Greetings. Welcome to the Thermon Group Holdings Third Quarter Fiscal Year 2020 Earnings Call. [Operator Instructions]. Please note, this conference is being recorded. I will now turn the conference over to our host, Kevin Fox, Vice President, Corporate Development. Thank you. You may begin.

Thank you, Diego. Good morning, and thank you 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 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, and any redistribution, retransmission or rebroadcast in any form without the expressed written consent of the company is prohibited. 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. Before I turn this call over to Bruce, I'd 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 in circumstances that are difficult to predict. Please refer to our annual report and most recent quarterly report filed with the SEC for more 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 fact nor guarantees or assurances of future performance. Any forward-looking statement made by us during this call speak only as of which the time it is made. Facts 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, I'd like to introduce Bruce Thames, our President and Chief Executive Officer, for his opening comments.

All right. Thank you, Kevin, and good morning. And thank you all for joining our conference call and for your continued interest in Thermon. Joining me on the call today is Jay Peterson, our CFO, who will follow me and present the financial details of our fiscal year 2020 third quarter. Starting off, results in Q3 fell short of expectations and a record prior year Q3, primarily driven by weaker year-end discretionary spending and other factors during the quarter. While we projected weakness in capital projects, we expected to see stronger demand in MRO/UE as the heating season began and as customers release the last of fiscal budgets. This year, we saw neither materialize, which negatively impacted both mix and volume in the quarter. After two consecutive quarters of double-digit order growth, the weakening in our end markets we noted last quarter has now led to two consecutive quarters of single-digit order contraction. I'd like to take a moment to discuss the trends we are seeing with our customers and in our end markets. From a capital investment standpoint, we see CapEx estimates for the next 12 months growing in the Middle East, Africa and India; moderate to neutral spending growth in North America and Asia; and Europe continuing to be a very challenging and competitive market. Geographically, the U.S. and Latin America and Europe, Middle East, Africa, both contributed to the shortfall relative to expectations in prior year in the quarter. In the U.S. and Latin America, we anticipated the weaker capital environment as some large ethane crackers are coming online and the next wave of projects are in early planning and engineering stages. However, we expected stronger year-end discretionary spending that occurred in the quarter, and we saw several new projects move to the right. In Europe, Middle…

Thank you, Bruce. Good morning. I will start by discussing our Q3 results, including our cash generation and debt paydown, and then finish with guidance and a discussion on margin enhancements for fiscal year 2020. First off, our revenue this past quarter totaled $100.5 million, and that's a decline of 16% against the prior quarter, which was an all-time record high for Thermon. On a year-to-date basis, the majority of our revenue decline is attributable to the performance of our European business, which has been negatively impacted by the macro European economy, among other factors. The legacy revenue mix between MRO/UE and Greenfield was 62% and 38%, respectively, versus a 35% and 45% mix in Q3 of fiscal year '19. FX nominally decreased total revenue by approximately $200,000. And in constant currency, our revenue declined by 16%. Orders for the quarter totaled $99 million versus $105.7 million in the prior year quarter for a decline of 6%, and this was due to weaker-than-expected year-end spending and a warmer start to the annual heating season. Our backlog of orders ended December at $102.5 million versus $135.9 million as of December fiscal year '19, and that is a decrease of 25%. And as Bruce mentioned, there are several large greenfield projects that have been recently awarded to Thermon, and we anticipate booking them into our backlog in the next 90 to 120 days. And our book-to-bill for the quarter was essentially flat at 0.99. Moving on to gross margins. Margins were 43.3% for the quarter, and that's a 65 basis point improvement versus the comp period. Sequentially, margins were down by 80 basis points, and that was attributable to closeout costs for a large greenfield project and certain cost variances due to lower volumes. Gross profit declined by $7.4 million due to…

[Operator Instructions]. Our first question comes from Brian Drab with William Blair.

Did you say what THS revenue was in the third quarter?

No. No, we did not. I've got that here. We will be talking about that both this quarter and the next quarter. But going into next fiscal year, due to the finalization of the integration into the legacy business, we will -- it will be unlikely that we will be discussing that going forward. This current year, it was just under $22 million, $21.9 million for the quarter.

$21.9 million for the quarter. Okay. All right. So that business is down somewhat from last year, but not really any different from the decline that you saw in the core business, I guess?

Correct. That's correct.

Okay, okay. And then can you talk about the margins that you're seeing in greenfield now that had been under pressure somewhat. Are those dynamics that are putting greenfield margins under pressure still in place, or what do you see there?

Yes. We haven't seen a material change in the greenfield margins. They're still running in the upper 20% range for the year, and that will vary a little bit on the type of project and geography. But the average is in that range and has been for the last 2 or 3 years.

And then are the margins in your backlog then, I guess, is it safe to assume that those margins are about in that range as well?

Yes. We see the margins, they're a little dynamic based on which certain projects are in near term versus the out term. And at present, the margins are essentially flat with the prior quarter down modestly.

Okay. Okay. And then on the last call, you talked about a couple of major project wins. Can you update at all on those projects? And I guess, what I'm wondering is, Bruce, I think you said that some projects have been pushed out. Does that include some of these larger projects that we talked about last quarter?

Yes. So that's a great question. First of all, we take a pretty conservative approach to how we book projects in backlog. And so we've received a number of awards that -- sizable awards that are not reflected in our bookings and backlog. My reference to those projects that could move are not the ones that are -- that have been committed. The ones that are more in question around movement have yet to clear FID. And then we did see some in -- particularly in the Gulf Coast, but we saw some other project movement to the right by about 6 months. And that's -- there's various reasons that are driving some of that timing. But Brian, to answer your question, no, there is no impact to the timing of those projects. We just get firm builds of material and hard POs before we enter those into bookings and backlog. I do know, for the large Canadian LNG project that we've mentioned previously, this fourth quarter, that will begin to impact backlog -- bookings and backlog. And those will be led with a multiple purchase orders over the next 2 to 3 years. So it won't just be one big number, it will be bookings throughout the year at multiple quarters for multiple packages. So that's kind of what you should expect going forward.

So the Canada LNG project has not really shown up in the numbers yet. That will start in the fourth quarter?

That's correct. They have not shown up in the numbers at all, so.

Okay, at all? Okay, okay. I wasn't sure if there's any like early engineering work or something that hit. But it -- so it will start in the fourth quarter. I got it.

Correct.

[Operator Instructions]. Our next question comes from Joe Hanzlik with Confluence Investment Management.

Just looking at backlog over the last 2 years, it's steadily decreased over the last 8 quarters from $167 million down to about $102 million. What's that expectation for backlog going forward, sort of with the LNG and sort of without the LNG?

Yes. So Joe, thanks for your question. What we expect, we expected in the second half this year to really begin to see some backlog build and see a positive book-to-bill in the business for a couple of reasons. We've yet to see that materialize. Some of that is we have seen movement in project timing. And some of that is just as we've secured these commitments, moving through the engineering phases to get to firm bills and material, those have yet to be let with firm POs to hit our backlog. So our expectation, excluding the large LNG project, would be that we would begin to see some backlog build. And we did see that in Europe, which has been particularly weak and is largely responsible for the backlog decline you had referenced. Our Asia Pacific backlog remains strong. Canada has been fairly flat. And we've seen a drawdown in backlog from this time last year in the U.S. and Latin America as we've kind of completed some large ethane crackers. But there are a whole another wave of projects online in various stages of planning and execution that we believe we are well positioned to win and we believe should hit -- begin to hit backlog in the next several quarters.

Ladies and gentlemen, there are no further questions at this time. I'll turn it back to management for closing remarks.

Thank you, Diego. And thank you, again, for joining this conference call today. We appreciate your interest and support for Thermon, enjoy the rest of your day.

Thank you. This concludes today's conference. All parties may disconnect. Have a great day.