Workflow
Graham(GHM) - 2025 Q2 - Earnings Call Transcript
GHMGraham(GHM)2024-11-08 21:59
Financials
Slide

Financial Data and Key Metrics Changes - The company reported record revenue of 53.6million,a1953.6 million, a 19% increase compared to the previous year, indicating robust demand across markets [8][22] - Gross margin improved by 790 basis points to nearly 24% of sales, while adjusted EBITDA margin expanded by 550 basis points to 10.5% of sales, reflecting significant margin expansion [9][28] - GAAP net income for the quarter reached 3.3 million, a substantial increase from 0.4millioninthesameperiodlastyear,translatingto0.4 million in the same period last year, translating to 0.30 per diluted share [26] - Adjusted net income grew by 353% to 3.4millionor3.4 million or 0.31 per diluted share [26] Business Line Data and Key Metrics Changes - Sales to the defense market reached 30.9million,a2330.9 million, a 23% increase over the prior year, driven by new defense programs and project milestones [23] - Aftermarket sales remained strong despite a decline compared to last year's record levels, underscoring the resilience of the aftermarket business [24] - Refining orders totaled 10.6 million, driven by ongoing strength in aftermarket orders, which totaled 13millionforthequarter,up1113 million for the quarter, up 11% year-over-year [35] Market Data and Key Metrics Changes - The company reported a record backlog of 407 million, a 30% year-over-year increase, with defense backlog increasing by 31% [36] - Space backlog surged by 150%, while chemical and petrochemical backlog rose by 58% [36] Company Strategy and Development Direction - The company launched the NextGen steam ejector nozzle, with an estimated market opportunity exceeding 50millionoverthenextfivetotenyears[11][12]−AlandpurchaseinArvada,Colorado,wasmadetosupportgrowthinitiatives,andplansforanewcryogenicpropellanttestingfacilitywereannounced[13][19]−Thecompanyraiseditsfull−yearguidanceforgrossmarginandadjustedEBITDA,aimingforlow−tomid−teenEBITDAmarginsbyfiscal2027[14][39]Management′sCommentsonOperatingEnvironmentandFutureOutlook−ManagementacknowledgedsupplychainchallengesinNavyshipandsubmarineproductionbutnotedthatthisenvironmentpresentsopportunitiestocaptureadditionalwork[15]−Thecompanyexpectsstableorslightlygrowingdefensebudgetsandseespotentialchangesinenergymarketswiththenewadministration[46][47]OtherImportantInformation−Thecompanyreportedcashflowfromoperationsof50 million over the next five to ten years [11][12] - A land purchase in Arvada, Colorado, was made to support growth initiatives, and plans for a new cryogenic propellant testing facility were announced [13][19] - The company raised its full-year guidance for gross margin and adjusted EBITDA, aiming for low- to mid-teen EBITDA margins by fiscal 2027 [14][39] Management's Comments on Operating Environment and Future Outlook - Management acknowledged supply chain challenges in Navy ship and submarine production but noted that this environment presents opportunities to capture additional work [15] - The company expects stable or slightly growing defense budgets and sees potential changes in energy markets with the new administration [46][47] Other Important Information - The company reported cash flow from operations of 13.9 million for the quarter, with a strong balance sheet of 32.3millionincashandnodebt[31]−Capitalexpendituresforthequartertotaled32.3 million in cash and no debt [31] - Capital expenditures for the quarter totaled 3.5 million, with expectations to increase fiscal 2025 capital expenditure to 13millionto13 million to 18 million [33] Q&A Session Summary Question: Insights on the space segment and backlog growth - Management noted continued opportunities in the space sector, particularly in value-added space assets, despite market consolidation [42][44] Question: Potential growth due to the change in administration - Management expressed confidence in stable defense budgets and highlighted the company's diversified market mix to navigate potential changes [46][48] Question: Impact of supply chain issues on business - Management indicated that the Navy is actively supporting the supply chain and exploring opportunities to accelerate schedules, which could benefit the company [50][51] Question: Future acquisition strategy - Management stated that acquisitions are part of the long-term strategic plan, but the company is growing organically and will be opportunistic regarding acquisitions [56] Question: Details on the NextGen nozzle opportunity - Management confirmed that the identified market opportunity is based on existing installations and ongoing R&D efforts to expand the product's applicability [59][60]