Graham(US:GHM)2021-08-10 18:55Financial Data and Key Metrics Changes - Revenue for the quarter was $20.2 million, with $16.7 million being organic and $3.5 million from the acquisition of Barber-Nichols [7][8] - Orders in the first quarter were $20.9 million, primarily organic, with Barber-Nichols contributing $200,000 for June [11] - Consolidated backlog at June 30 was $236 million, with 80% allocated to defense [12][27] Business Line Data and Key Metrics Changes - Defense revenue constituted 35% of total revenue in the quarter, expected to approach 50% with Barber-Nichols fully integrated [8] - Orders from the crude oil refining market totaled $11.5 million, indicating a recovery in that segment [11] - The acquisition of Barber-Nichols is expected to be accretive in fiscal 2022 despite additional amortization costs [26] Market Data and Key Metrics Changes - The company anticipates approximately 50% of future business to come from the defense market, with growth opportunities in space and recovery in energy markets [27][40] - The domestic market is flat, but international markets present growth potential [40] Company Strategy and Development Direction - The acquisition of Barber-Nichols is seen as a transformational move to diversify revenue and earnings [12][44] - The company plans to leverage strengths from both Graham and Barber-Nichols for organic and inorganic growth [35] - Future capital investments will focus on small to medium acquisitions that complement existing businesses [39][99] Management's Comments on Operating Environment and Future Outlook - Management views fiscal 2022 as a transition year with expectations for sequential improvement in revenue and profitability [19][42] - The company is optimistic about the upcoming up-cycle in the energy and petrochemical sectors starting in FY 2023 [45] - Management emphasizes the importance of maintaining strong engineering capabilities and customer relationships to sustain market leadership [46] Other Important Information - Jim Lines, the CEO, announced his retirement effective August 31, with Dan Thoren succeeding him [4][13] - The company has made significant investments in IT tools and resources to enhance operational efficiency [16] Q&A Session Summary Question: Opportunities in space development programs - Barber-Nichols is involved in propulsion systems for space applications, including rocket engine turbo pumps [53][54] Question: Impact of aggressive pricing strategies on margins - Management acknowledged aggressive pricing to secure contracts but emphasized successful execution despite operational challenges [56][57] Question: Margin profiles for commercial business - Recent orders in both domestic and international markets have better margin levels compared to previous backlog [65] Question: Future gross margin expectations - Management expects a substantial increase in margins as the company transitions into fiscal 2023 [62][75] Question: Capital allocation and acquisition focus - The company is prioritizing markets for potential acquisitions, including space and defense, while evaluating opportunities thoughtfully [98][99]