronger mix of greenfield projects that will drive revenue growth year-over-year but will be dilutive to margins on a year-over-year comparison.

Historically, Thermon Heating Systems also experiences seasonality. While we do anticipate double-digit growth on a pro forma basis, Q1 is typically the slowest quarter of the year, with volumes down by 23% to 27% from the peak heating season in any given typical year.

I would like to take this opportunity to thank our Thermon employees around the globe for their collective efforts to serve our customers well and create shareholder value in fiscal 2018. I look forward to seeing what they deliver in fiscal 2019.

Thank you, again, for joining us on the call today. Jay Peterson, our CFO, will now address the details of our financial performance for Q4 and full year 2018. Jay?

Thank you, Bruce. Good morning. I will start by discussing our Q4 results, then turn to a summary of our fiscal year results, and finally conclude with high-level guidance for fiscal year 2019.

First off, revenue and orders. Our revenue this past quarter totaled $102.6 million, and that's a record for Thermon and an increase of 52% over the prior year's quarter. Organic revenue in constant currency grew 9% in the quarter. FX contributed 6% to revenue growth, and M&A revenue contributed 37% in the quarter. And on a pro forma basis, our total revenue grew by 15%.

In the quarter, we continued to experience positive signs in our organic Canadian business, with revenue up 55% in the quarter, followed by Asia-Pac at 50%. And Thermon Heating Systems revenue increased by 16%, and that's on a pro forma basis.

Our organic MRO/UE mix for Q4 was 58% of revenues, whereas Greenfield totaled 42% of revenues. And total orders for the quarter were $94.5 million versus $69.4 million in the prior quarter, and that's an increase of 36%. And we did see double-digit order growth in both Canada and in the U.S., and that is on an organic construct. Our backlog of orders ended March at $159.6 million versus $106.9 million at the end of fiscal year '17, an increase of 49%, with the Thermon Heating Systems acquisition contributing 30% of the growth and our organic business, 19%. And on a pro forma basis, backlog grew 20%, from $133.5 million to $159.6 million. And our book-to-bill for the quarter was 0.92.

Moving to gross margins. Margin dollars this past quarter totaled $46.8 million, or 45.6% of revenue, and they grew by 66%. Versus the prior year quarter, our margins increased by 380 basis points due primarily to an increase in Greenfield margins. Margins from Thermon Heating Systems were higher than our corporate margins by 130 basis points. And on a pro forma basis, margin dollars grew by 23% in the quarter from $38.2 million to $46.8 million.

In terms of operating expenses, our core operating expenses for the quarter, that is SG&A, and this excludes depreciation and amortization of intangibles and any transaction-related expenses, totaled $25.3 million in the quarter versus $18.3 million in the prior year quarter, or 38%. And on a pro forma basis, our core spending increased from $22.9 million to $25.3 million, or by 11%.

Our operating expense as a percent of revenue was 25%, and this excludes D&A, and that's down 200 bps from the prior year level of 27%. And for the quarter, intangible amortization expense totaled $5.7 million.

Moving to earnings. Our GAAP EPS for the quarter totaled $0.18, and that's compared to the prior year quarter of $0.10, and that's an increase of 80%. Thermon Heating Systems contributed $0.01 a share to our GAAP earnings on a fully-burdened basis, including all incremental interest expense.

Adjusted EPS, and this is defined by GAAP EPS, less amortization expense and any transaction-related expenses in the quarter, totaled $0.34 a share relative to $0.16 a share in the prior year quarter. And we will be communicating this construct going forward due to the high level of noncash amortization expense running through our income statement. And at present, we are expensing $5.7 million per quarter, or $0.12 per share each quarter, amounting to $0.47 a share on an annual basis, and that's after tax.

Adjusting for transaction-related expenses only, and this is our former adjusted GAAP construct, our adjusted GAAP EPS totaled $0.22 a share, relative to $0.10 a share, and that's an increase of 120%.

EBITDA grew by 117% versus the comparison quarter, and our pro forma EBITDA grew 40% and totaled $22.6 million this past quarter. And EBITDA as a percent of revenue was 22%. And due to continued expense management and increasing gross margins, we were able to leverage our business model by 2.6x, with EBITDA growth of 40% relative to revenue growth of 15%, and both of these are on a pro forma basis. And this leverage was resident in both our organic business, with leverage at 2.9x, and Thermon Heating Systems with EBITDA to revenue leverage of 2.2x. And now to the balance sheet.

During the quarter, we made an optional principal payment of $25 million on our syndicated term loan, reducing the debt balance by 10% to $225 million, and this reduction will add, after-tax, nearly $0.04 a share in annual earnings due to reduced interest expense.

Our cash and investments balance ended the year at $33.9 million, and recall, our net debt-to-EBITDA ratio was 3.4x at the time of the October acquisition. And through growth in EBITDA and a reduction in net debt, we have delevered the business to 2.6x, all within a 5-month period.

Next, I'd like to talk about fiscal year 2018 performance. We achieved many accomplishments during the year, including the following: We acquired Thermon Heating Systems and made significant inroads to integrating this business into Thermon, concurrent with growing this business by 16% over the 5-month period in revenue, and 23% in EBITDA. And since the acquisition, Thermon Heating Systems delivered over $41 million in revenue at a 30% EBITDA margin, and this exceeded our expectations.

We grew total revenue by 17% to $308.6 million, and EBITDA by 50% to 64.8% million. And we finalized heat-tracing production in our Russian manufacturing facility, and we ended the year with a record backlog of $159.6 million.

And lastly, some guidance points for fiscal year 2019. First off, we are planning top line revenue to be in the $360 million to $370 million range in the coming fiscal year, excluding any contribution from M&A. And at present, we are not comprehending any M&A in this guidance. However, it is possible we will have actionable targets in the second half of the fiscal year. Also as a reminder, our Q1 is typically a slower quarter for Thermon in that we are not in the prime heating season. And note that due to lower Q1 revenue, we believe Thermon Heating Systems will be accretive in adjusted EPS, but not GAAP EPS. Also, while we saw Thermon Heating Systems delivered EBITDA margins of 30% during the heating season, we believe this will normalize to 25% over the entire fiscal year 2019.

We expect Q1 operating expenses, and this excludes depreciation and amortization, to be in the range of $24 million to $25 million, and this includes approximately $1 million in onetime expenses to realize future synergies. Consistent with last year, fiscal year 2019 is going to be an investment year in research and development for Thermon, and we expect operating expenses to grow modestly.

Note that we anticipate significant adjusted EPS and EBITDA growth in Q1. However, GAAP EPS growth will be muted due to the impact of amortization and interest expense.

In addition, our planned CapEx for this year will total $9 million, or approximately 2.5% of revenue, and that's flat with the $9 million in fiscal year 2018.

Lastly, we expect to reduce our net debt-to-EBITDA leverage in excess of 1/2 a turn, and this excludes any M&A transactions.

I would now like to turn the call back over to Brian to moderate our Q&A session. Brian?

(Operator Instructions) And our first question will come from the line of Scott Graham with BMO Capital Markets.

So we've got -- I've got a couple of questions here for you. You're looking at a year of organic growth of 3% to 5%. How much of that is being -- how much are you not getting from Canada this year. So what does that costing you based on your comment, Bruce?

Yes. So we really are seeing the growth in Canada begin to plateau with really a lack of pipeline takeaway capacity, so some further investments there are unlikely. At a level above about what we've been seeing, we do see some very modest growth. But if you look -- I mean, that had, had a significant impact to our growth in the second half of the year, just some recovery and maintenance spending and some pent-up demand, so we expect that to flatten a bit. We do see other parts of the globe growing in the coming year, particularly the U.S. Is well positioned with the backlog growth we've seen there and the project timing. So that -- Canada is having a significant impact on just the rate of growth that we are projecting going forward.

Understood. Another question I had for you is, I think, first, there was a comment about materials inflation being a headwind, and then there was a comment that pricing would exceed materials inflation, unless I misunderstood. Can you kind of tell me which of that is -- what's the takeaway there?

Yes. My comment was that it would offset. So that's -- I didn't say it would exceed. My words were it would offset. So I think we'll offset it. I don't see -- the level of margin expansion that we experienced in fiscal 2018, I don't see the opportunities to expand as we had seen in -- going forward into 2019.

Fair enough. Sorry for misquoting you there. This is a question for you, maybe, on the gross margin. So we have offsetting price costs according to Bruce. I thought I heard you guys say that you're expecting a CCI, the thermal business to -- for those margins to maybe come in a little bit, maybe I misheard that as well, I don't know. It sounds to me like -- gross margin sounds like ominously flat or lower in 2019. Could you help me triangulate around some math there?

Yes. We see flat, there may be some modest upside. I think our comments around Thermon Heating Systems is a really important point. We saw really healthy margins during the heating season. If you look at that business, that's because of the volume effect on the fixed cost basis, so [EBITDA] and margins were really good, what we see in the off-season is lower volumes. The actual product margins remain very consistent, but the real difference there is just the leverage on the volume. And so we see compression during the first half of the year in margins, and then we see that expand in the second half. So that's probably what you're picking up on in the messaging that we're giving you about a full year. We owned them during the 5-month heating season, and the margins were exceptional on the volume, but we do expect that to be significantly lower in H1, particularly Q1, as we have that on a lower volume.

Understood. And here's my last question, I don't mean to hog up the line. But the 3% to 5% organic that you referred to for next year kind of back to that, that is pure organic, that does not include FX, right?

That's correct. We don't speculate on FX. So absolutely.

And our next question will come from the line of Brian Drab with William Blair.

So can you -- given on this fourth quarter report, we're always -- about 2 months into the next quarter. Is there anything that you can tell us about -- and I know it's the seasonally least interesting period, but April and May, I think you talked a little bit about the momentum continuing in some of the geographies, but what are you seeing in April and May, so far?

Yes. So just some comments I made around the first half and also around Q1. We do see -- year-over-year, we see a much healthier mix of Greenfield. And certainly, given the year we had in Q1 last year, we see significant volume growth in Q1 year-over-year. We do expect that mix to be dilutive to margins, but we are seeing some very healthy growth in the first quarter.

So Bruce, if you do better than -- I assume really healthy growth, given that we just did double-digit organic growth. A really healthy growth probably means above 3% at 5% in the first quarter?

Yes.

Is there -- as you look at the back half of the year though, does that mean we're going to be materially below 3% to 5% for 2Q through 4Q? Or is there just conservatism and you don't want to make a call on the back half of the year so much at this moment?

Yes. So first of all, overall, we see positive momentum going into the year. And I want to reiterate that. The last 2 quarters, if you look, quarter-over-quarter, our bookings are up by about 5%. And we did see some drawdown in backlog in Q4. It's the first quarter we haven't had a positive book-to-bill. But I want to emphasize that the bookings we had organically in the fourth quarter were the highest fourth -- was the highest fourth quarter we've had since 2012 when we booked a very large project in Canada. So we are seeing a healthy booking environment. And the reality is, we're seeing a lot more projects, our concern is just over project timing. It's important to reiterate, we're fairly late cycle, so we see a lot of positive momentum. But project timing is likely to be later in the year and can move. We have seen some movement to begin to accelerate projects, but we'd like to see a couple of quarters of that before we get more aggressive on our forecasts. And I'd say, finally, well, there is a lot of price volatility in oil. And I think that's probably having some impact on the rate of spending increases as we are seeing in our end customers.

Okay. Okay, great. And if you could, maybe -- I don't know if I can ask you to rank order oil and gas, PowerGen, petrochem in terms of potential contribution to growth in fiscal '19. Could you take a stab at that for us?

Petrochem is, by far, the strongest, and I would say second would be oil and gas, and third would be power.

Okay. And that's what I would've thought you'd say. Okay. And I guess petrochem, specifically within the U.S., is the -- is it strongest in the U.S.?

Yes. And we are seeing a lot of opportunities continuing in the Middle East as well.

Okay. Okay, great. And if I could just ask one more. Have you seen impacts from the tax policy that your customers are pulling forward projects to take advantage of full depreciation?

We haven't seen anything that we could tie directly back to the change in tax law.

And our next question will come from the line of Charley Brady with SunTrust.

Just a question, on the R&D expense, you talked about another investment in the year. I just wondered, can you give us a sense of what that might be doing to as far as the margin impact this year? And should we expect that to level out after fiscal '19? Or is this something that has a maybe slower increasing on a percentage basis, but continues to move higher?

Yes. We -- I mean, we are really pacing our levels of our investments in research and development. They're directly tied to our product and technology roadmaps and the market potential and opportunity we see there, and in the pace at which we'd like to see those realized. So I guess, to answer your question, we will likely see some increase in future years. I feel like historically, at least over the last few years, we've been slightly increasing it, but historically, we've underinvested there and we see some significant opportunities to bring new solutions to the market, and we're going to invest accordingly. Now I do expect the pace of overall SG&A spending to begin to plateau with the volume growth we're seeing -- I mean, we're down 200 basis points year-over-year. And so we should begin to get some leverage on the overall SG&A spend in the business as we continue to grow.

And then just in terms of mix on fiscal '19, with the project pipeline that's coming through. I know you talked about some timing and stuff to get later, timing-wise. But I'm wondering, from a Greenfield versus MRO/UE mix, in the second half of fiscal '19, it sounds like you're saying maybe the Greenfield percentage could be higher than what it was in the second half of fiscal '18. Am I interpreting that correctly?

It could be. It's really hard to anticipate that at this time. We do have general sense of timing of the projects, but they can move -- and just movement of 1 or 2 projects can have a significant impact to that mix. For modeling purposes, I would encourage you to use the historical 60/40. I mean, we're within plus or minus a couple of points on that, in any given quarter. There some outliers, but it's pretty consistent.

Understood. And just one more from me. I don't know if you mentioned it, interest expense expectations for '19 with the debt paydown?

Yes. So on a cash basis, it will be approximately $16 million, and interest expense all-in is at 6%, including the amortization of deferred debt charges. So it will be 6% on the $225 million balance.

And our next question will come from the line of Jon Braatz with Kansas City Capital.

Bruce, when we look at THS and your expectations for next year, am I understanding it correctly, revenue assumption is basically for THS sort of flattish year-over-year? And is that mostly because of the softness in the Canadian area?

No. Actually, on a pro forma basis, we have about 6% to 7% growth in that business. And they're much less tied -- those products are much less tied to oil, and more in gas, and I guess the other comment is earlier cycle. So we do see project opportunities there before they translate into heat-tracing opportunities, and we also see some opportunities with sales synergies as we plug those products into our market access in the Eastern Hemisphere. So all of those things are positively impacting the growth rates we see in the Thermon Heating Systems business on a pro forma basis.

Okay, okay. And then Jay, on the amortization expenses for 2019, will that decline a little bit as you work -- reduce the amortization charges associated with the backlog? Or will that be sort of constant with it? I think it was about 3,700.

Yes. It will be a nominal impact, a very modest impact. So the $5.7 million is the operating expense impact per quarter. There was a slight impact to gross margins based on the backlog, but it's negligible when we look at the impact for next year.

So $5.7 million continuous per quarter?

Yes, it does. It will move slightly based on FX, but I would say (inaudible) $5.7 million.

(Operator Instructions) Our next question will come from the line of Scott Graham with BMO Capital Markets.

I have a couple of more, if you don't mind. Do you have an estimate on the percentage of backlog that you'd ship in 2019, in fiscal '19?

Yes, rough numbers, Scott, would be 80%. Recall earlier in the year, we guided that we saw our backlog burn, protract to the 15- to 18-month period. We're seeing a slight improvement on that, so I would model 15 months, or approximately 80% of our starting backlog to be invoiced next year.

Okay. And could you also tell us the dollars of THS that are in your split of Greenfield versus MRO/UE?

Yes. So the numbers we gave were the organic construct only. And virtually, all of THS' backlog will be considered MRO/UE based on that same definition.

We did have a couple of nuclear projects that shipped, represented about 10% that would be considered Greenfield. The balance would've been -- another 90% would've been MRO/UE.

Got you. And then finally, on the orders, which looks sort of mid-single-digit for a couple of quarters now. Is that Canada as well? Or is there something else that's restraining that number?

Yes. Canada, the incoming order rate has again kind of plateaued. And I think that's largely it. We have, as I said -- well, let me say this. We do -- we have seen a slowdown in orders in the eastern hemisphere, although we have line of sight to some significant bookings and they tend to be fairly lumpy in that part of the globe. So while our order -- incoming order rates have been down particularly in EMEA, and that's contributed to that slower order growth, we do have line of sight to some significant projects that we expect to close in the coming months.

Okay. So then, from what, I don't want to put words in your mouth, Bruce, but it sounds to me like the pace of orders growth should continue at, at least to this level, with Canada having pulled it down...

That's our expectation...

America should be better, a couple of things weaker, including Canada. But we should be able to stay in the sight of mid-single-digit organic going forward, do you think?

That's our expectation, and that influenced our growth rates that we projected for the organic business in the coming year.

And our next question will come from the line of Brian Drab with William Blair.

Just one more question. On the 5 new products, I'm curious if you could tell us anything about those products, and maybe what categories they would fall into, and if there could be any material revenue generation either this year or in fiscal '20 from those new products.

Well, I'd like to wait until we've launched those products, but there's actually a fairly wide range of products. They are, again, following execution of our product and technology roadmaps that will focus on expanding the solutions set around controls, communication and connectivity as well as in some other products and accessories in our heating lines. So I'd really prefer to give more details about that in retrospect following the launches, and we'll tell you our expectations for those at the time of announcement.

Can you say, Bruce, if there's anything that -- any ideas you have that came as a result of the acquisition and synergies between THS and the legacy business, technology synergies?

There are some technology synergies. It will take us longer to realize those. These would be more consistent with the organic business and plans that we have laid out for growth of that business.

So all 5 of these new products would be within the legacy business and not within THS, is that a fair conclusion?

Yes.

And I'm showing no further questions at this time. So now it's my pleasure to turn the conference back over to Mr. Bruce Thames, Chief Executive Officer, for some closing and remarks.

Well, again, we're really pleased with the overall results of the fourth quarter and really pleased with accomplishments that this team has made in fiscal 2018. We're enthusiastic about what lies ahead in the coming year, and we thank you, all, for your interest in Thermon, and thank you for joining us on the call today.

Ladies and gentlemen, thank you for your participation on today's conference. This does conclude our program and we may all disconnect. Everybody, have a wonderful day.