Greetings. And welcome to the Thermon Group Holdings Inc. Fourth Quarter Fiscal Year 2019 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to you, Kevin Fox. Thank you. Please begin.

Thank you, Roya. Good afternoon and thank you for joining today's conference call. We issued an earnings press release this afternoon, which has been filed with the SEC on Form 8-K and is also available on the Investor Relations section of our Web site at ir.thermon.com. A replay of today's call will also be available via webcast after the conclusion of the 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, 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 and 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. Before I turn this call over to Bruce, I would like to remind you that during this call we may make certain forward-looking statements regarding our company and business that are not historical facts, because forward-looking statements relate to the future they are subject to inherent uncertainties, risks and changes and circumstances that are difficult to predict. Please refer to our annual report and most recent quarterly report filed with the SEC for ore information regarding our forward-looking statements including the risks and uncertainties that could impact our future results. Our actual results may differ materially from those contemplated by these forward-looking statements. We caution you, therefore, against relying on any of these forward-looking statements. They are neither statements of historical facts nor guarantees or assurances of future performance. Any forward-looking statement made by us during this call speak only as of the time at which it is made. Factors or events that could cause our actual results to differ may emerge from time to time. And it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement whether as a result of new information, future developments or otherwise except as may be required by law. And now it's my pleasure to turn the call over to Bruce Thames, our President and Chief Executive Officer. Bruce?

Well, thank you, Kevin, and good afternoon 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. And Jay will follow me to present the financial details of our fiscal year 2019 fourth quarter and full fiscal year. To begin, I'd like to take just a moment to highlight some key accomplishments in our fiscal 2019. The increased investment in our research and development has resulted in a more robust pipeline of new products than at any time in the history of Thermon. These efforts yielded eight new product launches during the fiscal year that continued to differentiate our solutions in the marketplace to build and extend our leadership position. These new introductions included the New Genesis control platform that has formed the basis for our IoT cloud-based solutions going forward. These new solutions will give customers more accurate and timely information to improve the reliability, safety and efficiency of their operations. Most recently, we introduced the TraceNet Triton wireless temperature transducer, the next generation Terminator Beacon Light System and the HTSX HT High Temperature Self-Regulating heater to provide the most advanced heat tracing system and accessories available on the market today. We also launched new software platforms such as CompuTrace 6.1; CompuTrace power management and TraceNet Sync to improve our suite of design technology that creates greater value for customers starting with early design and continuing through installation and ongoing operations. Finally, we introduced the methane destruction module, which capitalizes on our Cata-Dyne Catalyst Technology by converting fugitive natural gas emissions to CO2 and water dramatically reducing greenhouse gas emissions for our customers. During the year we continued to invest by adding key talent, upgrading equipment and enhancing processes to…

Thank you, Bruce. Good afternoon. I will start by discussing our record Q4 results then a recap of fiscal year 19 accomplishments, and then, conclude with our guidance for fiscal year 20. First off, revenue and orders; our record revenue this past quarter totaled 114 million and that's an increase of 11% over the prior year's quarter. We saw a dramatic shift in the MRO/UE and greenfield mix in Q4 to 50:50. And this was the highest mix of greenfield revenue in at least the past nine years. And due to the strong U.S. dollar across the globe, FX decreased our Q4 revenue by approximately 3 percentage points. The heat tracing greenfield revenue grew by 42% over the prior year quarter and the above greenfield mix was 10% higher than our typical historical performance and was negatively impactful to our gross margins. We continued to experience positive signs of recovery with our heat tracing revenues growing double digits for the sixth consecutive quarter. And orders for the quarter totaled 106 million and they grew by 12% versus the prior period. Our backlog of orders ended March at $120 million versus $160 million as of March, Fiscal year 18 and that's a decrease of 25%. But as a reminder, only 30% to 40% of our orders are typically resident in our backlog due to the velocity of maintenance and standardized products flowing in and out of our backlog. FX negatively impacted our backlog by $4.2 million. In our book-to-bill for the quarter was negative at 0.93 primarily due to the acceleration of and somewhat unanticipated greenfield project revenue from Q1 into Q4. Moving on to gross margins. Margins were 39.4% of revenue and gross profit declined by 620 basis points. The significant heat tracing revenue mix shift to greenfield was the…

Thank you. [Operator Instructions] Thank you. Our first question comes from the line of Brian Drab with William Blair. Please proceed.

Hi Bruce. Hey Jay.

Hey, good afternoon, Brian.

Hey. I don't know if you want to add some color regarding the revenue recognition situation. But could you comment a little bit about what happened and how it was kind of a function of operating within an older ERP and the upgrade that you've gone through since. And I know there's a lot of information in that in the K around this. But on any detail, you've given and comfort you could give the investment community around to fix that is in place and kind of the root cause would be great.

Sure. There were six projects in our EMEA subsidiary that we were accounting for under our old ERP system. We have implemented a new ERP system and all new projects are under this new ERP system, which has greater visibility greater granularity and much more robust business controls to ensure accurate accounting and bookkeeping. So therefore, with this new system, we believe this issue along with some other business controls that we will be implementing including training and additional resource. We believe this issue is a thing of the past and fortunately the impact to Thermon in terms of any revenue adjustments was immaterial -- so immaterial that there were not any proposed changes to Q1, Q2 or Q3 of this current fiscal year.

Okay. Or any period?

Any period.

Any period. Okay. All right. Thanks. And then, you commented on the midstream LNG. I just want to make sure I heard correctly. Did you say -- what did you say about the potential impact from some of these major projects this year?

Yes. Brian, I didn't quantify it. We would expect some of those key projects awards to occur this year. We don't expect revenues in the current fiscal year. And that's a piece of kind of our comments around -- last year was really a year of heavy greenfield projects. We really see going forward in more normalized mix and because we don't see the capital that some of the larger capital projects in this current fiscal year, we expect it to be more driven by baseline MRO/UE type growth in our installed base.

Okay. So, of the many of the major projects in that midstream LNG though none of those have been awarded yet, right? But you think that –

I can't say none of them, but certainly the ones that we're following have yet to be awarded.

I got you. And then, just the last one. R&D spending is up and what do we expect going forward in terms of the level of R&D spending. Is this a run rate or does it potentially step down slightly from here?

At this time, we really see that 2% of revenues being an appropriate level. As we look across the industry and it's not just looking at peers. But, as we look at the opportunities that we have in our product and technology roadmaps over the next three to five years, we believe that's an appropriate level of spending to drive the pace of development to ultimately lead with the solutions we provide to the industry.

Okay. Thanks very much.

Thanks Brian.

Thank you.

Thank you. [Operator Instructions] It appears we have reached the end of our question-and-answer session. Allow me to hand the floor back over to management for closing remarks.

Roya, Thank you. Well, thank you all for listening in on this call. Thank you for your continued interest in Thermon and have a nice afternoon.

Thank you. This conclude today's conference. You may disconnect your lines at this time and thank you for your participation.