GHM - Earnings call transcript Q4 2021

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Operator

Greetings and welcome to Graham Corporation's acquisition of Barber-Nichols Inc. and fourth quarter fiscal year 2021 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].

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

You may begin.

Deborah Pawlowski

you of and this full Thank We results with as discuss good earnings and reviewing year that fiscal joining the we as appreciate simultaneously acquisition Graham's quarter you to Inc. us morning. fourth morning XXXX well today Barber-Nichols Doug certainly everyone. announced

both morning You that the the a should of financial announcement are this copy the financial results There of were and opened. that and released sets the during to this slides before our refer the results market morning. acquisition two acquisition have also will conversation we for

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

Lines, Officer. with Executive the will we year overview start and and Dan the of will call me will Jeff up Chief for for financial our Glajch, for Chief President Jim named Jim cover acquisition Operating newly and are today and Financial our our the Chief will guidance Thoren, of quarter Officer the Jeff as results Barber-Nichols. Officer, an provide On then open questions. as with XXXX. the review discuss Jim Dan transaction and and fiscal details have will the we then then well wrap lines the our

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

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

tables reconciliations provided earnings have release. GAAP We pleasure comparable that, Jim turn non-GAAP accompanying to it's With the with the call in measures of to over my Lines. today's

Jim Lines

at about to for Barber-Nichols where Good the you format developed, careers. acquisition. with stimulated, We will and our this in you the will growth discussion discussions today. the of to Plus, transformative $XX throughout surrounding and I exciting significance million workforce This one Graham discussing move place provide create through Corporation. begin benefits Graham, go Graham morning. long-term Graham's shareholders, transformative and excitement we acquisition into will and both join is build introductions. platform and customers, different everyone. BNI morning Barber-Nichols Barber-Nichols, appreciate of our to to stakeholders, able a call a earnings have Colorado we are call year-end quickly my the results as three. joining referred rewarded truly Thank adding Barber-Nichols due employees remarks aspect Arvada, draw Barber-Nichols employees talent and we slide This and to that all employment a from also Graham, communities, which Debbie day Batavia, at year-end an well-paying stable was closed York New suppliers, challenged,

criteria engaging met the Let Graham with this Jeff XXXX stating, for an three summer me BNI when the immediately strategically first thrilled done, have late nearly to am It in in Jeff get visited. critical process initially acquisition. wanted identified start completed Barber-Nichols I of by acquisition. what was this to in most years of

our of protection must such culture, to As establish and our the revenue for acquisition targets acknowledge of range. we markets served, to, is and key necessary I Chris values products identifying target and model to and past, as, Johnston, a IP process Business but operations discussed have Development, attributes for in not necessarily the limited this ideal commend case is Director with in sale, of value is proposed BNI. creating which getting for work combination. Chris compelling was for deal developing reasons an messaging target, outlining the and the for acquirer Most strategic target often, his isn't done. the responsible each Graham the a as why

the as at they engaged on stretch calendar BNI were Dan commitments. to level by earn messaging assets. a time special transaction. The confirmed can-do deliver trust, team. action make Alan and engagement, powerful. earlier. president up of impressed Dan away million, important of an employee took The were deal their extremely was organizations the company on and with culture, something to management are took contributions and a agree from Jeff, their develop as with us in both well of passion those have to their right and when initial and team permitted I approach the the agreed Smith, BNI discussion. We value Dan first and of have remaining Chris' BNI It the establish of and relationships to very commitments $XX which foreign represents by terms Thoren, and year all for $XX Dan to complete combination million created the XXXX business, wrapping up one intrigued us Fortunately, to most and ability time and and positivity, Chris BNI time They team the to observe at BNI's the it

business the planning have to BNI to of management capabilities culminating year to systems an BNI forecasting have of ensuing that fortunate and are it will XXXX. part and scalable wonderful become observe Jeff This revenue Dan will and of their and Corporation growth. million was outstanding calendar results, today. that Barber-Nichols. two years, demonstrated the deal the to overview effective the detail the rationale them and their for through Over controls future forecasted in provide ability has in company $XX processes is us Graham processes drive importantly, we to go and an are deliver necessary at strong Barber-Nichols

was asset-based our the stability, about is I However, for diversifying BNI BNI with aspect defensive market, visibility program goal is compelling the the there We what Graham's. while overlap and greater wonderful The it about specifically serves into propulsion shipbuilders, offensive year of defense systems products Barber-Nichols provides term multiple fulfilled view and the credible defense long serve ships. nuclear which loading. no

market the the serves market and BNI add as sophisticated ever-increasing rocket in for This markets segment and along also be addition, commercial life-support and the growth is systems. long communication and Things, to are generation, engine integration. way people systems technologies expanding commercial of fuel growing market within advanced with for advanced such which an system Internet to energy networks space new In due the term space the industry defense bring Thus, today space, throughout with world capabilities revenue we interconnected. new alternative expected power

for been become Colorado energy couple in at Dan will defense, of part and our with Malone, Barber-Nichols and Chair very the I with I growth. CEO for and Dan and was both performance this and provides Dan Graham. own will due and for a me. with report to Barber-Nichols. Barber-Nichols the responsible also Barber-Nichols. and Chief the revenue near the when Operating of and Corporation morning. the Vice am in terrific Dan Officer of He work of of it and this we is work BNI will long Arvada, and Alan immediate platform directly mentioned. our have moved XX have businesses. profitability current them Board. he into President that and President until is of in General Barber-Nichols joins will acquisition Matt XXXX expanding to Thorne term Deb XX% months Dan fiscal and is call excited Graham's have of President remiss. Jeff topline President follow-on I Dan past on Manager and as pleased Graham. Manager for Vice improvement petrochemicals Graham and CEO organic Dan Barber-Nichols General a President catalyst as Matt be times. May approximately the Actually, acquisition for addition Smith, mentioned historic a Importantly, had for are to

and You and get its General term are excited Barber-Nichols Alan our to benefit the detailed done all familiar with terrific he as long really returns. job shareholder Manager. about into discussion the am has to I

grabs the referring strategic I of mid-$XX deal let's fiscal quarter four. to to quarter our XX% XXXX to of through is asset-based and and results for range revenue walk organic Barber-Nichols. Barber-Nichols an add defense fourth you structure. provide of the and Graham's that the strategy XXXX. multiple uncorrelated will full am guidance. million volatile facet The through will importantly, that is A Jeff was now take levels through fiscal However, year provides acquisition long the fulfills to perfectly. reached and year-end loading. offers Dan and sales and year for I runway diversification high fourth then walk And rationale the growth in a performance, objective results. less slide Moreover, revenue energy, of streams of revenue overview ball you key consolidated

Barber-Nichols mid-$XX sales. by quickly We we will revenue, defense in move fiscal expect believe combination million approach million defense the Complemented modest growth in then fiscal XXXX. by XXXX and into range the $XXX

observe the fiscal participation the capacity XX% for cycle and navigate cost The and success supported into markets petrochemical fruit. Everything get segments and chain in working hear continue new for in our and win fabrication our in our for comparable has component capital also execution to a innovation our selling changed was supply created year. last commitment and and us of supports underserved we of side at by assets strategy these This competing execution has oil has position with has done to global Graham's mature economies. to crude and base level in model installed existing energy us. capacity for price-sensitive well markets of to read, operations continued to investment Our emerging sales bear XX% investment in previously team the XXXX. been petrochemical refining will efficiencies to It markets segments. in shift

for to completed business key our the Batavia. That months reduction margins is within improve his subcontracting. expand leverage grow encouraging. in operating markets team different to in That is permit and velocity of capacity to orders today XX% Importantly, Today, projected than six backlog Energy we thus our and the production margins initiative workforce. by ago. A feel far. to due conversion production will and petrochemical our and workforce achieved expand capacity Alan need also

pre-XXXX to returning the However, before levels. a has to bid long way pipeline rebuild

watching and time are closely departments. due been It have We few taken the critical a takes company's sales, long have at not Cost other to Graham. next to the measures manufacturing, this across need during engineering, the to knowledge quarters. proficient worker depth a build IT quality,

of to protect continue elected event long COVID-XX. We near reduction the benefit Black by during strength to and We this caused term cost Swan evaluate term Graham measures. implications of

also Let's was $XXX,XXX. There defense acquisition Earnings with importantly, move million On million. Also to price-sensitive Backlog XX is pressured personnel. $X.X to XX% nearly made was added compel business by gross revenue share U.S. backlog were with segment workers we join sales workforce. to $XX now on more at success potential our a support in improve it $XXX our on valuable pandemic sales Please of million, due during $XXX market. XX% short and Fourth penetrating at income March the Graham. to due refining to from of $XX.X for sales Graham quickly million were pandemic a profit quarter Barber-Nichols to want Barber-Nichols. acquiring approximately region. used million. of the move five. $XX asset the the sales Coast quarters the a the production address decisions which for freeze lift the XX%. headwind larger was backlog revenue XX% $XXX for slide Government to made should the market. we and A slide also inability of cash of coming increased backlog margin driven to difficult Defense in by the as quickly more convert was per during but expand existing was March was today. effective cycle cost and Year-over-year approximately on having multiyear to were production were and has And the Gulf million XX, $X.XX not team. million $XXX.X net six. Profitability to is This million strong

human not infrastructure We have resources. but the the

Smith Alan remarkably our average slide Alan and XX% lost time production workforce COVID-XX, Let's even if unaffected This was to full his difficult. capacity move did on year revenue backlog produce year made as full in to and is $XX.X at conversion achieving results. fantastic and what though in that management not team million. could to of operations performed apparent throughput planning Due the an of by COVID. seven. of the team

$XXX.X margins were March On on of for was profitability as mired to by of stayed throughput hold demand to we up COVID-XX. petrochemicals defense too, had and lower implications have year-over-year. levels. the million Here We said and pressure strategic Energy year. personnel I to terrific $XX the from eight, earlier, million decisions million, underabsorption stemming slide that range XX% do a bookings $XX under due XX, also strong due backlog caused disruption of a to pre-COVID

Importantly into them. months we roughly and to organic own of the to is backlog XX% under expected to to million. convert $XXX backlog is to bringing fiscal during XX% XX combined Barber-Nichols contribute into our adds backlog fiscal XXXX again, XXXX. $XX our of Barber-Nichols for million revenue total just revenue expected $XXX the million

Now the revenue. the on expected have year anticipated together results to slide. strategies XXXX. improve in acquisition, growth. remainder to transformative organic Large Barber-Nichols The accounting Once than future gross a $XX with follow-on more M&A of $XXX move more path million stronger million to to start with is provide investment acquisition being and revenue will for million a exciting million, be million XXXX. $XX range platform and to for to EBITDA fiscal reshape revenue guidance is guidance. returns. This a we let's Full purchase and BNI $XXX mid-$XX $XX defense range importantly, is diversification dramatically Adjusted million to XXXX to margin is is Barber-Nichols from shareholder elements million the between SG&A recent total position to and of growth be $X Graham. come was It an we with $X fiscal million. the to complete treatment revenue propel Graham's in fiscal by of Graham's and yield organic

well. first Importantly, beyond should and improve we are operations article as therefore margins

Gulf in defining R&D, gains and and fiscal represented our energy pleased first Once jigs should that be price-focused reminder, time operations. involve or is to lower in from as revamp previously achieved. Coast productivity to of enable order the $X oil a article a new great involved U.S. I of ideal month sales, One order significant cost, base. am orders XX% for through operations were first is during the crude flow quality underserved We by undertaking see build It of this market. article end refiner are beyond feedstocks. refining the lower markets installed first also releases million that secured May success these in XXXX. of winning use of became Both Just of of from petrochemical from in fabrications work, work production opportunities production are worth the is XXXX. segments noting market. fixturing and It a early XXXX

Dan want diesel the call to is debottlenecking I refiner to remarks, local a demand. other pass provide acquisition. walk and the Jeff? more and With those to Jeff Mideast meet over to gasoline fuels through to The refinery the

Jeff Glajch

Thank and good morning you Jim everyone.

turn acquisition Barber-Nichols If to you could deck. the

to three. similar Barber-Nichols was with than speaking it look slide in to we moving I earnings at to a through to me great it. and with deck you two, slide On allow which here Harbor have be in It's statement you on you reading Dan rather from If Denver review Safe will the that Thoren.

My It mentioned, as great Barber-Nichols, for since on is may which Graham their graciously have Barber-Nichols time. XXXX me. fit Dan past most visit was activity Denver immediately basis history accelerates Graham been quite BNI, of Jim I we working meets with Graham the it clearly size to in our company. for a probably years. As time the long heard a and the of criteria the of to certainly most will XX% It increase a willing on that my to acquisition is transformative for August and me at several meet the a refer Graham, all pro first exciting by have facility in describe the you diversification strategy. over in when was forma

in overlap no our $XX $XX approximately to XXXX rate of will fiscal aerospace $XX expands for business dramatically approximately XX million to see XX% million months is be to there adds fiscal Barber-Nichols industry. current run exciting This us. in growth. Since another or expect million from space of also business, revenue a BNI XXXX business million this platform. our expands which mostly $XX We is currently. the defense related our with market the to defense in

Looking expect defense than forward, opportunities and BNI with to This growth us in aerospace, from Along to and our energy. fantastic and complement is more our come aerospace. business for and half refining cryogenics petrochemical platform. a offers defense advanced we

businesses We for to together, to Barber-Nichols be see add Johnston to and Chris to opportunities. and engage are BNI. of growth exciting across As mentioned, million and in backlog once well XX% of a increased exciting. identify with working grow look more Graham's some aerospace. and million, which M&A organic reduced Dan via ability addition and This we excited of M&A earnings Graham and volatility is of and yes, in is have Jim further clearly I combined to clear $XXX backlog of to platforms with growth revenue defense multiple to we multiyear $XXX nearly opportunities organically to million, intend we visibility, have backlog $XXX

wanted of the in the skin the deal, Barber-Nichols some owners As part game. of

So approximately shares was in of earning. numerous owners that with nice in accounting equity to some initial ask approximately part $X the times we or This the purchase post-acquisition remaining if Clearly, outstanding. shares expected for stake our for have near-term I having XXX,XXX us a purchase shares of deal. Graham another BNI though a to X% likely the accretion million the bring damper are were the mentioned consideration. a Graham very little use is in who increase made transaction represents sense. aspect will would me The positive

the gaining strong a has BNI business. of of over team nearly skills, President. Chief very energy XX Matt as Officer as is brings remaining towards team we BNI expect President led future. across Barber-Nichols utilize fantastic new Barber-Nichols, XX BNI. Malone taken and Finally, are ascending strong has Operating successful which drive will I President its leadership has This Dan along four. management at his that who very Dan leadership with slide all similarly which The by Thoren a years is to team, of now high of combined Matt a level, capabilities of company. a On to the is Graham top-notch. the to

structure. balance $XX Let million deal paid entered Of $XX the in $XX remainder. $XX a our term of million, million million This million of XXX,XXX and of shares. sheet stock me $XX us and over the with up for the cash. made we from Graham loan $X into about or leaves $XX cash million, talked briefly was million cash of

of Based of if zero. based deal, million, of at cash But projections, after Between met, in them XX benefits EBITDA two it believe is become there If the payout and new Annual efficient but bring level Graham as Dan fiscal great. a threshold named Will slide provision achieved to million the year believe to flexibility XXXX and kick earnout the Graham believe July. Barber-Nichols earnout the earnout we five. some assumes forward-looking increases the combined payout. maximum justify excitement capabilities interpolated. I the the a initial provide of million in to to They organization mentioned now the M&A million million. has price just Barber-Nichols? The our EBITDA with to to third of XXXX, for position those On our additional executive I go Matt allow essentially which up on was EBITDA. earlier. the We that will also debt far $X.XX is organic us This fiscal payments. $XX to acquisition $X likely and more will brings the will be purchase a Along Meeting current at in deal I officers numbers, Graham EBITDA the be which, sheet. synergies. $XX $XX an team. is a is so. acquisition, at end net have will balance investments. would approximately capabilities year needing will on not our our There times But no gives So future

lot a was dormant achieve shareholders. having a While cash did that comforting, for cash return of not our

know all to desperately wanted I have that growth and You utilize for return. stronger a cash that

I that it Now confident will. am with Barber-Nichols,

loan into a a We million of with million a as $XX earlier, I which It bank have America. revolver. term $XX well entered new as relationship Bank mentioned includes

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Arvada, Barber-Nichols then development would to speak the based They like to on a history have XX about and in of briefly of Dan provide I pass depth it over to a Colorado, more Denver. is suburb Barber-Nichols innovation. Now will year engineering, far and business.

XXX they As which have some real former had cool years a four is here. they employees, just over or what engineer double capabilities myself, have ago. They five

cannot We to are looking at rapid growth. size have a to forward future facility adding recently a state-of-the-art BNI most more This similarly wait is construction pace tremendously a Barber-Nichols' manufacturing and workforce to engaged. feet bring XX,XXX the fantastic. support employees some looks square training plant. of completed team you facility leadership their and continually They outstanding I and of enhancing nearly It for double extremely tour. their through the The is is skilled, at importantly entire

Dan I will the over high, more I depth and Dan? will Operating have Barber-Nichols. President set Thoren, Graham's about Chief that to provide Now bar new pass Officer, who much

Dan Thoren

you provide and supportive Thank Jeff. everyone. of Barber-Nichols. background your am happy be and kind morning Good with you I Jim introduction more for to you Thank BNI. on

work environment that make thermal like a power numbers far nurture in We so management that build highly that hangout specialty about systems will physics we and facilities, six of the used are plants and and advanced research numbers lot is systems. kind submarines, machinists, engineer slide about pump, talked a Barber-Nichols about technicians compressor team and and XXX here I happen. sophisticated that tell will turbine but on We support more its personnel us. you our applications inspectors, and just engineers, the of rockets, people

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of also separation power to cathode other involved energy More and gases administration giants building power systems, power anode BNI been North and chambers systems. new We the controller for use fueling motor nitrogen commissioning we American and pumps storage higher machine. systems. are and BNI pumps import in XXX,XXX spend RPM and to and recently, earlier advanced power BNI, compressors thing The solar that one and plants slides Since test slide we RPM. RPM. blowers more more plans One power provides separate to oxygen X,XXX joined to apparent concentrated with product RPM area. turbo speed frequency push day gases. on first generation the cryogenic see over I is been geothermal have been out making plants generator a The driven hydrogen has and that product then, to we energy in LNG installed Slide drives hasn't On motors XX,XXX into money terminals view fuel-cell and have blowers. opportunity we alternate dense involved work the variable When in a gen to another and all BNI's satellite XX industrial the world. that XX. gives air in one, around argon on jumps from Since specialty perspective. X,XXX

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I dreams, their families customers we do man. of their I tell, about back some also technologies. we their our my people, things. can the to their our very believe I you Graham, and excited you, our As am Jim, amazing and Together, to about products. will passionate think customers are am employees learn I and

Jim Lines

the Well, thank review your for Jeff of you you BNI down of the and Dan detailed and walk thank acquisition.

first through what customers. Dan As a incredible an for we Dan, that's came company, passion felt a away as with products, and with their came and impression, what I, that Jeff fine And team leader, what I people, remarks. at their you BNI built their heard in speak fine prepared Dan's been initial fine met a

much for so thanks Dan. So that,

XX. slide again. now Your enthusiasm to referring shined once I am

models and bases the operating fabrications. to are side, The fabrications produces large, asset produces tolerance Graham On highly are tight Graham BNI BNI tight complex the different between integration served and very different. and Graham of predicated machined segments welded is tolerances Arvada for markets very BNI Graham. not the are the in by in The or on as markets synergies. for BNI had Batavia transaction value, realizing and Also, different. outlined, Jeff

Of may be course, there some.

Alan's Graham, our has successful. for practices, integration accounting Initial in in it's processes and working governance. people, organization be both with And umbrella. quarters, Graham. about strong. businesses successful thrilled and and Dan Dan learn of our With both Alan's the in I gains operating team systems independent about now that as performance Thoren can Dan and defense run one combined and Batavia team. techniques nearly and business culture, ensuring finance together and the in Dan can realized will Matt' are our work the believe Batavia compliance course, shared customers and under continue plans, been Dan competitors program capital Matt's Batavia the and our customers improvement And driving pool to businesses. constraint team processes with and deep Arvada. markets, is Operating company Graham to are working share Graham and XXX employee will Officer systems that management with very we deeply every Also, both Chief management is in will businesses. talent to with share has directly Alan, knows benefit there to margin best and with be coming Barber-Nichols BNI share are that There related Dan, is investment strategic public passion more Arvada However Arvada person our and much role Matt a is and

slide to XX. on This move transformation provides. the Let's projects graphic BNI that acquisition the

for revenue market growth and backlog further X% A X% for in petrochemical approximately to for and XX% forma an XX% by XX% refining, combined end continued is XX% end markets the is $XXX defense, additional to entering accelerating by with end XX% of Refining there industries, pandemic, to a simply $XXX installed XX% other and of provide of recovery base. and focus to from the and was million markets projection to be and from conversion price-sensitive pro refining, Graham of Excitingly, position between petrochemical $XXX comprised end markets. for the breakdown on XXXX, from million to and revenue served entity. to defense fiscal markets, shift fiscal mergers the XXXX also following in XX% markets end programs, defense underserved For chemical acquisition new other million, aerospace chemical growth various our BNI strategies from and enacted acquisitions. also segments to

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The slide industrial. aerospace prospects becoming with the industry presence to deployed the from for capital defense outstanding of market. XX. Graham BNI access our will to is With conclude BNI an of diversify addition revenue growth and I expanding also Graham, and expand provide an acquisition

financial chemicals in volatility. significantly revenue multiples aerospace than those our end to that cyclical and orders. and streams now market into reduce are visibility energy Defense future adds valuation less to due fundamentals results Importantly, stronger it and

to defense be to that provides catalyst revenue continue approximately needed expected XX% fiscal in. we multiple. was was is break grow in we catalyst, As range and Graham that A of out to revenue Barber-Nichols. the that Graham's BNI XXXX aerospace will enhance revenue, anticipate valuation stronger than without

as secured. exciting the with sheet XXXX growth to substantial provide chapter having to defense and or growth get Graham will and BNI our further along for be flexibility meaningful. new I acquisition of new creates Fiscal our chemical improvement. is and margin the Graham's or I follow-on Once leadership that have with it provide take team. XXXX, revenue markets Dan addition investment in refining balance necessary adding on pandemic, to that Beyond beyond structured that organic trust aerospace acquisitive traditional is low-cost invest programs you and opportunities debt are BNI We in organic an may Graham. join about Jeff and additional share excitement the that

talked a have We lot thus far.

you. Let Q&A. Thank us line the for open now

Operator

Instructions]. [Operator

line of Our first Tate with Group. Please the question. comes question your Maxim proceed with Sullivan from

Tate Sullivan

Hi. detail the exposure the for and after most revenue. just first defense for related jumping on provide some that most can if Thank Navy? XX% closing you BNI torpedo congratulations is And context. that systems? of in gave and Is at all acquisition your all And of you XXXX work. you of Please, some to

Jim Lines

of Yes, U.S. you for can follow-on that support Sure. Navy. I offensive defensive you will weapon systems Dan primarily vessel it's if wish. programs the so take that the back and and

Tate Sullivan

XXXX your to ramp earlier guidance XXXX please? Okay. refining workforce? year is BNI, your comments related Was up chemical needing Graham you. And lower And your it for side, fiscal business does your incorporating for revenue? that that the Navy a to and Thank imply then about with on

Jim Lines

chemical of pandemic the been Sure in oil quite crude and petrochemical on It have does. top The the volatility it. and due markets prices to Tate. then challenging

low it be the to fiscal you for not markets million. will our to BNI, consequence, Graham's accounting that million, orders traditional and XXXX a non-defense non-defense, additional as minus. watermark accelerate And And in fiscal which in that with production foretells $XX pretty non-defense grow from look risk. workforce. has resources, XXXX in conversion or markets our in cycle or trying naval for rationale XXXX plus production million. XXXX, low backlog low a our in were petrochemical they If could Alan or XXXX, $XX orders were those for energy a XXXX substantial is at our us. a revenue And $XX and That's mitigate backlog that's backlog entering we

Tate Sullivan

one have follow-up. I

is For mostly growing defense workforce your the Is side? production correct? on that

Jim Lines

have where accelerating backlog, conversion be we At this velocity, would point,. velocity. the large because that's it backlog

Tate Sullivan

Okay.

Jim Lines

margin capability we Then has which through that that headwind. will, pick horsepower to minimize and chemicals they otherwise also a up have subcontracting to and push when and might the Alan of that work an execution refining having do, amount is

Tate Sullivan

all. you Thank Okay.

Jim Lines

You are welcome.

Jeff Glajch

Tate. Thanks

Operator

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

Theodore O'Neill

Graham it's or Can morning. similar? the Good all Barber, the approach just between Yes. bidding you at how process to discuss different and

Jim Lines

Dan, side? to the do bidding discuss you want BNI the process on

Dan Thoren

be Yes. to. would I Sure. happy

of bunch a different cover we So markets.

bidding is process across of very them. all the So different

For everything. We has a entire solicitations, are the they and it cost put DOD, government, put government come into when the proposal ability it's of NASA contracts down bid in justifications often audit consideration. kinds together the competitively that and some you to for in formal bid, do and have are And getting your sole-sourced, for sole-sourced.

commercial leverage the to the commercial opportunities potentially more relationships On it but side, ends on up being side. some probably competitive

often everything lowest not bid, government that we and value commercial. cost. both best it's so for much It's necessarily And pretty

Jim Lines

Thank you Dan.

long Theo, improved and On cycle it's a opportunity, or likelihood the side, is the similar nurturing the margin. an Graham to BNI earlier selling there also that pretty there the involved higher Barber-Nichols, is in success Graham in is and for

about distinct relationships, define as opportunities, nurture design Graham are chemical way might is its utilities, we project EPC working side. we and two So long Barber-Nichols a there a years. be the three sales observed scope, working value And one to cycle. energy is bought what what's of in Then as they have a equipment has have phases bid. which precisely front-end Barber-Nichols in something sales cycle, concept, you Then recall, the demonstrate is nice is a the on very from FEED, four the where is phase There Graham for similar chance build does with phase engineering there capital more early nothing which rough going or called to to of cost. is the

two, bid we retrofit might gets of One or something. of new refinery, three RFP ultimately capacity is then refinery of those revamp buy bidding or it. a refinery One issue four the contractors or an of And large they EPCs. the to the

always be does nurturing e but are different just will Dan's rate capture well longer found it's opportunity visibility it concept well. higher see team and holds I margin have sales the although nurturing as as also work which the team and similar sales be, Graham net team as in that the does for well very really a Barber-Nichols, profile cycle, longer that the Dan's Graham work similar, true that the somewhat We of in rather long it's will extraordinarily for and the good and that you are same and you channel, into more has does

Theodore O'Neill

Thank Okay. you.

Jim Lines

are welcome. You

Operator

line of next Brett Kearney with proceed comes with Please Our from question question. the Gabelli Funds. your

Brett Kearney

guys. Hi combination congratulations terrific sounds like Good for very It morning all. all involved. and to

Jim Lines

you Thank Brett. morning. Good

Brett Kearney

coming a the combined all longer So organizational completely organization. together to the guess, contemplated of and about term? understand most and have will all integration front excited Graham maybe of meshed that kind and at commercial you you could I But through synergies at continue no go opportunities up you and as in obviously, some discuss getting you the outset I Barber-Nichols

Jim Lines

you take want it? you me that? to take Do Dan, want

Dan Thoren

Go Take at first a ahead, it. shot Jim.

Jim Lines

what's is Okay. most us had of that within stream we the a defense. addition diversification revenue excited effort around a Well, had diversification

building defensive vessels. in but I the programs. a industry, defense around for And the industry offensive the different is as serving systems said, is on ship Graham of team defense Dan's and segment side those very So the of

provides and that that those backlog enables make deploying gives credibility have us the but growth confidence where more clear point from of need in outlook, the potential to So investments us organic not defense a we orders or excitingly combination. which around to difficult little of area, that future very view, may are In us industry when to and bit orders the visibility really energy space of more full procurement A future the that are conversion we provides transactional. we build long the visibility multiyear only with capital. realize like backlog

because with takes higher of making of around great more or provides very investment us is significant very because there away. it which that acquisition with capital more there predictability, Barber-Nichols visibility are confidence investments is So a a deal an and organic the is risk we exciting when

Dan Thoren

been side, talked gets about have we has And engineering I Barber-Nichols the little then But talking. my think have a on a that about months bit for as we through really and sophisticated group. Jim vertical that me, And that this more me strong start acquisitions, that piece the other of think to we the excited. and go about integration of systems, really engineering type system it can with and can Graham those, BNI between

So partners serve. vertical to more strengths I organizations and we more really take other with like the line after go and that higher integration trying that system the we up to probably end markets various the engineering of and and along can think, each offerings opportunities of to

Brett Kearney

just And follow-up. one maybe Terrific. then quick

initial thoughtful, manner. of the one implement kind Is broad-based across integration is of combined structured the ownership all share thought given benefits a I kind side. there the very And priority of a employee plan you think aligned guess, organizations? in to employee transaction I well

Jeff Glajch

is This Brett. Jeff. Sure. Hi

We have a couple things.

nine the or the will will plan have plan. I shortly years in which to Graham forward are going clarify, expanded stock benefits then stock employees to eight the to Graham do. to for, ownership initially we Barber-Nichols That sense ability them that of and with is buy we place the look at an program, if purchase thoughtfully Barber-Nichols there employee makes leaving through place we side, to that will have we On see share benefits both employee just have at regard a organizations anything had along and to in be believe, With now.

that something as are to as very and his team Barber-Nichols interested that Dan bring So over in. soon feasible. absolutely we is will And

Brett Kearney

Terrific. all. again That's and great. Thank congratulations you guys to

Jim Lines

Brett. you Thank

Jeff Glajch

Thank you Brett.

Dan Thoren

Thank you Brett.

Operator

Please with proceed comes line Deysher next John the Management. question Our of question. from Pinnacle Capital your with

John Deysher

my Good I morning taking for Thanks was just everyone. call. curious.

I the other asset. since, is talking a Were You bidders for BNI August XXXX, clearly been any there property? have quality guess,

Jeff Glajch

relationship around is again. we into and with time relationship over Jeff is A companies, With a market a to the two-and-half really, more an And years. had then we individual for acquisitions regard little over was about it Barber-Nichols, part off that process have an be our this interact of build form exclusive this for intent we of to transaction. John, relationship. we a try to

those some them I to So that's It us know makes an get ultimately of was get view for distraction. it didn't a other us There a process, wasn't what sides. really it would And relationship. benefits we bidders. exclusive to both sense, really the think both any know them, to if of have really one allows sides to se. and per bidding eliminates It

John Deysher

Good. Okay.

no other signed there. of key about the website section eight contracts were employees I employment many was looking curious BNI's listed leadership employees and those So under bidders. I eight have at there am forward. going how

Jeff Glajch

that level we the some sign But John, of key have employment contracts. Sure. into want detail. had employees we quite don't to get of

John Deysher

Some of them.

Jeff Glajch

all are the remaining employees with organization. those But

John Deysher

All Okay. Fair congratulations. right. enough. And

Jim Lines

Thank you.

Jeff Glajch

Thank you.

Operator

of Our Bair Ascend next line Advisors. Wealth your John question the comes with from with Please question. proceed

John Bair

congratulations. and you Thank

very As something a exciting pleased long you time to that see us finally benefit all. shareholder, I am got will looks very and that

say, to they come who those things wait. As good

past Graham In or over So and I these of have was business words, BNI interaction actual wondering a working together on couple components? if had project any three years? other of particular kind questions. I

Jim Lines

have didn't any, we I No, offered collaboration the Jim. on would commercial is say, This to products market.

around how fluid flow is spent integration system of integration, said as a considerable Graham will flow that markets talking system of the the and approach fine of and serve. lamented both collectively by capabilities managements transfer components Dan's capabilities we fluid Dan thermal heat the Barber-Nichols have And capabilities thermal our couple teams time and Although about we the complement.

detailed of to expand about some can had marketplace. conversations the combination the benefit have offering our we we So and how the

John Bair

Index? Short-Term now change could of next the I tied is split assumed interest is that am that interest part question is your is, the what and loan a might to as And effective index of Credit part that I rate often conceivably wondering reset the rate this Bloomberg second question. BNI on that? rate had? how wondering question And if have is of then by the Graham there debt then term kind was any Okay. on am

Jeff Glajch

there was are assume cash acquisition. only you any there. if It's debt did The a the the working to regards With regard capital acquisition be not target right. from the there would cash off. free loan, debt, reason any John, none Barber-Nichols. is to was With term debt-free,

based BSBY using rate XX and one on BSBY BSBY are basis plus XXX We believe the the under is points. rate points. basis just it's the rate I one-month month

is So XXX about right points. now the or basis X.X% variable-rate

to opportunity the that's some We to up sort rate for have the we a term in of of perhaps loan. derivative lock set something considering. are the the And

yet that the my the this be high a haven't is that loan. lock across Given certainly process be rate that we on with but variable of the to entered the comfortable it's in XXX will the at we we rate current be which into would morning, something above obviously rate but agreement thought that done a would term

itself, a XX-year amortization. with Just five-year on to provide little a a more depth loan the loan it's

should in years, five end still it obviously of So be principal remain half would at place. the the

John Bair

Okay.

So the hearing then a would I monthly basis? am rate right? adjust Is on that

Jeff Glajch

Yes.

John Bair

Okay.

Jeff Glajch

a Currently, of we were, rate lock loan. it into as to unless it more enter to fixed again, would swap down a

John Bair

Right.

Jeff Glajch

we at. are looking again, Which,

John Bair

well Right. very, Well, with the then debt very Graham assumptions fits no philosophy.

of best and again going forward. congratulations Thank luck you. So,

Jeff Glajch

John. Thanks

Jim Lines

John. you Thank

Operator

comes Capital. from question of question. next Shapiro Lawndale Our with line the proceed Andrew with Please your

Andrew Shapiro

Hi. Thank I to if the could, acquisition out such. A just here few, and you. flush impacts

issued, to the what market? and their restrictions, flowing any, were them On that are attached if out the onto shares

Jeff Glajch

a the resold. of six they of that Andrew, there restriction be Sure. minimum both cannot months is on shares a on

Andrew Shapiro

Okay.

Jeff Glajch

they And XXX. then are subject to

Andrew Shapiro

subject then right, they be are XXX, because to would I not registered?

Jeff Glajch

Yes, correct.

Andrew Shapiro

I and payout bit can time the course, of a policy of the a a for to policy, such, Board and respect What know the holding regarding if you the company's going long with as the lot dividends of are and running even the rate going cash little established guidance have thoughts to dividend forward? previously less Okay. lot debt a we cash, a to flow. or now obviously cash is With no don't more debt color provide had

Jeff Glajch

dividend explicit policy there Sure. is per an se. The dividend,

They over looked the ideally flow, high approved intent would Board a number and at cash and Board grow years, the it that at investment. would will a at then conflict at cause meeting our dividend it a the a M&A utilize not going flow looked increase ultimately The our the normalized percentage a a of with week dividend was that looking and it rather cause certainly. normalized of kind be currently. at forward or so as last keeping portion obviously of not of cash percentage it lower problem the However, Board or was has organic but dividend the it where

So where we are that right at now. speaks to

We position obviously flow always, our be way, to monitoring sheet there going monitoring in could the dividend cash adjust well growing. intent to steady or balance that no needed is the we had significant will while keep any above is flow, our forward, can activities and different cash change or investment significant either is if what dividend

Andrew Shapiro

no at prepayment there the all? Sure. debt, And is penalty then

Jeff Glajch

correct. That's

Andrew Shapiro

your in cost-plus? if cushion cost the fixed-price new for accounting Okay. I loser feel in contracts Are they overages? bulk the a the to risks and more there contracts enters of understand Graham's the fairly to a event nature of Or are I also And a guess I these nature the where contracts the primarily to of you but that am would was the last and build but the not into. is like because get contracts of BNI contracting contract? nature of company, it's least What

Jim Lines

don't types typically three involved different why contracts outlining your program just of moment you side a the that or four Dan, in? spend you on

Dan Thoren

Yes.

contracts firm that do those the we of are fixed-price we and contracts majority have. So

them. we line the materials we contract out risk with time jobs with that's We also we the have type also have and the bid contracts of associated and fixed-fee And contracts. as cost-plus these essentially amount

defined, relatively first costs, that we to we So type majority for and often are we upfront But the material not the how buy manufacturing an a On push a well relative defined then customer believe pretty carefully likelihood so approach propose and is we scope of of that contract the for little instance, commodity where we revenue all longer will understand much a about But the is of the if and are jobs is bit inquiry, that dollars types are get we normal, we the the firm appropriate. around worried with. customer when risk contracts if development of the proposing time propose the risk types feel associated really material lower then of isn't than will higher success well negotiate are contracts. the is contract different yes, with that's contract propose proposing term raw that. than mix jobs and they and They where minimize comfortable fixed-price fixed-price. firm materials we Certainly, and we types involved we or what of definitely it's the price. choose cost-plus different

Andrew Shapiro

historically, developing over five how resulted And have these last the of any years, often contracts in loss into a contract?

Dan Thoren

more will into But run and we here because we instances, than Certainly, had some other we projected. issues in do make there.

end line had we up, I advertised of even and and of EBITDA with Jim will down land kind in and that's comes low number we Jeff where typically some that it kind an to losers all-in-all, overall, bottom So a think mix. teens

Andrew Shapiro

you these bidding more thus you you when to are into now larger that tend run run things, bids on you will And you these running same and be at Graham some these competitors name adept of that Okay. into? for the can are main the And they and competitors are than absorbing into things?

Dan Thoren

There much that us. I But competitors certainly, many company. have There Yes. us. today. can them have the not people we larger capabilities in probably than is has that XXX-person name who won't smaller are than be

are absorb more expensive. us. they costs than they larger Typically are can and operating Typically overheads they Their typically, are more So more expensive. loss.

cost will them. against to typically our have do take that a is what allows so additional consideration advantage And we into little smaller we that a that may into you as And bids and build margin have risk bit a company. more

So have while. for yes, doing it a been we

handle we can contracts contracts type out have and bid it kind a feel appropriately. good development got have on that production figured we like we type and of We

Andrew Shapiro

you. Thank Great. Okay.

Operator

Wright question question. of David Please the your Henry Investment from Our next with with line comes Trust. proceed

David Wright

XX on the was you Hi. what okay, to times putting Congratulations you work. and the transaction There sheet forward see Can forward comment, EBITDA to BNI. define great was the balance were EBITDA? for paying

Jeff Glajch

Jeff. over post are acquisition. The be first Sure. forward EBITDA expected is EBITDA would This XX the months

So most months fiscal of that XXXX. fiscal technically will fall the of into XXXX But there. there is two in

David Wright

There okay, XX Jeff. It's months. is forward

would be $X.X that So million.

Jeff Glajch

that in Something yes. range,

David Wright

Okay..

are and so that cash Are transaction is Are the you what if free, well? Is new you the buying you buying facility the within business? company? debt-free the And buying? as

Jeff Glajch

all facilities leased. Barber-Nichols The No. here are of

buying So are the we business.

of of but fixed assets buying capital the working the business, We majority buying the are the building within some the themselves. not buildings obviously are that

David Wright

or leased And third parties people? from are BNI from those

Jeff Glajch

individuals. them are They will call related, related I

BNI at them retired Some they of BNI are BNI former them of are also or some are employees. still but

David Wright

And how Okay. facilities, many of total Jeff? that's a

Jeff Glajch

XX,XXX is and there here, off big is square new is I on roughly just there number but bunch one the of XX,XXX Well, There a feet that small facility of there mentioned is site. facilities or the a ones. one buildings of then XX,XXX and the size then campus on or medium that's about earlier

David Wright

Okay.

Jeff Glajch

are. leases the It's one campus that

David Wright

Okay.

Jeff Glajch

campuses. And it's spread out over not multiple

David Wright

you leases? existing coincident these leases new into the entered Or with Are transaction? have

Jeff Glajch

Certainly, They leases Chris and was and many and expiring new we They leases, were were existing. myself the were. them building discussions were the in leases, of other had around in been lease Johnson the involved the the existing a recently Sure. lease directly was new negotiations.

did So this the a and was not with where Barber-Nichols themselves. very discussions part alone were satisfied were of the We lease scenario those negotiations. leases

David Wright

the Will get an with Okay. we acquisition agreement? X-K

Jeff Glajch

Yes.

David Wright

period thereafter? And then in pro formas the

Jeff Glajch

will will have or little couple also. the yes, month That months. obviously, a those while but a but of take you Yes.

David Wright

congratulations. Thanks questions. my taking Again, Great. for

Jeff Glajch

David. you Thank

Operator

question. Management. Our proceed next line the with Please Schwab of comes question Gary with from Valley Capital Forge your

Gary Schwab

enhancing at Graham? the I combination current Yes. Hi sharing guys. your any was just on effect wondering, constraint does BNI like have capacity

Jim Lines

with facility, The they flowing Jim. well expanded newly Arvada asset very the into at that This the conversion is in backlog. base that backlog are and of their

for the facilities, Allen's However, would plant isn't the the equipment large build. operation actually weldments that well-suited and

Gary Schwab

Okay.

Jim Lines

versa Vice

Gary Schwab

that in BNI second any a does companies, volume course, And good overlap the better, give for are material have fact materials Graham the small you could procurement purchase and that as question, of margins. two overall breakpoint Okay. allotment the

Jim Lines

chain Certainly, we efficiencies through create supply would combination. to look the

are materials different. the materials, the types However, of rather

So improvement in of types I volume-based classic materials. to because they a not a are would see sense dissimilar expect

Gary Schwab

you. Got

Thanks. right. All Okay.

Operator

no hand would to for further are remarks. questions. back There Mr. Lines closing to the like I call

Jim Lines

forward you employees combined benefit Doug. today. we the so stakeholders the are and all very the in and about on Graham. from new Well, shareholders you look the the of chapter Graham. the Thanks This particular to for updating you thank in time BNI of excited we your thank everyone an for Graham, you entity. and July Again, the progress And it is And in Barber-Nichols and time exciting Jeff, Arvada. acquisition today. pleased for your provides thank Dan into integration so much in

Jeff Glajch

Thanks everyone.

Dan Thoren

Thank you.

Operator

Thank and Ladies for does teleconference. conclude this gentlemen, today's you participation. your

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

Graham (GHM) 1 Jun 212021 Q4 Earnings call transcript