Graham (GHM) 8 Nov 242025 Q2 Earnings call transcript

Greetings, and welcome to the Graham Corporation's Second Quarter Fiscal Year 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Deborah Pawlowski, Investor Relations for Graham Corporation. Thank you.

You may now begin.

good and Rob, you, morning, everyone. Thank appreciate Graham. certainly your time in interest your and today We

me the Financial which remarks, with and Matt CEO; line Malone, Here are on the President we General Chris President Thoren, Vice questions. provide Dan, for Thome, will and Manager our going of open our Chris, Graham to after Chief of Officer; Barber-Nichols. Matt call and Corporation are and Dan formal their

year copy of results the You XXXX should fiscal morning. financial were quarter have this released a that second

If on you it don't have the our release, is ir.grahamcorp.com. website at

also that discussion. there will You find the will accompany slides today's

looking at in safe turn review you would the to Slide harbor statement. So slides, I will those X, if

the is session. You during to earnings subject here could well well release results should the the other be documents cause as uncertainties These statements that These to as in Commission. may risks as as filed aware stated events today. that during discussion well actual Exchange Company with differ factors the risks other provided formal as we Securities that Q&A with make to statements the and other from apply and future as uncertainties are and factors by materially forward-looking and what some

website You our find can those documents or sec.gov. at on

useful call, During be performance. also evaluating in measures. will discuss we these our will We today's some non-GAAP believe financial

in with a isolation However, you GAAP. as information should in not or additional presentation consider for this results the substitute of prepared accordance

We measures slides. accompany comparable release in GAAP have the measures that reconciliations today's with provided tables and non-GAAP of

required These and operational reconciliation provided. and book-to-bill and performance the key ratio. These are not of orders, quantitative or indicators backlog, gauge use a progress We metrics performance a each is Company. of the performance help this key of are measures also to

find our our deck. at the of disclaimer use slide back can regarding KPIs the of You

over Dan? Dan So with X, to I'll would it Slide please that, to turn to you if begin. advance

morning, Good everyone. Deb. Thank you,

delivered that team a across record XX% increase Our million, $XX.X demand marking robust markets. highlights revenue of our

of operations business efforts Notably, expand last effectiveness quarter significant improve few our to strengthen market our the reflect results reach, expansion. our This margin our showcases model over years. the and

margin gross focus points of and nearly This opportunities XX.X% on EBITDA margin of margin margin sales, XXX adjusted our points, execution basis by business. XX% XXX reaching expanded higher improved growth, to meaningful line into the throughout expansion Our our reinforcing by basis and solid sales. bottom translated

as in Graham We positioning a markets. profitable key are increasingly our and leader resilient

operating for base the over from of efficiency nozzle the the no million milestone In significant we the $XX financial in $XX nozzle a $XX our customers, addition, R&D are X estimates on benefit Based meaningful facility. see installed credit success debt, and This deliver with maintaining profitability to us to for investments. current access next enhanced technology of injector advanced pursue our confidently recently strategy, that our years with NextGen estimated exceeding million from enables market potential technology our our cash initiatives position can a line XX for we steam on is environmental million to hurdle strong opportunity more improvements, Gulf than hand with product, total benefits, designed our demonstrating our This new additional and strength Coast this an years. NextGen company. refinery, growth that a agility. In sheet marking to of rates revolving launched meet balance through growth we while an our at

Arvada, land purchase a to of Colorado, Barber-Nichols growth support made the our in anticipated we subsidiary. Additionally,

further, exciting track With further launch year long-term leveraging of and initiatives. Chris solidly details provide strong and million the Matt full Graham's these which us growth puts profitability financials will We propellant guidance pleased for record achieve X.Xx, to in continue, by on to EBITDA, confident our cryogenic supporting XXXX. the our but also our a to a more fiscal announced ratio raised cryogenic gross yesterday goal a space adjusted $XXX in mid-teen and years share sustained we book-to-bill of to both our that backlog that momentum leave our we I'm in plans margin on new establish I are X EBITDA facility, low industries. margins to it will expertise review and will to testing ahead.

we ship potential navy in about that creating challenges highlighting future issues order headlines delays recent production, rates. chain supply recognize and with concerns Lastly, submarine schedule are and

impact schedules. business urging customers this and expected to is short-term, not our the are maintain as us our in to accelerate However, even

environment struggling to this other be opportunity us capture may to fact, presents where meet for suppliers an work In demands. additional

Now Matt, I initiatives. will our to more insight growth over turn it recent who provide into will Matt?

our Good we our current marking outlines with Arvada, see in To campus land the the black The acquisition recent secured. Dan. bold you, of right morning, is Thank X, shows Colorado. slide you with existing everyone. Starting the of shot plot will have land Slide strategic on the of our that footprint. right new aerial

plot positioning the consolidate operations, highlights freeing working future enable existing our up we is million to us $X.X limitations constraints proactive As those investment us space will certain see, space This expansion. can better a continue and the image to for as step within within. you been to grow. This facilities we address have new

allowing slated will programs we lines move emerging construction scale for begin facility our product smaller in initiatives, growth the new forward. support fiscal year XXXX, as and to us additional long-term to With the

to Moving X. Slide

a The testing providing a Flagstaff programs, PX our state-of-the-art covering needs defense, As segments. announced near and to for all enable existing also liquid liquid liquid capabilities which enter centers, in set components, oxygen, testing us prioritize are will testing the often and our needing assurance, devices. timely systems product markets energy, facility new critical quality evolving space, testing facility excited high constructed be demanding fluid subsidiary in-house hydrogen, solutions new pumps, Florida. in high serve yesterday, customers By across propellant Technologies plans will for scalable, we applications. for to across to even scalable with cost-effective alternative Enhanced release management solutions, specialized potentially include for our programs methane facility -- our share medical to and cryogenic of combustion for addressing will validation

it support will aligns early feasibility Additionally, that versatile studies long-term potential this for a goals. making our asset strategic customers, with

to new rate return break XXXX. in cash to aiming year and X to in preparing are for the in approximately are future, Florida a steps is support testing testing capabilities these internal deliver summarize, payback X XX%. To acquisition innovation. achieve begin providing growth years land mid-calendar years to We crucial of in X current ground exceeding initiatives, the expect and initial soon Financially, projected facility space the an facility to by and both future and and the Colorado the needed

our We to second will markets. With Chris are excited as over that, financial in quarter for it we turn to expand I details. reach leverage critical continue these investments to Chris?

Thank you, and good Matt, morning, everyone.

our reminder, Technologies, for in on a acquired will include quarter we November begin XXXX. I results which PX Slide of the As X.

ramp-up our was XX% incremental sales increase achieved million over included As and This you we with can year a of last record totaling increase all $X.X also the PX. Sales revenue base. diversified $XX.X million, sales over the expansion from to of see, represents across programs, million, another reaching quarter milestones. in driver, fueled year. major new $XX.X timing increase a were of critical defense and market XX% a existing a by the which prior the This defense programs project was growth

the refining projects. sales $X.X higher mainly timing to contributed of petrochemical Additionally, improvement reflecting chemical and million overall the growth, capital

XX% remain levels, compared sales were and of last down our business. they business. our of highlighting aftermarket our importance of record made revenue, defense to Although up the strong, our sales year's domestic total the resilience aftermarket underscoring scale U.S.

Turning to Slide X.

by improvement sales mix, XX.X%. volume, operational basis enhanced a favorable points and execution. gross driven Our by higher expanded was margin pricing, XXX strong to This project

from to profit Our gross will quarter skilled which workforce levels, supports $X.X roughly equipment. the grant, the the or XX X million securing benefited commitment program BlueForge development announced related for funds gross with grant. margin million training $X.X similar our to we July, also This our defense continue The to in over Batavia points labor growth. contribute next Alliance for and aligning welder quarters our future at in and grant basis

U.S. BlueForge is how are As our X, for submarine we as a translating this we performance grateful pipeline. On strong a partnership income million, Alliance reminder, bottom line. see supports our industrial Navy we diluted to GAAP increase expand significant million XXXX, and for in net a base, the that is $X.X reached our non-profit quarter Slide capabilities period the and boosting per share. $X.XX fiscal the of $X.X the the same from second talent

which projects, to results beyond include timing adjustment earn-out accrued of orders, was but the of rather reversal quarter's a previously $X.X liability earn-out This the PX. for due million a lost any not This period. extend

XXX% item, to income Excluding among $X.XX diluted our net others, $X.X or by million per this adjusted grew share.

XX.X%. level fluctuate projected year-to-date tax to reflects at on first tax awards the mix discrete normalized this QX based at our bringing in in items, of a income year's While a and derived factors effective from restricted rate can the stock effective was benefit quarterly vesting approximately rate more like income tax of the quarter, foreign our levels, XX% rate and

the expansion For reflecting which second margin, fiscal year. prior for XX%. Slide to basis and rate continue totaled tax EBITDA, highlights points million the between our our XXX $X.X quarter, of effective XX.X% full over be we adjusted year, XX% an expect X to the a

SG&A technology. investments expenses to this strategic over increased the rise year, our prior operations, our was personnel, While in million $X.X primarily by quarter attributed this and

the bonus costs acquisition. from with PX Specifically, additional $X.X in we million the along increase incurred acquisition, performance related the supplemental in Barber-Nichols a million $X.X to

We or at be fiscal million our long-term our increase point growth ongoing $X.X of facility growth, and increased should bonus investments I support these the during The million ERP another that approximately acquisition our $X.X the overall investment costs of objectives. Batavia with of in associated well position in SG&A us Barber-Nichols was end for performance remainder conversion R&D. inflation, various quarter will XXXX. from the basis in also expenses at points future supplemental initiatives. Overall, and revenue the the completed recorded reflects and the and XXX million $X.X for out

Turning to Slide XX.

to generation, million cash reporting flow of continue for We robust demonstrate $XX.X cash operations the quarter. from

in outstanding strong balance cash Our with debt. sheet million no and $XX.X remains

our strategic available $XX with as Additionally, revolving flexibility credit growth September initiatives. to financial of million pursue have providing our XX, us we significant facility on

For expansion new welding $X.X our and capital expenditures capacity machining investments in totaled and million and focused centers. are including productivity the enhancements, quarter, equipment automated on

accelerated to million our schedule Additionally, this related an Navy. is customer approximately CapEx of expansion of which accommodating is supported for shipbuilding $X.X facility, plan for essential the U.S. the Batavia

up million, construct our increased range fiscal discussed, have the Given facility $XX XXXX our Florida $XX in $XX and we million expenditure to of in Colorado, $XX Matt million. to cryogenic a testing to capital land from a Arvada, acquisition plans recent expectations previous to million that

should elevated our order capital to expect growth around capital of sales for our XX% is the of level out nearly our to We to greater years long-term CapEx this of and objectives. than $X next a meet million. I spend investment point approximately continue large on X% XX% in have return several that maintenance projects that all of

Turning the quarter, orders to for that defense MKXX torpedo award resulting Pump the of we the Notably, system book-to-bill in these a submarine including for sector, Columbia-class We of August. approximately announced of used the million the XX. Turbine in the Slide Air reported X.Xx. orders $XX.X in were for ejection of half ratio

included with also million grown by excellent we the nearly backlog our orders in an increase visibility order cryogenic over into $XX.X large million stability. key customers. Furthermore, to totaled saw refining or totaled contract quarter, for the our the us a Overall, XX space for million reached to driven has the increasing up for one XX% by pump sector, but This of quarter, the due in orders addition, XX% In the for with backlog a quarter. and position. and year-over-year This market at the $XX a $XXX aftermarket chemical/petrochemical strength the by recirculation a space for September high Aftermarket operational consistent orders. refining robust market ensures million XX% in backlog $XX defense $XX.X totaled orders strong future, our our which million. degree not of which backlog, demand prior record XX provides year. Slide only highlights our ongoing

our million. petrochemical chemical diversified Our to risen has growing backlog across almost $XX by of while up backlog million, space $X has our approximately see or XX% and surged backlog nice our by It's XXX%, markets. all

to It We XX to expect months. for the to XX% to to note XX, anticipated quarter. guidance orders the we what of convert with are an XX% convert updating following the primarily XX from of sales next within to approximately beyond our for fiscal conversion for provided majority XX over U.S. that we the Slide is important additional the months, XX% from sector, backlog XXXX our XX% months the defense projected Navy. On are last

revenue anticipate growth between which the projected of midpoint and of $XXX to fiscal range. over continue reflects XX% million million, this a top We at $XXX XXXX line

our projections, EBITDA in point on increase and a strategic However, XXX that we based approximately revenue the million I to the gross our guidance to-date, of and $XX adjusted at XX, million to adjusted improvement implying better-than-expected taken essential the upon operational the EBITDA historically $XX midpoint. the priorities an labor for of account top of lighter the vacations. On This are fiscal also suggests seasonal a for expectations our and results quarter year, third to our range long-term achieving the bottom holidays are raising $X.X into due remainder cadence range emphasize end by XX% XXXX. should Slide we and the representing goals. out margins, we our have margin point at direct X.X% midpoint, basis that noting over million, the

EBITDA progress X steady goal in momentum, by adjusted This track short to and the growth. targets ourselves strategically mid-teen low positioning guidance on making are years to our achieve recent adjustment with coupled our margins sustained just for us our keeps We EBITDA away. fiscal XXXX, of meeting to

of expense that, XXXX. Importantly, This adjusted the now points EBITDA an component the the end contribute long-range will the that our bonus goal supplemental this of progress our XXXX. With help can approximately margin basis fiscal at bridge for XXX will is Barber-Nichols additional questions. fiscal in to completion open toward we call

first of is line Our question with today the Capital Gomes [Operator Joe from Markets. NOBLE Instructions]

I seem the about basically was guys. business bit doesn't And driven and space by here? want it Really the little you talking but you asking space just they've there, -- building calls to segment was impacting maybe the wondering OEMs we're that are reason up backlog seen and there. are I nice your I'm a segment. job the slow couple seeing of a that your to could talk start off people how space some, be on about down got on

you do take Matt, to one? want that

Yes, This will. Barber-Nichols. is Malone I Matt at

prominent. is deployment down at said, of in space On still of launch market, that to all being large on few So specifically, space kind There of there. transition side, satellite experimentation what a very see as well consolidated as are of see scientific of lot lot exploration the really opportunity we the sort and consolidation we're assets. to continue point, to the main certainly to top microsatellites I from a think value-added is, this a And which starting LEO is providers.

the continued And the we're seeing so, growth where space assets. in is value-added

specifically So around different satellite assets. these very technology cooling, advanced propulsion for

our growth. the seeing part on we're stable of is it. I and a business, where it yet that's growing so remains and What future still bright say will And is the

Tuesday, you benefited election there's of, trades, had been the lot insight. better for obviously, somewhat the Trump have we Thanks here, and a guys of on for that a lack from I and term think that. And

that growing. in? with to bigger the we're specific Or is going where areas color it doesn't do programs you're knowing matter in or hello, you think do what have from you there's would on, are out emphasis on change on, your be appreciated? As administration? growth programs potential of President those contacts, you're really and on to because maybe see Any that additional of be you know looking thoughts the could what Do you a that who heard be kind think you going think,

take Joe. to Happy that Yes. one,

So tell the hard future. always to it's

we're really quite Navy with bit with from strategic and I'll But of a a diversified of nicely where that. So start I like base programs. starting business in backlog

programs side. I likely specifically, very So those that energy, safe. future, is if the the look When that pretty the I stable, on And some even there defense see changes strategic little I I see on, energy maybe as a coming budgets. at bit at some growing we're look I think

up for in gas. pressure Trump oil we that fuel. for benefit There's economy office So lands he quite for before and lot bit happens, was when general and a the the of when saw of exploration, opened prices a public lower-priced on

side, refineries there's on margins the hurts that think I a -- the bit probably it because their refinery to reduce. little start

petrochemical the side, low-cost the On it's in feedstock a gas. natural

benefits. that So

market the energy that But the then And one a we've is side, mix again, probably we of them. as the probably energy markets such So that between for new new another pluses really diversified see down, company legacy to the focus becomes that, probably of and one minuses beauty the serve. able nicely coming we're and less is that up, move administration. built in a some goes that for we

with okay like. what where looks and we're I'm at generally, So the future

The next question Oak with Ryan Ridge. is from the line of Dick

Good Dan. rate any job hear on the of was quarter A comments with another question your on the build it to impacts good chain. supply potential execution, on -- strong

could You Can bit? work. a be that What's to mean? capture mentioned little does there in occurring? you additional that a elaborate your confidence What potential level

Yes.

kind really, to there, of as Navy chain, the going little So customers is et understand and of a making and investments, the supply this But really they're again, is what in we active on bit listen cetera. seeing what's hearsay. our supporting

the Navy chain reallocate And can Graham supply -- that's also high the shipbuilders talking what so about performing what to and also opportunities you to like are partners is wonderful. They're accelerate to Corporation.

we that can to have that the within Navy Navy held assets is of of about also So that life the those the have yards. in the do that traditionally think I field. is we And it extending some been we're getting what inquiries talking relative

everybody the for can in is challenges improve? okay, board good at we chain, just as at, I have And problem do it's supply to look where solving opportunity looking it, we do So across Graham. the see what I

related, additional for And Are opportunities you've programs. for expansion, the welding $XX help after support expand Batavia million-ish for with campus? had to investments the are now and Batavia there for Barber-Nichols strong very then there the BlueForge kind expansion, Colorado Matt, And go of you your grant to the building, pots and the business? land maybe

Dick. Yes,

and schedule can really all how our we help we side have to strategic announced. a say talk future is Dan validates of customers a that can in we in to are flow. volume our for Nothing the think U.S. that the accelerate we as Navy ship-build we right in Graham supplier the our communication that Barber-Nichols constant we we today. opportunities communications both with just and and on have as opportunity talked what of lot we that that really about. the such And we So need constant we But to can are our improve ones just now just us to it BlueForge, about fact front customers and see opportunities with

from next line Stanley the of Beacon with comes Russell The Securities. question

drive you'd there specific that in call HX. and bit respect quarter, a this and your compression QX? lift, that on conservatism With of guess the following on headwinds just on of impact great a the a the reflect just Are in the lift, I'm looking this gross I implies number beyond Congrats holidays end? any last and does the guidance at the it that quarter. Or to margin bit almost quarter. would XX% out

seasonally of XX% reflective guidance margin QX, our and we're about at just lower XX%. Year-to-date, is typically right? really It's to the XX%

third the comfortable in So range feel with we that's the given the quarter. slowdown

up on change following wondering next front? question acquisition or it for implications I'm what earlier on on focusing the might given government? know might its you around you be what election. far the an what be And now your we the about so criteria And just Does

Yes.

get have are just the to you're XX% Russ, of to sake year, as strategic for do nice our doing The acquisitions of growth. plan. So part we you X% is to know, acquisitions that organically when long-term don't acquisitions per thing growing

sit acquisitions. So nothing with today as that. change have discussions There's current we administration feel time going past, today. regards But imminent targets, any to potential framed do and more we here we're really in the opportunistic we the we all in be don't changing the with we as see to

The the Francese next of question Investment. Frank is First Eagle with from line

Deb, something that's bit fit non-Graham your that like in reported wondering refiners you great wish is $XX to this difficult on that Dan, stuff nozzle scoping CapEx Chris, stuff, a just companies how X other if marketing. million see my actively quarter. around it easy out the nozzle little was Dan, could opportunity the years, the to for and clients? years, from Matt, this. I all Anyway, structure or XX already And places more NextGen give I petrochem there? Is you you're

Yes. question, Great Frank.

is right identified would the say. So easy what pickings, now I I we've guess,

on. of technology So we've that out we provide a bunch ejectors got know will that there this improvement steam an

Now we're what other to that years. R&D produced doing have expand nozzles here within environment, of we that types the is looking over to the

putting starts R&D to So with expect the we're kind we're addressable experience million that the improvement out field that we start that could $XX place. that just to some the that, into investments we wanted this really get to get so the and to market but making would in one show grow, we ballpark market of

are So that, lot countries other to and our countries this aren't base to higher, installed about just to as much more as we a costs, we're and is this affordable that add lot right? I through technology. where you the would India Frank, subsidiaries, other is -- And know, our costs such have fortunate as China very this utility and a excited introducing valuable the they're our U.S. in them. utility of global

other for would the follow-up have the for be for steam replaced this ejector ejector our isn't to It option with replacement is to about, It competitors' on usable a then nozzles. is Graham question to And your this entire them. work.

scenes Florida. expected talk talk or a going how the transfer? I mind about of -- that of We about kind going much guess, strategic on talking behind about is Batavia, locations? question, maybe just employee bit the transfer How Barber-Nichols, a little much sharing we X more the either Dan. accelerating of And or we those than Or seeing in across you're better actually sharing that's keep

Yes.

Another really Frank. great question,

We've the pretty been have on the more we side. recently sharing on side, engineering best So been active. the side, HR on practices IT

yet. computational is group Technologies to strong really PX coming our ready technology in going we're some about talk help And fluid And the I think in not on. new there's Batavia other experts collaboration we're matter nice been hand-in-hand dynamics. that that's So they've to up working each on But really business leveraging some R&D with units subject the our that and to ones. of

So cohesive units other to fun. think a as to each other. is really It's the within And to able introduce business ton kind it business and that we're ton units a of of each fun. we're building people honestly, the I group those a of

with Instructions] Capital Forge the Management. are [Operator Schwab The line of next Gary from Valley questions

facility Yard. to million you Mobile have this I margins just is and a and build about some a GD the -- that the in Virginia awarded the made business? color Can going modules to for shipyard they mentioned I to Austal non-nuclear announcement -- specifically Columbia? How affect of $XXX state-of-the-art your the Navy in by there, September expansion that sales question in add quarter. you job Fantastic to

it up just questioning to really it The approach open Yes, current show stuff that us not I'm transaction, and is that I we don't that that really easily. think Navy goes and the the supporting affects our specific familiar very it to per give shipyards with process. shipbuilding accelerate don't se. different to approaches but that think

to competitive perspective. So at a it harm a support. we're affect probably shipbuilding, the be us It equipment, to our for But of I'm which specialized from sure bit little to been there's generally, that accelerate us. able all helps going doesn't

in that country. thing I it's would positive for very a total, say So our

next with Funds. question the is Tony Gabelli line Our of from Bancroft

doing Congratulations quarter. performed great Dan, and have so acquisitions. maybe longer X the guys well is more years, My been term. just you In on question,

transformational I'm sort what sort just someone you lot to look of do sort looking you of next a move from where company? would of lot has acquire want yourself of Sort see a there's and now? of growth, sort to -- of do -- something So of something to just trying see Are long-term years trying and you? this at Or to opportunity see is? to where X more your company your more do come you

Yes. see are We a grow organically now. as doing enjoying to inorganically. of we're both really nice far the road ability We right ahead what really as us and

system of I some interesting capture think you some component time, point that will. megatrend towards the and logical acquire to really move At boomers retiring is gives and And grow and potentially suppliers, opportunity business. if organically the pretty us this baby integration. in subsystems we're next

that of I that before. new strengths lot right a little microcap So markets I help new company and and not now XX think to have different in see to learned may lessons next technology the could small we're so a for use growth that I inorganically. there's the the love that in X to apply to very each public additional seen it of years years. organically ourselves we're room But gosh, that of we're it a bunch the markets, diversified able our and markets, different in as

So nicely of Corporation Graham Barber-Nichols a I see after acquisition. honestly, the this Tony, just was now that controlled growth and the acquisition as before it part

The Valley with follow-up Gary next from question Forge Capital. is Schwab a

that you been understand, getting all or petro that I in contact customers, just a sales customers that huge From the ejectors and as orders than a because aftermarket your say already that are that solicitation mentioned coming you've selling set Can the had service? and getting information. the contact rather percentage what a the you of from it's nozzle coming because possibly a you installed and service so from almost subscription like start by your have got you I introduced. said monitoring on you'd the these base of your -- also program NextGen what numbers to from used can needed the subscription initiated and refinery refineries and both customers. been names you base had still have hard condition-based Matt for coming the petro your follow-up up you

tell Boy, you head. know that top number, Gary. couldn't It's I I my off probably something the of that don't

At turn like to for to comments. this Thoren back further floor time, I the would Dan

Thank us for you all Thanks, Rob. today. joining

you'd in participating Conference and with X speak on Southwest Emerging the in Growth to If Equity we Boca us be an in November detail, Conference more IDEAS conferences, Raton XX Noble like will Dallas, X. upcoming December the opportunity on in

will to our presentations all again on results. day. reach with XXXX or please to feel out Enjoy time. third be you website to look forward after our your these any We us available fiscal talking always, quarter at As free

teleconference. participation. Thank you. you This your We does conclude today's for thank

disconnect You and at lines time, may this your day. a wonderful have now