Graham(US:GHM)2024-08-07 18:34Financial Data and Key Metrics Changes - The company achieved record sales of $50 million for Q1 2025, representing a 5% increase or $2.4 million over the prior year, including $1.6 million from P3 Technologies [10] - Net income for the first quarter was $3 million, a 12% increase compared to $2.6 million for the same period in 2024, translating to $0.27 per share [12] - Adjusted net income increased by 20% to $3.6 million, equating to $0.33 per share [12] - Gross margin reached 24.8%, an expansion of 170 basis points over the prior year [11] - Adjusted EBITDA was $5.1 million for the first quarter, representing a 10.3% margin [13] Business Line Data and Key Metrics Changes - Sales to the defense market reached $29.1 million, marking a 28% increase and setting a new quarterly record [10] - Refining sales increased by 20% to $8.2 million [10] - Aftermarket sales were down compared to record levels of the prior year but remained robust overall [11] Market Data and Key Metrics Changes - U.S. sales accounted for 82% of total revenue this quarter, reflecting the size and scope of the domestic defense business [11] - The backlog has been consistently around $400 million for the past three quarters, with a 23% year-over-year increase [16] - Defense backlog increased by 29% or $74.5 million, while chemical and petrochemical backlog rose by 82% or $10.5 million [16] Company Strategy and Development Direction - The company is expanding its defense business, which has reduced economic sensitivity, with a total backlog nearing $400 million [5] - A new 29,000 square foot facility in Batavia, New York, is set to enhance capacity and production efficiencies, particularly for U.S. Navy commitments [6] - The company is involved in a net-zero carbon emissions project for an ethylene cracker site in North America, aiming to minimize carbon emissions [7] - The focus on developing full lifecycle product opportunities ensures the company remains a trusted partner throughout the operational lifespan of customers' facilities [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategic positioning for sustained growth and achieving long-term financial goals for fiscal 2027 [21] - The company anticipates revenue for fiscal 2025 to be between $200 million and $210 million, indicating top-line growth of 11% over fiscal 2024 [17] - The effective tax rate for the full year is expected to be between 20% to 22% [12] Other Important Information - The company generated strong cash flow of $8.7 million, maintaining a strong balance sheet with $21.6 million in cash and no debt [14] - Capital expenditures for the quarter were $3 million, with expectations for fiscal 2025 CapEx to be between $10 million to $15 million [14] Q&A Session Summary Question: Details on the air turbine pump program - The air turbine pump program was a competitive bid, with the company's extensive experience in similar programs positioning it favorably [22][23] Question: Update on aftermarket database project - The company has developed a comprehensive database of equipment installations and is working on automating updates to improve sales efforts [24][25] Question: Status of the facility expansion - The groundbreaking for the facility was delayed from July to August due to typical project timelines, but confidence in the overall schedule remains high [26] Question: Labor force increase efforts - The workforce increased by 23% during the quarter, with ongoing recruitment efforts supported by the BlueForge grant [27][28] Question: Capacity issues related to new contracts - Current programs fit well within long-term capacity plans, with necessary investments being made to support new contracts [30][31] Question: Pipeline of opportunities post-P3 acquisition - The P3 acquisition has opened up new opportunities, particularly in space programs, with a strong pipeline of projects being pursued [32][33] Question: Gross margin outlook - The company expects some lower-margin work in the pipeline but overall gross margin guidance remains stable [34]