Graham (GHM) 2025 Conference Transcript

Summary of Graham Corporation Conference Call Company Overview - Company Name: Graham Corporation (GHM) - Industry: Mission critical fluid, power, vacuum, and heat transfer solutions - Founded: 1936 - Headquarters: Batavia, New York - Market Cap: $487 million with a 21% CAGR since 2021 strategy unveiling [5][29] - Employee Count: 600 globally [4] Core Markets - Segments: Defense, Energy, and Process in Space - Installed Product Base: Over $1 billion globally [4] - Backlog: $412 million, indicating strong future revenue visibility [5][32] Financial Performance - Fiscal Year 2025 Revenue: $209.9 million, a 13% increase year-over-year [29] - Quarterly Revenue Growth: 21% to $59.3 million [29] - Defense Market Growth: 28% for the quarter and 23% for the full year [29] - Adjusted EPS: Increased by 97% to $1.24 [31] - Adjusted EBITDA: Increased by 69% to $22.4 million, with a margin of 10.7% [31] - Gross Margin: Improved by 330 basis points to 25.2% [30] Strategic Focus - Growth Strategy: Transitioning from a stabilized phase to an improving growth phase, with a focus on new product introductions and operational efficiencies [17][20] - Investment in Facilities: New facility in Batavia funded by a $13.5 million customer grant to enhance production capabilities [12][21] - R&D Investment: Plans to increase R&D spending to 1-2% of revenue to foster innovation [36] Market Dynamics - Defense Sector: 80% of Graham's portfolio is sole-sourced, primarily linked to naval nuclear submarines and weapon systems, with a long-term revenue opportunity of approximately $1.7 billion [8][12] - Energy and Process Market: Focus on both conventional and emerging applications, including hydrogen processing and lithium battery extraction [13][14] - Space Market: Represents 7% of the portfolio, growing due to geopolitical tensions and advancements in launch capacity [15][16] Future Outlook - Fiscal Year 2026 Guidance: Revenue expected between $225 million and $235 million, representing a 10% increase [37] - Long-term Targets: Aiming for low to mid-teen EBITDA margins by fiscal year 2027 [39] - M&A Opportunities: Actively exploring acquisitions that align with core markets and enhance product lifecycle [28] Leadership Transition - New Leadership: Transition to Matt Malone as CEO has been seamless, with Dan Thorin moving to Executive Chairman [43][44] - Leadership Stability: The existing leadership team remains intact, ensuring continuity in strategic direction [46] Additional Insights - Cryogenic Facility in Florida: Nearing completion, expected to support high demand for testing space products [40][41] - Operational Efficiency: Focus on improving product flow and throughput through new facilities and technology [21][22] This summary encapsulates the key points from the Graham Corporation conference call, highlighting the company's strategic direction, financial performance, and market positioning.