Graham(US:GHM)2024-02-04 16:00Financial Performance - Net sales for Q3 fiscal 2024 were $43,818, an increase of $3,945 or 10% compared to $39,873 in Q3 fiscal 2023, with organic growth of 7% excluding P3 Technologies[74] - Net income for Q3 fiscal 2024 was $165, or $0.02 per diluted share, compared to $368, or $0.03 per diluted share, in Q3 fiscal 2023; adjusted net income was $2,424, or $0.22 per diluted share, compared to $857, or $0.08 per diluted share, in the prior year[77] - Gross profit for Q3 FY24 was $9,723 million, reflecting a 56% increase from $6,227 million in Q3 FY23, with a gross profit margin of 22%[91] - For the first nine months of FY24, net sales reached $136,463 million, a 20% increase from $114,091 million in the same period of FY23[90] - Adjusted net income for the first nine months of FY24 was $7,369 million, compared to $2,511 million in the prior year[99] - Adjusted EBITDA for the three months ended December 31, 2023, was $3,852 million, representing an increase of 72% from $2,238 million in the same period of 2022, with an adjusted EBITDA margin of 8.8%[103] - Adjusted EBITDA for FY2024 is anticipated to be between $15 million and $16 million, including costs related to acquisitions and integration[119] Orders and Backlog - Orders booked in Q3 fiscal 2024 reached a record $123,267, compared to $20,044 in Q3 fiscal 2023, driven by follow-on orders for U.S. Navy programs[77] - Backlog as of December 31, 2023, was $399,244, up from $293,671 a year earlier, with P3 contributing $6,225 to the backlog[77] - Total orders for the three months ended December 31, 2023, were $123,267 million, an increase of 515% compared to $20,044 million in the same period of 2022[116] - The book-to-bill ratio for the nine-month period ended December 31, 2023, was 1.7x, indicating strong order growth driven by large defense orders[116] - Defense orders reached approximately $334,455, representing 84% of total backlog, a 43% increase from $234,485 in the previous year[118] Cash Flow and Capital Expenditures - Cash and cash equivalents decreased to $15,163 as of December 31, 2023, from $18,257 at March 31, 2023, primarily due to the acquisition of P3 and capital expenditures[77] - Capital expenditures for the first nine months of fiscal 2024 were $5,193 million, up from $2,394 million in the same period of fiscal 2023, with expectations for total capital expenditures between $8,000 million to $10,000 million for the fiscal year[106] - Net cash provided by operating activities for the first nine months of fiscal 2024 was $19,483 million, significantly higher than $8,946 million in the same period of fiscal 2023, driven by increased profitability and improved working capital management[105] - The company repaid $9,522 million in debt and used $6,812 million for the acquisition of P3 during the nine months ended December 31, 2023[107] Market Focus and Strategic Initiatives - The defense market comprised 84% of the total backlog as of December 31, 2023, reflecting the company's strategic focus on this sector[84] - The company anticipates strong demand for defense-related equipment due to increased defense budgets and geopolitical tensions[78] - The company is positioning itself to capitalize on growth opportunities in alternative and clean energy markets, including hydrogen production and geothermal power generation[81] - The defense industry accounted for 56% of sales in Q3 FY24, up from 54% in Q3 FY23, indicating a strategic shift towards defense[89] - U.S. orders accounted for 95% of total orders in Q3 FY2024, up from 40% in the same period last year[117] - The company aims for 8% to 10% average annualized organic revenue growth and Adjusted EBITDA margins in the low to mid-teens by FY2027[120] Challenges and Risks - The company is facing significant cost inflation in labor and raw materials due to global supply chain disruptions and geopolitical events[131] - Foreign currency exchange rate fluctuations reduced cash balances by $39 due to the strengthening of the U.S. dollar[128] - As of December 31, 2023, the company had $3,000 of variable rate debt outstanding, with a potential $30 impact on interest expense from a 1% change in rates[132]