GHM - Earnings call transcript Q1 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings and welcome to the Graham Corporation First Quarter Fiscal Year 2020 Financial Results. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded.

I would now like to turn the conference over to our host, Karen Howard, Investor Relations for Graham Corporation. you. Thank

begin. may You

Karen Howard

and to everyone. first discuss Diego, joining quarter appreciate us today Graham's good you, We morning, you results. Thank fiscal XXXX

that wires have distributed should a of news You copy across morning. this release the the was

We we're here also today. that providing have with commentary associated slides the

them If you find release company's website slides, you or don't the the at have can the on www.graham-mfg.com.

will today Jeff review President and Jim Officer; and Glajch, On period Chief as our and results as the Chief our the Lines, Jeff call for the outlook. are Jim with Officer. our me Financial well Executive

Q&A. We will then open the lines for

well release filed As some be Securities is future well the These Commission. can the stated found actual factors, which discussion slide on provided Q&A. are the this These at website you what and uncertainties on risks and we results are during as www.sec.gov. in statements with as factors other call. and to with These aware, to or and documents the may as events forward-looking statements in the the uncertainties other cause as company as from well risks make could other earnings Exchange are during and materially to differ our deck apply by subject as and documents

I some our also performance. call, non-GAAP want believe today's to useful discuss point evaluating in out financial will we we that during are measures, which

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

GAAP slides. tables today's and accompanying of We the have earnings provided to non-GAAP comparable in measures reconciliations release

Jeff? over call turn begin. it's to with my that, And to Jeff the pleasure to

Jeff Glajch

exclude ongoing Steel to Steal’s node X, the or by that could start want Energy June. and I when – late I focus the utility the our include Karen, on good completed Energy quarter, numbers. If of you, want the morning in my have you first of are results so we nuclear I turned Slide commercial Thank Steel, remarks divestiture Energy noting to I business, but I in to business, will everyone.

million from million $XX.X were $XX.X sales year. last QX down

year The revenue. cost hence in over raw of Canadian large project than oil of to one contribution alone which last and first very third it quarter was QX last had sands was typical used That project, refining higher high materials a year. sales

the results revenue, share. related loss of first net was of sales and related Energy in last the million quarter $XX,XXX, and evenly In $X.XX Steel Within first related fairly incurred we quarter per year's there $X.X QX, operating the $XXX,XXX split sales losses million to $X.X between to income divestiture. quarter. in Steel QX was Energy to

Steel. due $XX of Steel Orders reduction This is $X.X in for divested. at at the of million QX over which was half of up the which down Energy million March end $X end were million on the quarter was the backlog, were $XXX.X was on Backlog the million $XXX day business Energy March, however, $X million. million, was pulling from to XXst and the the

previous of noted slide. X, If million you the QX return the of sales Slide in reduction I to $X

the $X.X due year's sales international was lower by QX sands XX% in were domestic, the which and $X Sales million was primarily driven last million were to from The which XX% split Gross mentioned big in compared was sales million, I to profit project, down was Domestic with earlier. international international. million. XX% in revenue. $XX international but decrease Canadian quarter oil $X.X XX% refining domestic up sales QX, dropped

$XXX,XXX and loss from operating related $XXX,XXX $XXX,XXX to to $XXX,XXX numbers all year's lower loss per Steel share earnings adjusted divestiture. of was X. the $X.XX also net of operations loss was results and noted is Last was quarter, share the and out Slide the of Energy quarter. related shown per sales in for Steel of the in on were margin Energy this EBITDA impacted adjusted EPS EBITDA, the The the by numbers exclude previously

If to all you accounts rest this to X, in million, move to per and increasing Slide million XXXX. $XX.X to fiscal throughout payable, by our due Nearly of expect share. $X.XX reduction or was decreased cash the timing be cash the position quarter of of we the $X.X

this. We cycle, want not our paid that and please in anything dividend the I do per note our was $X not million normal yesterday quarter, of dividends announced to read while into

Board Board full full be in dividend with quarterly annual is will conjunction present. it when will and Our always X the our time at as meeting, August meet is considered the on the

in the in fiscal expect Capital We QX light spending $XXX,XXX. still $X.X $X.X million million to XXXX. be at was in capital to range

continue and Board strong and Our near- utilizing team identify to sheet acquisitions, management business which benefits balance on be our have long-term close to focused on development to shareholders. and our opportunistically

on comment on guidance our and complete QX, presentation for will Jim our fiscal XXXX. outlook increased

Jim Lines

for begin conference you remarks quarter our My Good results Slide joining Thank Jeff. X. on you, first call. everyone. Thank morning,

quarter to the million. was of Revenue comparable in metallurgical year-over-year large for to the to, same that quarter the comparison sands end This comparison. $X.X Revenue to percentage chemical, extent Compared markets in market $X.X end a to down as and year-over-year million. in last million the petrochemical and was was chemical, Jeff markets. the not quarter, refining in end however, There is the due quarter. was end petrochemical refining refining order was a same first Canadian oil upgrade it quarter last as approximately revenue skew markets, of will second order year; $XX year, skewed had that highlighted, it

to last markets, compared includes other million utility down were which earlier. a the to to market, year. was sales Revenue to compared $X.X up $X commercial $XXX,XXX year sales, markets industry Sales year. were million nuclear including up to petrochemical defense, from Power last chemical, end end

ago continue to of year our a $XX.X Domestic sales. total domestic to revenue represented X% a have strong up is million. to We from revenue and waiting XX%

to fiscal nuclear business. Canadian nuclear oil a expect line from On noted were a excluding XXXX was commercial International million, This nearly sands XX% to basis, million comparable $XX due commercial year excludes Full previously fall between order. to and $XXX revenue $X.X therefore, is expected sales down million revenue XX% the million growth. million. earlier $XXX $XX.X we the basis; utility to the comparable utility business, top from a on year revenue,

bids from attention those chemical black Nonetheless, A your in graph. On the refining compared orders The and markets turn to quarter line bidding that predict. difficult we now Slide of Order is of strength a second fell was and in remains close of active. market XXX% the is second nuclear the X. of utility large and are markets inflection expect out Please corporation's to fiscal XXXX. timing the bottom large them or also end the the excluding to for strong orders nearly and orders first the quarter. projects the for our XX-month to quarter, trailing couple the project from and commercial for end petrochemical from cycle non-navy basis, evident up point pipeline

fiscal markets, substantial for quarter previous $X.X be year predict, orders in expect where quarter. also to million. first difficult book-to-bill refining the within and petrochemical on up is to While $XXX end to have second we chemical, do for projected slide, project be in And above We mentioned the do million, is XXXX full of line XXXX. between fiscal growth vendor corporation. award year compared million bids anticipated the pipeline top to to a XXXX for we a another I setting fiscal $XXX be to an in million $XX.X uptick our

$X.X I’m due classes to nuclear and of backlog propulsion lowered million our of $XXX.X It to now referring is Slide our we to to at was naval Backlog to sale U.S. the aircraft June on vessel two is programs, program the nuclear commercial that business. and committed important by XX XX. point XX% stood submarine for out backlog. of and utility the million and represents carrier the Navy propulsion nuclear are spans point that – of XX% three program.

and utility to the XX% grow refining invest Backlog not and for our and markets. the model as continue is revenue end backlog in market, nuclear and market. end all from fundamentals, investments growth Customers, to are the naval distinctly we program to market resources the in execution share different was propulsion backlog We petrochemical market commercial to nuclear total June. and which at of industry chemical related this sold

XX% backlog convert that doesn’t and to of years next and during XX% into will beyond. XX% two that months, is expect XX% the revenue convert until XX begin We longer-lived to to

move on Slide now XX. to Let’s

million guidance. margin approximately between to million, and XX% line XX% previously, the and represents noted for margin is revenue growth, fiscal as upward is tax million. commercial is spend expected modifying nuclear SG&A $XX Gross business. $XXX projected We million fall our XX%, rate will and top anticipate, to to and to be XX% be between utility This $XX are XX%. XXXX that $XXX excluding We revenue effective

upper line end the and run rate the be in anticipate implicit by influenced current guidance conversion, orders Achieving of to at guidance. also will current the backlog quarter revenue second close is the we holding short-cycle in revenue top

questions. the open please Diego, Thank line now you. for

Operator

comes this session. O’Neill Hills At question-and-answer first with from you. Research. state Thank Litchfield we’ll time, [Operator Please Theodore question. a Instructions] your Our be question conducting

Theodore O’Neill

this in the The Thanks in and related either to the for the is of sort talking States? to weather of good United Jeff, sort much. outlook any you, have very for is quarter, I the on softness Jim shifting out of at year. coming looking tariffs Thanks orders the for question or customers, views of

Jim Lines

is Hi Theo, good morning. This Jim.

Theodore O’Neill

morning. Good

Jim Lines

July, that have it seen policy, settle negotiation order. to very fell weather site No, What customer land in anything of particular company tariffs. we didn’t finalize – that schedule, protracted specific were about really period took complex trade is purchase June of once one weeks or was We in everything the and else it the the order a is, case. but purchase specifically set four terms order, to their to we was in identify the a that delivery in able out commercial correlated the and and to case,

move case, pace pace. should shift it the second in good are in seeing But they Latin the at quarter quarter. particular that American which that transactions we In their close it to own feel the just very another the and first from was case. move, can quarter We can order’s second at that

at transactions, – at these to take to nothing weather, So to to can to related related pace to times, nothing close, predict. at difficult closure. time Very the just which come tariffs,

Theodore O’Neill

Yes.

falling quarter. matter So next from it’s to one just quarter the a of it

into slipping QX. We’re

Jim Lines

One other close we’ve last the felt In close quarter the two cited. in but to expecting still we the would that of it for close, we’re that quarter, and not. the in did I the able cases to we’re that hunt one

Theodore O’Neill

much. very thanks Okay,

Jim Lines

your Thanks question. for You’re welcome.

Operator

come question. question Sidoti next Joe with from Our your Mondillo state Please Company. &

Joe Mondillo

Can guys. Hi, hear me? you

Jim Lines

Yes, you Joe. We hear fine.

Jeff Glajch

Good morning.

Joe Mondillo

Good morning.

first off. guidance the address to wanted So

a So buckets, market sort your definitely that a sort big second half the in of three of of half. is main second is pickup from? a it that of – even broad-based? oil most sort mention at it’s pretty wondering the in new or petrochem And of navy, coming refining, and where Or least suggests what pickup I’m

Jim Lines

our We the be would the and large that the would to also – with market than would first second quarter-by-quarter the for in market end looking quarter. the also, quarter, expect first in level from uptick revenue And half there for the refining end a half we second naval at is backlog chemical conversion, stronger petrochemical. the compared a be revenue strong

well So out. spread pretty

Joe Mondillo

one. though, going remarks the I pointed you’re so What the you above up so revenue, your below to book was a the pretty understand it that’s relative thing and were for pretty see, out quarter, and to good – that. to able was your going you visibility what confidence, backlog orders? also But wondering in you anticipating you I are that you also ratio have your if is to And In Okay. book-to-bill gives pretty – in be see you that prepared one. one pipeline recognize first pickup that pick you and that in And a mentioned good can strong. that

Jim Lines

year closing expectations of while timing, further in. The expect And to maturity been front been in our fiscal but is our pretty timing cases, – come some our for year one with over get And it’s enough horizon all, in confidence over we we pull the a new and the of have these have them case a we’ve a we in and XXXX in some book-to-bill out pipeline get it level basket quarter-to-quarter, of in been naval the to And understanding be have of work difficult opportunities, don’t a now, orders, view for we it’s will the five of to and these the above and some for good hunt years. now three quarters supplemented by then there being sorry. of the projects. bids one opportunities that of

to quarters. we're naval our backlog and expecting in multiple typically those have which So not can slide they to add months but

have be should do reasons a we above good So that one that I cited. the book-to-bill for view the just

Jim Lines

timing high could regarding the of revenue half the of the the The of customer If that slipped impact of that the on second year. shutdowns, in half delivery near-term bit of the and those have we’re in that can us level additional The thought ones the so a a come second ultimately relatively QX order the will year Jeff, the timing, in on side, to half a little year. projects confidence just slip in they the one date, the so through while customer expecting have because second have tightly on delivery the gives QX. defined revenue

Joe Mondillo

of Okay. acquisitions Steel, regarding about then just Last of update XX and in Understand. And the changed could how a that. evolved strategy to in address the you that's if just versus if you Energy terms how question sheet also going and I'm that's curious and wonder find process give sort acquired just the you go has broad everything in of could sort trying how years? overall and you over balance process when on acquisition that, last on

Jim Lines

the continue to does pipeline, strong, on your it be first have... question On we Sure.

Joe Mondillo

can sorry, you me? hear I'm

Jim Lines

right. I'm all sorry, Joe, you hear me can

Joe Mondillo

guys, you doing? are Hey how

Jeff Glajch

have got get to the of in Sorry. On past the goal you through of the opportunities the actually. to in due a of to on market of We're opportunities in naval strong as question, pipeline the but a directly strong our or diligence. focused get front opportunities your number the first we to looking continue pretty have are capital lot you've opportunities market. all – us, in one over areas commercial goal and market line after focused strong know from Joe you line, quite and are go of on We're and one those non-large quite

there to we that so second time few your improved years how, has ago, done a a process hasn't Development which external a really number which pipeline, a key a is great the use a of is Regarding we changed expanding small a was our in I the In would say I of addition job past, who's process advisors. it that certainly changed? Business for question, but us it, of think expanding why part brought capabilities, lot, Director and would our access points. job was here is

with of up. Chris our he's Business to Development, continue pipeline done great We external use but job Director a advisors, building Johnston that of onboard, really

were greater that and of of than he's pipeline far breadth number they in are the past. today The internal any driven at opportunities, opportunities the the point

Jim Lines

XX%. if process analysis the we potential have I can look analyze also market collapse will, end and the XX%, acquisition market, cost, went happens we down want to as a the flexible add businesses our end look of if markets, and XX%, Energy the following cost just XX%, end and you the business is, in at how in volatility Steel and improvement, the part scenario to revenue unexpected business the what that those of Jeff, fundamentals

and collapse As be flexible we market. experienced in end with with that cost to such Energy for as Energy an nuclear Steel utility we experienced how might Steel the business and survive market bases

analysis may our scenario but of of under have might business we markets that's the if part what not that And what the and and scenarios. variability, analysis, some

Joe Mondillo

you. Thank

Operator

comes Bill question next Baldwin Securities. Anthony Our state with from Baldwin Please your question.

Bill Baldwin

morning, and Jeff good Jim and… Hey,

Jim Lines

morning. Good

Jeff Glajch

morning, Bill. Good

Bill Baldwin

beginning hard on Congratulations for just to pay the work off like and you. really looks

Jim Lines

Thank you, Bill.

Bill Baldwin

your the I'm ask break $XX.X business, going segments us in on down million refinery, flow, you you, between to order Navy the and for chemical the can of power? that

Jim Lines

light obviously, level. a was, order It

the not Navy. which of rate had sides. call we exception a we the of our project on what had typical our that We markets run goes Navy end short-cycle with So large lot from for much across work,

So and mostly refining it's chemicals.

Jeff Glajch

$X was did have of that I we in note of more. course, utility that the Bill, million business, commercial And, which don't our any nuclear call

the mark, core essentially mark the where – or the So petrochem the is of most million. $XX remaining refining and all remaining

Bill Baldwin

Yes.

Okay.

on types assume than I that but not months? your what's And products general business? than business? services less you XX with Okay. XX than of you And your less business, – are sure short-cycle – of before, short-cycle I'm short-cycle refresh just me. and What described of What – it nature months, less involved kind

Jim Lines

that out in of that that large businesses. into percentage how have transactional overall and and A months. in inside two ETO, the are within fit in-time is terms – a It's what then three nature and distinction, that quarters in less in smaller make it of typically less up To to order spare work. some the And they is business tend short-cycle to comes that week is come fits we out they complex also, and A replacements product in work. parts process.

So that. can product be parts it it services new like also be replacements, a and sales, and can spare

Bill Baldwin

and going markets? refinery into primarily petrochemical the And

Jim Lines

largely petrochemical and the segment, markets. end refining it's On aftermarket chemical,

across For cannabis we cannabis; industrial, all industries, refining example. sell and the an pharmaceutical, new market, as products, go the it into can end general petrochem, some also

Bill Baldwin

link it installation's equivalent the how drivers there? utilization aftermarket are business, has So then installed, I I and the long guess, just out the the on been been currently, at guess least time

Jim Lines

right. You're

are an we're XX-year-old fortunate that in business. very We

to forecast work our time affiliation but that to off drives with from our we're America, Graham, not there to in around some getting North been installed installed is closer to structure drumbeat a that improve of segment for by higher where to also our organizational the historically improving pay passive we replace a that levels have intending and operational and customer base, made segment we're, revenue user, them, of better. We've really in but help being it our the also than pretty the steady the investments providing over world location profitability services in the And that believe, to will either. the personnel where aftermarket a We high and base the had massive drive installed aftermarket. end equipment of And reliability massive business. base the time, has

Bill Baldwin

Absolutely. you I get breakout Do do missed have of part revenues been indication I you all your or aftermarket? historically what – revenues generated are it of all part aftermarket? of What some

Jim Lines

been we've years, on off. the Over and

our So we the revenue. had and neck on de-bottle and dive, base, our had replacements the I order parts revamped what a in did no because aftermarket, for what being work, intended from But was the on when XX% But of if project and so larger we of past, missed been of purpose much installed is off. deeper it coming work. sight said of

think somebody classic from XX% derived then large between we installed somewhere the work, replacing installed our to from revamped, total, de-bottle replacements. neck a else's could project equipment XX% it's tend or and and in could of So also parts be being but base Graham's revenue to our base. be It

So from the to derived our or manner base. more some is X/X it's minus akin revenue installed in plus of

Bill Baldwin

right? over using time? calculated a period complete a over probably Averaged be would cycle, that And of

Jim Lines

XX-year in things five-year, Yes. to look We tend snapshots. at

Bill Baldwin

on menace based trying that installed time going that so your take and and from your a work engineering your mean competitors into very Jim, fact aftermarket you? difficult right. away right, base so have that does specialized then that to is the Five-year, forth, content as

Jim Lines

the high us it's but designs. Yes. difficult It and moat And our installation. be We our actually for think it's dissect pretty that's we disclose of competitor's to in don't because go can details a hard. done,

equipment typically a a as when it's into competitor's complete partial to So replacement you're replacement. a going opposed

do system. put have in and and go the OEM The to very together that. to go three, of overall seven and work, to suited Some a it's competitor difficult guarantee and best is seven replace systems six, components in our have or component five, six

Bill Baldwin

Very good.

real to this the like focus test. it’s that a position in and you're puts benefits good Sounds on putting Good from that you a real aftermarket. luck,

Jim Lines

a great assembled us. are team. think job so. They a We doing We've great for

Bill Baldwin

Yes. Thank you.

Jim Lines

You’re welcome.

Operator

Blair [Operator with your question. Instructions] comes Thank John state question Ascent Our you. Please Wealth next from Advisors.

John Blair

Thank and Good you. morning, Jim Jeff.

Jim Lines

Good morning.

Jeff Glajch

Good morning.

John Blair

Hey.

Philadelphia picked that that be but And you of, another country a up might fire Solution's the refinery any of not going to any shut if another lost down. if sense or be understanding had try that's lost capacity that loss of as part refinery refining and Just result backlog the operator another in sense is a refinery, get pick to operators by you wondering Energy hope other indication capacity. there shut is down, in my up of any might

Jim Lines

Nothing question, John, tied can't anything our Hi respect material Philadelphia to that's first reduction there. to with to the of backlog meaningful Services. we identify Energy

typically look to running utilization. that is per of American is refineries Systems lower question XX% if the directionally other barrels should picked shut or of would to Philadelphia That end be On part but at the by its on us, has that base, day. disabled refiners up capacity refinery of North but in America? the meaningful, down North or other XX% favor regional the refining Energy at be and refiners you

refining in So asset the slot. base America we the that North would pick anticipate would up

John Blair

believe – from or XXX,XXX if But them some day indication cause that, some had look basis of to that Yes, didn't been I regional or other was would maybe it whether maybe I see expand that barrels regional thought to operation it's on elsewhere. like there you a with was. – just of any trying customers your a something their to –

indication if the any I don't So is that's your answer you guess have case.

Jim Lines

refining America about the in decided. base represent that of you North number X.X% They asset No.

utilization could running that to XX% So today. anticipate the that we within level are would XX% be refiners absorbed

John Blair

I That's Okay. you. today. Thank Very all good. for had

Jim Lines

Thank you. John.

John Blair

bye. Good

Jim Lines

Bye. Yes.

Operator

turn it gentlemen, time. and Ladies back you. Thank remarks. closing this to for are no I'll there at further management questions

Jim Lines

of listening in today. you announce on the press call And questions second as updating thank our progress as any look orders in informed quarter. and we'll build. and the to with the you Thank releases forward new everyone at we progress the you, We our for on backlog to orders, and keep endeavor everyone end have on conference to come meaningful your them of they Diego,

So thank day. very good you much. Have a

Operator

today's all Thank participation. you conference. for concludes This your you. Thank

may your disconnect Have time. this at lines day. You great a

Graham (GHM) 26 Jul 192020 Q1 Earnings call transcript