GHM - Earnings call transcript Q2 2021

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

Operator

Greetings, and welcome to the Graham Corporation Second Quarter Fiscal Year 2021 Financial Results Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Chris Gordon, Investor Relations for Graham Corporation. Thank you, sir.

begin. may You

Chris Gordon

and us Christine, Quarter everyone. appreciate We Thank to good discuss joining today Second Graham's you you, morning, Fiscal Results. XXXX

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

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

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

business and President Alan me the of Jeff provide Chief today Vice New the On for of with today Chief are up overview Financial of Lines, Batavia, prepared our the our our General fiscal Officer; then Jim Officer; rest year period, Executive financial our provide the will and our an strategic overview Smith, and Jeff President the Alan our Manager Glajch, call will a remarks Jim start outlook of wrap will with with XXXX. facility. York operations, of overview

lines We will the open then for Q&A.

non-GAAP we we evaluating forward-looking the subject other Exchange we also in some to as These These could release will in call, want and may future and results slide risks documents which are filed These out documents other statements financial factors and that As Q&A. materially well actual at you useful as believe and the what differ measures, be well events are from in uncertainties www.sec.gov. make by performance. uncertainties website the during with found as to to apply or the I and Securities cause this Commission. earnings are deck statements on discussion the which in discuss can well during our company other some the factors the aware, today's point to as as our stated as during and risks call. are provided

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

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

call turn If Jeff to you Glajch. will Slide the I will over to hand X,

Jeffrey Glajch

you, Thank Chris.

starting very last COVID-XX. Chris in approximately million, capacity over was It sales a we're the in due the $XX.X Navy year. quick defense, In Sales up to in the Navy. after were half were to mentioned, which in market As approximately half million the revenue a order, from the made on $XX material QX we of operate of quarter, in X. normal a running $X.X QX at QX XX% up little had turn -- QX Slide capacity nice in the quarter. million

We expected this to the quarter. occur in

$X.XX pulled is per still the QX $X.XX our of year. While sales it repeatable XX% the $XX benefited share the Year-to-date, work full year. fiscal QX drove net not improvement. slightly work also from or sale, higher nearly defense of is This an were surprise. of $X.X or was into million revenue million. around would of for acceleration at income expect QX. The Navy sales Asian our $XX.X We year. from expect share, XX% type margins not and a be per some to had sales. one They available full is was and it Cash than capacity good from million quarter we Stronger subcontractors. up $X.X at some last million or the for a for

million, refining by Asia Finally, were driven strong the awards the defense $XX in in United quarter States. in and orders international

conversion of fiscal of a The provides improved foundation our backlog portion to our $XXX.X for the year. backlog the improved guidance Our million. for

international. million, Sales at quarter was last international. XX% slide Gross XX% was sale the -- the domestic, the the with year's profit from to finally, Slide year. to XX.X%, quarter. million. EBITDA margins from second up $X.X $XX in were up due On million in domestic, Last on XX.X%, was $X.X last primarily XX% to volume. detail increased year, quarter last Moving X. discussed in year's net Gross the were income quarter up X. quarter million second $X.X up second I margins was And last from million, XX.X%. to on XX% from $X.X X.X% in Slide

from year, XX% XX% was For last the with with last COVID-XX versus international year. were X.X% in of by margins was and and was at international substantial, the first XX% the the year, the in but million share, challenging million first production were sales due first income of first the last compared down last or $X.X $X.XX XX.X% increase compared year. gross COVID-XX slightly $X.X EBITDA QX to XX% profit in due was were first $X.X off million are that half to $XXX,XXX Year-to-date XX.X% when COVID-XX. recovered of X.X% last more $XX.X margins despite domestic, year, have second $X.XX impacted we versus half last million, This per than half again, Year-to-date quarter loss fiscal XX% or XXXX, Again, year. $XX.X our net the per Gross and quarter. share in sales the million domestic was capacity quarter. down

$XX capital Cash of payable. end accounts accounts X. is this working $XX.X Finally, the fiscal at namely is on but at and receivable million, of from moving million to XXXX, timing simply Slide down

expecting quarter. this come are We in back to third the

dividend has half in Our compared of $XXX,XXX Capital spending remains at $X.XX been $XXX,XXX the last share. quarterly a to first year. at light year the firm

have second spend $X between total the we capital we the year the and increase in As expect still the million. to last the $X.X and be of for few our million years, year, seen spending will half in

activities, on continue. very we time, has we Finally, and our pipeline these good had adverse COVID some on over as work continue conversations to acquisition and relationships as efforts effect have built not an our

more Alan for remote the fiscal operations our -- -- and well in will However, updated active. a providing occurring market many will in-person. guidance very will depth a provide are still our then still rest on opposed complete still QX, as of update as of them provide as are there's to Jim Alan? But by XXXX. presentation our they and

Alan Smith

Good morning, everyone. refer $XX were X. Jeff. quarter to for Slide you million. second the you, I'd that ask Thank Sales

Jeff material-only had defense defense up continue were workforce. his due the to order for in as As our company very to a industry to the greater conversion prior completed defense million grow which a due conversion year-on-year mentioned order to Sales we mentioned large naval required and customer, prior -- remarks, little resources. materials $X.X

been annual $XX and to Lastly, importantly, to $XX Please has guidance increased $XX million to move on XX. to due of our million. million backlog, to Slide from strength million the $XX

the that impacted are product, this has is during being COVID-XX for to year. convert to we the several expected work While ensure are demand there our actions maximize implemented financial margin of that that

In pursuing increase During company from differentiating execution maximize defense onboarding IT margins. the conference outlined first our focused material competitors the the in tools order we quarter on productivity our call, was the realized in initiatives our quickly our reducing company leveraging that and to and to are superior hiring I team. welders, the of industry particular, several costs, through

small procurement front, buyer our Therefore, procure reducing has the our On relatively Graham the from in a we plate. is costs. material steel and had plates typically stainless distributors. of success carbon steel team

However, are our reducing mills to directly are willing us, cost. to low thus sell in we finding the this of demand, time

of than increase terrific workforce weld our is Currently, X. order in train that workforce are development. we end, work. and from learned. our on training, We does expand and stem for applying have prioritizing an are productivity company, our creation the welds XX expansion volume. from must on for To also our the bill enhancements content welder focused Navy up production addition to a in growing for has skill capacity. will the The now the the jigs to We to areas company welders the first-time Welding flows, and recently critical set is lastly, of up The we improving Productivity have this completed improved our lessons other completed the of has operations. employee production school. for Navy fixtures, work we now campus capacity many higher a

which dashboard partners. global outsourced manage will Our our aspects aggregate will The managers. improve turn to that project is of and all the track IT I'll will that, presentation improve productivity IT our of continues projects. our management developed dashboard fabrication to develop the getting information tools, to platforms stored department over our several A is ability to Jim. on With

James Lines

necessary an chemical more Slide crude this oil changed. Alan, of couple taken my and control afforded refining in markets. price-conscious starting strong participation XX. an Replicating discussed refining strategy is Order example, Opportunity state the modified everyone. structure I'll good implementing remarks generation especially and of opportunity and of and structure during to actions India, which of Both and was resources bid were to the with successful level in in given personnel. petrochemical low, execution is technical the be level and the China, in within effectively strong, markets. share quarter past you, years also quarter address certain in segment management result Thank subsidiary market It localize success and was The India. morning, as a differently. to the established the selling begin diversification We segment strategy. order quality were the

A are move India rather followed locally having for chance permits within allows towards presence Graham toward orders for to Graham best Also, certain competition. than that. then customer pulling fabricating supported local they long the have important. We project to a time. large secure is its when and components This a

India. orders and in am now our not quarter. before. $XX We the Graham X of commend million a users were As as the in used that I that the plan and had secured of of initiated These orders most for strategy, And recent to new the strategy large executing customers project orders. secured large today, the both for company and of with this pleased India success work. result team I drove those were projects. pursue X end the principally

in refining large highlight markets is our is development. conditions and by being Navy quarter improvements, oil crude U.S. work implement tools, shipyards capabilities, feedback and quality that oil noted and we last and confirms Navy. This program modern is fabrication U.S. for weak, crude management the U.S. refining securing and XX This and the for down in will for the pipeline with our Another our our find listen petrochemical the also in the is year. petrochemicals while to strong. additional employee engineering about orders old, value invest Navy and years the willingness strategy was in to machine facilities, a strengths, General and order personnel compared program

clockwise, significant go to left beginning in XX. want are our and mentioned on million amount to well discuss of markets. early-stage The approximately Asia. secure work did Slide that stage. work in is activity plan market I in are move that orders move a we team outlook moment seeing sales briefly to year-to-date to upper key for The the additional $XX a Indian for The Let's from quadrant. procurement I must what fiscal and rebuild to pipeline plus Asia. ago,

be We expect quarters few next building to pipeline. about the the

in disease. was as that once pipeline spread are to We an has We under impact be impact country the in it workforce bid placed, project again COVID X activated the Asia to postponed of disease will from control. seeing large had due to back the to the be teed be having be placed, up believe order in the

overseeing next our India, we COVID don't proceeds picking In Refiners, both of that and in hope parts. following. again, an having secured, those with are now oil are capital point spare in uncertainty. projects slowing On We demand carefully projects. or order that engineering-only recovers quite see a retrofit large it proceed, Southeast COVID resulting right routine under months. postponing XX are Our a the also team up they revamp the was we refinery cash activity on until control. in rise for MRO is within heightened Those positive crude following Asia note, slow this was may focused China and for preserving and the on along team to Americas, revamp

case, national will once that million. a we pandemic-driven only change detailed layout being upfront is and refiner For resulted barrel released proceed is independent and the stage $XX exceed that quickly could engineering oil activity ultimately it at for Crude in integrated fabrication, proceeds done, that fund fabrication. enabling this the oil have it pulled so to when If disruption a in global most into by and $X order anticipate below refiners. project

active. to defense Navy over particular Moving Navy. U.S. and overall in is

of pipeline solid We a have activity.

not segment strategic have There's done components requirements it country. for year while of that programs before, are other Some for this others into underpin be vessels. defense multiple components to terrific vital and continuing missions for new repeat visibility upcoming national is for vessel our we are that strong. new Submarine

identified vendor over opportunities and for $XX million and a selected should they $XX X the million have We months. to Navy, with pursuing be the are of placed next

M&A target identification in strong development due to fundamentals. long-term defense have We segment concentrated the and its

cases to is subsequently until of them I in there global to On remote These of and are the was and nurture economy off were in majority revenue with markets refining Jeff cycle revenue spares inquiries. established visits. its Short and upbeat preservation where a on demand to -- an mode we are markets, As as is relationships derived. COVID, step-up combination note, back continue the cash certain spare petrochemical is short-cycle interactions noted, oil parts XX% recovers. with along mentioned, selective in work feet XX%. Crude prior

an Chemicals behind abated. Getting just has not world COVID delayed. yet demand the shelved regions catalyst order for most demand that However, translated The sent in petrochemicals fully also a and returning. Projects is shock improved that have the are throughout not or is down. into pandemic level yet. been

to or XX. state Let's provides now Backlog $XXX guidance and of commercial defense. time next convert convert when XX% X approaching next X XX% a extraordinary staging next is to evenly Slide go on many planned page. work quarters. at between of an move fiscal backlog during XX% Please the companies on backlog million, to backlog split to already ability planned The process this cannot. during to the in healthy with quarters of the is to

tax are our range million $XX we increased is As $XX Jeff $XX between the be half and margin be XX%. between second implying open I $XX Gross million And the mentioned, you revenue we're to projecting XX%. We've With and Alan that for approximately updating expected effective between million, guidance. million $XX.X and for revenue. spend questions. million. should Christine, between line $XX that, the and to ask SG&A XX% million and is rate the would

Operator

[Operator Instructions].

comes Joe question from with the first Sidoti. Mondillo Our of line

Joseph Mondillo

let quarter know what defense was the you gross I wondering exclude us if if So order. like could material that the looked margins you for

James Lines

comparable It been order. was would have that because a materials-only

different. it So wasn't appreciably

Joseph Mondillo

to... Comparable

James Lines

overall. quarter the In

Joseph Mondillo

What...

James Lines

The quarter overall.

Joseph Mondillo

Okay.

XX -- XX.X%. the the So

have would or around Excluding there? that order, it XX.X% been

James Lines

materially different It's not Correct. from that.

Joseph Mondillo

you that or slow. relatively that the terms things of and maybe the the is orders far expecting can of of some past this in sort of but fiscal over year, as pipeline mentioned rebuild work Asia some as just then And you next, like In and sounds sort of quarter, guess, a related, you're the you the bookings what see I are of saw of for the it the past was Asia pipeline. maybe sort in in rest strength

the Asia that indicate saw Americas in than in sounds is so quarter? pretty lighter second strength saw be that we that will what does it quarter like weak. the that, And you And

it vantage from you're that just point could quarter of comparable four in my So the what you be to Or bookings seems trailing like may pipeline? seeing the average? about talk just overall, sort

James Lines

a example. aren't to make million then level might they quarterly million as did or think variable, At patterns have an notwithstanding be $X assessment orders into is quarter. those work and the $XX correct. by $X take in with qualitative refining and secured level, million information the some a There petrochemicals. as that us million, when We $XX Those generally an we've the quite slowness project is are you I order in your order always region lumpy today large you overall our can get shared repeatable and account

look aggregating end to But it year. level, all large We can see us of quarter the for X. And to back order above a material some or we positive note, upcoming Full it, from the our are a we and those have be So takes impact. QX also how as quarters anticipating project at a were. we more QX markets, book-to-bill necessarily feel don't an indeed work. softness on

Joseph Mondillo

the be And year? that for would

James Lines

I year, the For apologize.

full the For Yes, the year. Joe.

Joseph Mondillo

can to backlog? your -- It on looks And margin decent have just beyond margins that you you fiscal that, gross maybe the like looks your help guess beyond you're maybe relative to going 'XX. some gross place half Okay. of in quarters. you're backlog, just the year and pretty I margin relative looking sort sort what then margins Could and gross in actually been expecting back over the that of comment profile last or understand the X like guidance. of that us then to all X at the gross

James Lines

I'm work had begins forward, we bit. The cited margin as little a that for reasons previously we average believe we to up. naval going it the there's dissect quality to that. for And project

with closer evolution and has his our executed Projecting been we're X to able should sole from the backlog backlog more we've source bid, bid, percent running margin our team well or was XX-ish under was right competitive over competitively so -- a extraordinarily in shipyards, a I'm time, competitively a the the strategy Alan decade, sole potential source As to years of relationship point versus have Navy backlog under what's is how to backlog And that maybe what on at think XX% XXX% be is we for of different competitively ago principally seeing sorry, XX% move the is today, XX% all than now. last years, contracting. the been bidding. in few through forward of that the

next years. overall of we the an then performance next through expect improvement, a into So result. in improve we quarters, our financial several quality course, to as to that would that And translates believe, several backlog move as we continue the

to these Western margin was you really expression to the under what Americas margin can with end or work. probably variation satisfactory of a at market. That at have or lower most up. price-conscious margins, caught gross have may those We've going our and then on markets of averaging does what's the we as available work, move As of we previously our referred hemisphere markets, And able seen look today. we other participated underserved in haven't sensitive been have or we that into or price than appreciable to equal segment win

profit is the op down However, to drop satisfactory.

So therefore, where go. where goes. that on is gross fixated we're necessarily profit fixated not margin to We're going on

Joseph Mondillo

Okay. implying the you quarter, than the in of Because back implying guess and, the looks quarter second like improvement. XX% I What that rates driving And good, the that of you've other can't count back it seen operating first operating back guidance would in some roughly. half margins driving XX%, low what is were year, driving gross year that? the is is half? last be really at you of half looking the at you're very the because What but -- good

Jeffrey Glajch

Joe, last impacted was the were improvement or was at We've I this were improving. X backlog the the and is backlog our forward, to some QX our that we about quarters talked probably -- there. in back the X was last by year went backlog we if half been think capacity. seeing Obviously, in our middle and margin of we margins fact But we the that for our Jeff. communicating -- improving,

driving it. really what's that's So

Joseph Mondillo

what months? address in you're hop question, in then the anything and of I'll that sort your you ramp-up into anything regarding seeing Relative cases Buffalo you could have that we And just the you're in anticipating as say last the Okay. market country COVID, in and get just queue. seeing that we're winter to just potentially to

Jeffrey Glajch

Sure.

seen think put good dramatic an the We've not the bit here local a got we've risk processes little employees. minimize -- to uptick, some of a to very in some Graham I markets, uptick. we've in but at our

late we across visitors for on-site period in have exceptions. been that company We've in and us. time during minimal got not April, March, the cleanliness are those allowing put shut that We very with effective very the we down early primarily procedures

community by not some But that can stay of there to think very what's community, we've be that of of bit fact is uptick be their lot has the COVID, the local we're a -- base are in. going though. going with going we're pleased COVID I on can employee some continue a travel but way not issues not huge uptick we're outside them we been of our an our to obviously, the places, a with Though, on because occurring. of of and wary in locally, But impacted seeing So as what's vigilant.

our focused ball. stayed job doing employees our team we eye around take making and are leadership COVID on the Our off great sure a that has don't

Operator

[Operator Instructions].

O'Neill Our next line the with Theodore from of question Hills. comes Litchfield

Theodore O'Neill

on great quarter. Congratulations a

Jeffrey Glajch

Thanks, Theo.

James Lines

Thank you, Theo.

Theodore O'Neill

Yes.

question you that? how Last about up talked to going welders. So now saying is to it's you're What's is And welding the And first expanding Alan, my school up driving for XX. X Alan. quarter, going? it

Alan Smith

What's we we driving had as project, appeared we thought. completed than room it more that that is the

all well. be So the and more complete. of going accept able restrooms weld we we'll the is, should students. a of and end restrooms. locate new to finishing The the that's by very XX ready were is project training to portion -- That canteen be up two teaching November, and and building completed the canteen Where We're boost.

Theodore O'Neill

XX, the Navy, here. I bids certain this those understand on may are components. Jim, Under about you're And there? Slide Great. What not this bullet -- sure that new components I'm are talking U.S. point

James Lines

for That is we involved we that programs us before. cite grow have that in by done it we're it's our to Theo, to to new fabrication winning continue the because new organically ability new not three that components. And a within confirms equipment, terminology wanted

Operator

Joe of Sidoti. Mondillo Our next from with comes line question the

Joseph Mondillo

a sort bottom-left capacity next more Middle follow-up talking and in petrochemical the quadrant, XX, ethylene Slide same of that of give you cited Could about the Asia. wave about the of On in questions. slide, East sense the a you're you Just you now? of couple of market, projects maybe into year? orders next that what's seeing would where to maybe right this and what at when going for And or kind there some are convert guys? of multiyear of start of type Is a they these thing timing us on

James Lines

more in it's also of X ago, I would markets I improvement price to today different there and coupling is have production. thing, East of projects, And The in These oil, projects a integrated the would the Middle multiyear crude Joe. of we where integrated global X say likely the perspective refining months type than would had contend, some petrochemical oil. -- are are typically stability need with pre-COVID. refining

So we think that's a couple of years out.

However, China production opportunities Arabia, there's China those us. particular, orders by us. There, $X countries, petrochemicals quite too, couple about mission for via investment China the building in might integrated million China, that that new diversifying In thought refineries to a through clear execution refineries. several doing wherein of We're that regions right Saudi and going they'll as ahead new oil opportunity into in massive petrochem one the of in in petrochemical $X capacity be be particular, of for capacity. incremental a they're refining, integrated other we Asia, now with for -- with would crude of million before, have probably

barrel will execution $XX We regions are right chemicals through It's they towards to be world for the a work of as And in of moving it's other towards an we've to million petrochemicals. integrated particular crude more also now oil and phase fuels running we going refinery. for a around anticipate China secured, through now. barrel from that less transition backlog the

Joseph Mondillo

answer, where is so mainly short-cycle or as North specifically Or base is really as was America, given big? up. Okay. are you business, your wondering that? that your are up. inquiries specifically as I markets your beyond I'm on is just those that And based far wondering, geographies And mentioned what just inquiries installed

James Lines

We domestic, tend it XX% is work the is as domestic. international, XX-XX. vast our majority to think short-cycle but of some of

Joseph Mondillo

mainly those then? then domestic inquiries so And are

James Lines

I'm That's correct. Yes. sorry.

Joseph Mondillo

then update sort And typical if any lastly, sort sheet could and and balance your there. updates us of Okay. you just quarterly on update M&A wondering of

Jeffrey Glajch

this again. Sure. is Jeff Joe,

this million, coming bit should around in quite our is be got should of to right mentioned months. expect was in I that in, receivables quarter. that consistent improving. $XX which see sheet, balance couple the it fairly we I cash a We've in the is would where last next the now On quarter,

And the We're and regard quarter. good position to have reach else is active. of the so we expect to ordinary. of to during our M&A, mentioned, those fact as that And sector. I of we that that With lot will balance rest on over -- we in the continue cash up for start Jim and remain process primarily sector build focused our time, nothing And a in out we such a step defense sheet, relationships would Navy both I place out, been place. the a this the the Everything is relationships while.

couple we've And predate the so they visits a we've had COVID, continue quarter. so been last over able of to in-person those primarily remotely, though

to been the of a challenges, some and strong. continues the -- doing environment this we're acquisition side It's pipeline virtual even continue, will relationships. be those And those all. it have had because on the the we with at So slowdown hasn't through

hopefully, So can things we at and to move forward. now, the continue pretty about where pleased pipeline right is we're

Operator

further back Lines, floor over time. at to you no have to would comments. Mr. I We questions turn this now the for like closing

James Lines

Thank morning. great and day. updating And to our listening you, everyone everyone this Have a Stay look in Theo, Christine. call, Bye. forward your we you, appreciate thank in Joe again conference We and safe. January. for to questions

Operator

Ladies this conclude and teleconference. today's does gentlemen,

day. a for your may lines and you at your time. Thank wonderful have You participation, this disconnect

Graham (GHM) 29 Oct 202021 Q2 Earnings call transcript