Earnings call transcript Q4 2023

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Operator

Greetings, and welcome to the Graham Corporation's Fourth Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Deborah Pawlowski, Investor Relations for Graham Corporation. you. Thank

begin. may You

Deborah Pawlowski

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

with Thome, call and the me Thoren, Here President our are CEO; Chief our Dan Chris Financial Officer. and on

accompany the the copy results, released slides website on release morning. on have this fiscal not, if at we quarter our of website our ir.grahamcorp.com. formal should today. our you 'XX open will fourth also questions. slides You you will earlier And a going financial remarks, which their for can we conversation access -- our and provide the are on which Chris the Dan line that find to after

turn in Slide X would review the you the to statement. I'll If deck, Safe Harbor

that the cause that may statements and to during from what aware forward-looking uncertainties, to is statements as well subject well we formal factors to as Q&A events as some during here could session. the These today. risks actual stated materially as future results apply make You differ should are discussions, that be other

factors These by provided the and and with the other documents as are with and uncertainties release, company in the filed Commission. Exchange Securities well as risks earnings other

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

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

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

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

They’re But key not a metrics the These orders, numbers regarding not find the the back -- indicators use at for the key SEC. but of and of our of use of reconciliation each or gauge as key the backlog operational quantitative non-GAAP performance meet a is performance supplemental require our metrics does company's can and a company. these performance a the that these disclaimer does methodology deck for also performance of We in quantitative measures calculating by provided, are definition measure progress and book-to-bill. help defined of term to you the slides.

So X, Dan and call Slide begin. to the over to advance with that, I'll please to turn

Dan Thoren

morning, Thank in with We heat energy everyone. business. transfer progress with Denver, and our our our Good business expanded operations revenue and space made strategy vacuum more Debbie. stabilized fiscal our in We excellent technology XXXX. in diversified Batavia, further you, defense, turbomachinery and new

revenue. the XX% million We over had $X.X record for revenue included the about million of $XXX acquired increase year, a year. This of prior

our were we’ve growth Importantly, the success of of and petrochem markets. refining our revenue with XX% XX% markets had total reflected revenue. combined and diversifying Defense revenue was our

our XX% to revenue the market was category XX% driven energy year other new of by on grew for sales. Space and

see market opportunities heat for transfer the about excited energy. developing both and we provide The is we equipment many these hydrogen are We quickly new in turbomachinery and applications.

from Another brine. lithium is interesting market extraction geothermal

on a follow million fourth Mark the included hardware Torpedo. for on year plants. more the to We provided strong value geothermal geothermal orders to $XX.X quarter power Fourth record is have quarter, driving the million in for year. extraction with added of surface lithium of note into We orders a projects. and power the But the the for investment $XX historically million of provide the condensers process ended orders $XXX.X XX

X.Xx respectively. quarter quite healthy at the X.Xx, year the and for Book-to-bill and was

and the programs. was U.S labor our operations, XX.X% strengthen helped. deliver for Gross on margins, improved of our year business margin continue just overruns better better We the to X.X% last gross impact to due Navy compared of mix year and a to also productivity cost

further expand. price two ago as better contracts, more and margins years revenue As several we received first have we to from from complete remaining articles the we orders expect

as We work excellence, our be I'll still to Chris stopping done more there, presents aren't discuss financials. there after operational though, which to drive much

to to provided outcome revenue $X.XX least. the impact I very It our -- had beginning I it space achieve pleased approximately that million to exceeded related topic a filed was of adjusted per diluted other say share. we like EBITDA of One the a to event, our our or was address this net and would This for is disappointment about a despite during were bankruptcy the our large results guidance. customer $X.X year, raised on the year as for able the the and quarter. guidance that at

to to me the that, on results. With Chris it Chris? let go detail greater into turn

Chris Thome

and Thank good you, Dan, morning, everyone.

X, If you third XXXX for had was see $XX fiscal roughly quarter. of X% the our we over with period, sales trailing the record fourth organic could turn growth quarter year as This you prior that Slide strong well million. to sales as up

Our increase was the in million revenue, key some which growing several industry multiple with from led space programs market This up year-over-year. XXX% way to us due expanding market. million have $X.X which $X.X with demand in this customers, was

and increased to or $X.X XX% sales million, XX% of Aftermarket markets to refining petrochemical the total revenue.

last refining up, the a lower of major India. were reflects fourth down sales million. $X.X capital This projects project as quarter as comparables in had to timing market, both due in was aftermarket tough year's well benefit as this Although

refining demand market, to aftermarket be in the in activity continued the given customers. opportunities and strength the continue regarding We with encouraged the our

were represented and for our fiscal While $XX.X strong and defense the were XX% quarter highest second XXXX. very quarterly flat sales still revenue they of was million year-over-year,

of heat profit and to projects last accounted sales. transfer the year our given than For sales of X% execution U.S last and for improved our margin year. on and improved Batavia. International in our were X.X% much up sales and Gross business Navy quarter, vacuum higher the our were XX% sales measurably over U.S total XX% in represented related

impact reserves that of Dan the space gross pricing We aftermarket also one improved as to net customers from and related than This as bankruptcy strong XXX,XXX to volume mix discussed. higher more benefited our space well with and profit sales. offset for

$X.X increase in related administrative and the was general compensation. of million million, to based fiscal Selling, year. net our the XXXX fourth result $X.X performance quarter were customer, of space in expenses reserves million The associated prior the up of $X.X over the

the XX.X% impact and quarter measures. containment bankruptcy, in SG&A the revenue, to this and compared cost discipline improved of fiscal XX.X% our fourth of fiscal with XXXX of Excluding reflects improved

a If $X.XX diluted we quarter you which of XXX,XXX. will see X, basis, on net per share, for related in amortization of loss non-GAAP or turn was The the income share earnings net amount. per intangibles, you breakeven. to an share can customer share a the space to Slide adjusted and had in On diluted added and per of adjust our adjusted income net back were impact impact into net not had quarter our approximate per diluted $X.XX computation

year's $X.X remind Adjusted $XXX,XXX. for last you our of we that strategic we quarter, impacted I cost to quarter our quarter commitments was paying dividends. EBITDA which investments by which now the was programs, for U.S made million fourth the meet higher associated will could higher was year's XXX% last fourth ensure is than with Navy

year touch will on Slide X, results. full I Turning now our to

showing sales Dan $XXX.X and grew with XX% growth. markets million fiscal As record XXXX mentioned, to regions a by all

our We that high-end are was above raised extremely of last as the was with happy guidance result, it quarter. this

million Sales represented and to revenue. to increased or XX% space industry of the XXX% million $XX.X total $XX.X

and Sales $XX.X refining the Additionally, XX% market fiscal were to to and U.S in XXXX. petrochemical million total to sales the increased million. XX% sales aftermarket XX% of increased for $XXX.X

of is Given defense of U.S. more our revenue business, our geographic last couple a now to of mix over weighted heavily the years shift the in become much more

million such Year-over-year, gross on space reflects commercial International improved and customer. sales were by million. aftermarket projects, also mix and an net impact margin related related the defense XX.X%. our $XX.X higher to space and points to execution improved up to of margin basis offset partially XXX to increases increasing contracts. were XX% sales These pricing our improved as This $X.X

scheduled profit Gross XXXX, XXXX. Navy material projects. Navy remaining first source fiscal the remain million to which the included estimated $XX overruns first labor four for of projects first were article the article cost XXXX In complete completed related losses of we fiscal U.S impact end these and U.S in to article our quarter two on projects, fiscal an second and of by

Barber-Nichols the current million SG&A net $X.X in operations intangible fiscal $X.X amortization of $X.X were to of XXXX reflects million, our related additional an expense increase the year including million, $XX.X months space expenses acquisition, the increase million The impact the in of customer incremental full million of $X.X results. SG&A year given our two or XX%. and from

incurred last of cost in these hiring discipline, of of were and well financial as acquisition as elimination containment sales non-critical the as positions, measures, as Offsetting improved million well costs delayed agents reduction integration increases and $X.X the outside as year. such

income non-GAAP diluted $X.X share income respectively. $X.XX, million and a adjusted basis, were net respectively. per million and were $X.XX, income income net GAAP adjusted per and and net $X.X On diluted net share

Turning future. $X.X third the of million, 'XX you and with up XX, end profitability our fiscal Cash cash XXXX. see to were through up all improving for fiscal million $X are Slide improved and how end on balance of investing from and X, sheet million deleveraging equivalents we quarter while March the the and can compared discipline, $XX.X the

received of for for the Cash the cash $XX.X generated the $XX million out contracts. was flows should for I from and operations quarter related materials of reflect point to year. customer defense fourth million million in impact deposits the $X that larger year

forward, expect large lumpy Going our nature to we of the these contracts. to be cash due flow

XXXX, leverage during XXXX were level to available credit million calculated improvement facility strong for growth the us support million, our ample with to was terms elevated or will accordance credit $X.X quarter support Capital our organic at was This fourth liquidity expenditures our our which facility for opportunities. of year, and approximately year-end. by year generation our and At amount expansion the March us is debt the million, $X.X allowed providing the cash strategic investments. in sales. $X.X and million X.X% of XX, productivity This revolving $XX reduce our the under of our initiatives, as X.Xx reflects were ratio fiscal

million to for and the and or you the included million view year. production. the the we and $X which We announced XX order MKXX power were Heavyweight sorry, quarter previously If of will the million X in $XX.X quarter X, lithium for Mod vacuum -- our Slide our for Torpedo a geothermal for a had on had million orders up system of $XX and turn order XXX% orders now $XX.X follow orders

the by capital XX%. customers million aftermarket fiscal increase in for an be leading were The orders market of After quarter, indicator and of future $XX.X business XXXX petrochemical investments markets. a fourth refining markets in to these tends the

XX% represented record the of total reached driven that $XX.X our $XXX.X new of to For million. orders a up million, business by was the This for million orders year, year. $XXX.X defense

in We discount markets. across execution are were is believe made, record about. our customers new Aftermarket orders the in our million. our validates demand aftermarket petrochemical including and other energy, also confidence markets, having markets $XX.X are investments demand which excited This success not the and XX% diversified to we new as we our these the we year business and refining well our to growth space as in orders for and winning up

the If strong show compared to backlog now point $XXX.X visibility. of we no for backlog our million XX% provides with customer Backlog X, bankruptcy. I to us with to given and that up XXXX. out there fiscal orders you fiscal filed at heavy related to are defense year-end who should which was end the turn space Slide the weighting

Approximately to of backlog expected revenue to primarily ability XXXX, in are our deliver orders XX% in industry. the giving to convert and strong fiscal to currently on and convert XXXX to to fiscal backlog relate XX% to XX% XX% a sales in defense is guidance. to expected confidence Approximately in margin of a sales

said We midpoint as guidance expectations is our XXXX. strategy fiscal fiscal to This in long-term to goal, Slide to revenue $XXX X% for of between to expected be XXXX million These will believe raise exceed line which range. per of our year-ago. XXXX the review top growth million, $XXX grow results with just X% as we million, $XXX to us XX% fiscal the our line at well that revenue XXXX is XX, allow Turning can suggests now for target the over right revenue which a about to year. fiscal

costs a well million million operations our $X for of million out $X expect to $XX.X ERP point EBITDA $XX.X which heat to out I to transfer for in we the acquisition EBITDA $X.X of From that an adjusted million approximately $X planned margin an perspective, million million Batavia. to Barber-Nichols year, these implementation adjusted X%. next earn bonus, suggests X% to measures and adjusted about vacuum exclude related as as system should

in by those projects adjusted fiscal that low better we goal. the teen We be to the to employing into years margin our improved achieve expand beyond several lower mid margin ago as on still in expect we impacted margins first will we year article work to our price and and contracts, to XXXX entered start rollout our more meaningfully processes, EBITDA

I call the will to back that, pass Dan. With

Dan Thoren

you, Thank Chris.

XX. Let's turn to Slide

We to we continue organization growth our and steady evolve profitability. advance through strategy stronger as the

best deliveries. culture expertise, compliance fully exceptional timely and because engineering Our skilled that each service workforce succeed believe is products challenges an company to high and vision open to aligned diverse We to highly we that provides markets. our our customers our us build can responsive is of with that with mission-critical of do our engaged

transfer on our have Our application. equipment. and focus severely as well work, is of technology is critical the our vacuum customers success This or refinery nature markets of refineries it compromised. the vacuum time is as system -- with of a succeeded If output the on serving our our column. we doesn't how Think technology process is distillation to where heat over about critical our the exceeded turbomachinery

failure Similarly, management quit communication working Space torpedo an system ocean catastrophic. conflict propulsion thermal could a our satellites pumps if in fail. be of

to heat our create processes Our are machinery engineering compliance expertise high our transfer to qualify technology turbo vacuum these and solutions differentiation. and key and developed and

of pillar strategy excellence. our is operational second A

the employ in we improve operations. continually to processes our initiatives many have We

a a We have initiate for in upgrading overdue and information system transfer our upgrade been heat turbomachinery will consistently long operation. system systems ERP operation, vacuum

eliminates quick payback. more We and are that welding like making investments provides in rework equipment automated

Finally, services to shared expanding continue. advantage economic our gain will

The third people. pillar is our

most them advantage. grow are and and valuable people competitive are develop asset we maintain committed Our a our to to

development identify surveys resources have in other the tools, had identified We improved fill to to then We using programs follow as engagement instruction, gaps with communication, such good through success engagement. initiatives gaps. and

we Leadership academic for And company a apprenticeship initiating -- weld development a is have quite schools, actually through community with program. expanded size. partnerships training and trades trade resources machinist advanced our and in-house of skilled

lenders, solutions. external leverage finding relationships, stakeholders including our our Finally, to strengthened business. we means our communities, be shareholders our improved will our better win-win suppliers, a This In and communications,

with opportunities us And building of making excited are of about of steady we're our our progress plan. support stakeholders against We better companies. journey quite front our the in and encouraged

we that, open call With Christine, the can questions. for

Operator

Thank Instructions] [Operator you.

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

Theodore O'Neill

quarter. Thank you, on good and congratulations a

Dan Thoren

Thanks, Theo.

Theodore O'Neill

just new remarkable You've wondering could give started a Is you market along share And Is others? got some your this you that insight if success in more taking into little it. us from orders here. for products? Was all there. it growth business there I asking was just

Dan Thoren

it's it think performance. I -- I with starts think

really can orders. our perform with for businesses as they're customers, So additional rewarding us our

customers, actions to the come as those of relationship lots of and companies out that with a customers that make and year both really perform. importance to invest It year, back just our in back we us. our established points they're the an think I And we ultimately have a were bit bleed businesses, satisfied. a to ago, made to coming customers little to sure continue half

gives work ago, you to thank But year and a through that go out everything some are and And a continue us certain out. areas. little years it's get to that a ago, challenge to heroic here's will that seeing the just again, Theo, a expansion that mostly supply to and equipment customers our help and answer for are saying needed customers was We you really us help our helping honestly, attempted I and I'd get. a X bit, in say to they really half chain expand we hard efforts, ago, year was sense, half process. a in more

for requirements, for something And And the special chain in goes components, to supply a while seeing high-level high the and cetera, beyond, checked related in That seeing high -- testing is simpler if that improved some to We're pocket -- high-level perform are this is that we're that raw challenges is compliance lead customer. see we're material not challenges it just some, has times and et areas. of relatively above is at stuff. extremely that equipment, that. still has we before the supply struggling but high-level asking compliance, you what with supplying high show and still provide we long really are whenever in some can service, particular where well chain out

seen it's delivered as problems very them. So to once have That’s they don't valuable.

our really and world And compliance I struggling there. think mission-critical so like I equipment of this is high niche the

So to that how see I think can our customers be. are valuable starting

Theodore O'Neill

You're a other customers is the saying suppliers? brought that compliance you that products differentiator to compared your to high

Dan Thoren

Absolutely.

Theodore O'Neill

just Okay. online up here. that during about I to doesn't look ask back. Is wanted I correct? look that's did the Virgin coming It like Orbit. call some quick

Dan Thoren

in XX correct. -- did find That better. the XX Chapter for concern process, not They is Chapter going but filed and they a

kind launch they is essentially point good appear of at assets news to probably the liquidated time. rid coming and assets market their and of interested And so get assets. let's -- the they lots that customers in in That they is, their the back. of some be So don't to majority were this of transition of other some the they've

ongoing their to they process. other assets cetera. point in their to an wrapped for bankruptcy yes, bitters sell companies. not It's et space this at had inventory, It's time. they So But still buildings, up able were

Theodore O'Neill

Okay. Thanks very much.

Operator

of question. question Ridge Oak next with Ryan comes your the from Please Financial. Rich with Our line proceed

Richard Ryan

year, good the the Chris. on performance Dan congrats current guidance Thank and and you. And also, for

Dan Thoren

Rich. Thanks,

Richard Ryan

guidance. what's virtually covered in is delivered. you're to expected the all the shows be on In backlog already the it question by slide and revenue guiding deck to A

You that say, within to could question guided? somebody would space look the have at hey, vulnerable appear other to there this be, and be vulnerability contrary, the turn upside that. the the you're or business included your happen that with there backlog? doesn't so this in complimentary customer currently maybe on could areas And side Any of was what what

Chris Thome

as supply part. the very about seeing still other companies, on as well on Dan we're Rich, your bit talked as observation the side. pressures, just a good chain labor side little Yes, Like

were pre-COVID. improve, we were -- Although they we conditions these where not they're where have seen still

So, really have comes backlog, execution. it down as to you just point out, we the

our continuing perform, outside to comes risks really control, and So it team labor. supply as just and to our chain such

Richard Ryan

a as How you've Chris, and Okay. the should on some flow should remaining QX, projects, articles seasonality, at but kind you at line? we 'XX? growth as of during at follow looking kind we line look the look got of fiscal XX? the for we year, as how on, should or look at the at top QX the two the how delivery revenue Any other first model revenue

Chris Thome

Sure.

our Rich, really of know, have lot you don't a we As seasonality business. in

fourth little hit higher year. Our at bit the a does, working teams our be to as times goals for the to are quarter tend

don't into see lot guidance. our built of seasonality a we So

Richard Ryan

you've leading road. Okay. China expansion Again you on But the or a and aftermarket base you interest in that either and your space projects domestically drives aftermarket installed kind could and new be business. had India? does some the petrochem said indicator the refining, down petrochem that like and or refining the that What large in look side, of indicate

Dan Thoren

Yes.

So domestically up. it is picking

to domestically opportunities continue are inquiry rates seeing We grow. and

horribly just that back domestically. coming been coming has it we're certainly But slow So back. seeing

us indicated kind and noted execute up it's all Chris to it. to earlier, of that booked we've our got you already year As

it indicated, pipeline back domestically crew work for as as got doesn't plenty of our strongly if come our that's here. So we've

has China is slow up it's opened internationally but a reopening. shutdown, COVID seeing we're after their What

second programs. then level So see That our to on year. different to we fast to seeing of clear. And But build we the as back, fiscal we'll XXXX. back, requests more -- an quotes are are half quoting not of comes orders entirely comes in start those, it that's to in how increased the on it

announced. we've close are are different to being several bids there got that India, out that

India expect it looks a out flattens hopeful or and for through of like we maybe continue it we're we fully comes they so two of their then back presence. that that India kind on. can go kind our And And as election then year, process

to different interesting of different really it's all kind kind these markets, places. follow of in they're of So all

be of able And the that to that able so is the be to X ton something really value. move market the ability the been with Graham to provides years, flexible has diversification last build and over a

market backlog and we're of kind stability. to other, more lot the a holes one from able provide So to our use fill move to

watch in time, in much place better us than a And much and better prior we're and for cycles, in we long so Rich so have we're the years. you you a place. been followed a

Richard Ryan

capital for was a you allocation. When years Sure. during tough Thanks last had. that. One back, nominal that couple the Graham look one had eliminated you dividend on of

the your back up Now that few over you're at should the come back and does how in the Board we years? dividend look compliance at format or capital level, allocation the discussion next priorities

Chris Thome

pay and I of within we we long-term can And the strategic growth start opportunities returning Dan starts look we'll out, then last our growth, an From we capital we Rich, looking year we allocation to organic it after that shareholders. our advantage debt. few right? if with use plan, have to of. to then hopefully, abundance capital, there, years, excess next back down feel would M&A We again. to And when have that, at released organic take capital, as Yes. laid

So capital we're we have. strategy that comfortable with the allocation

Richard Ryan

Okay, guys. great. Thanks. the in Again, great job execution,

Dan Thoren

Rich. you, Thank

Chris Thome

Thanks, Rich.

Operator

the with [Operator e with of Instructions] question. your from proceed of Our next line Please question Gabelli. Brett Kearney comes

Brett Kearney

morning, Good congrats on Hi, the guys. momentum. continued and

Chris Thome

Hey, thanks Brett.

Dan Thoren

Brett. morning, Good

Brett Kearney

the system, that kind noted platforms. you're the seeing, the manufacturing through and guess, for assessment automated Dan, gets cement, even about talk the performance. the tools some reliability some and absolutely to I you're agree differentiation you can opportunities in guess ERP I digital making, with landscape you investments the see potentially U.S ability for global you across of vision your of of differentiation

Dan Thoren

examples. improvement, Yes, capital our investment When stronger give continual minds generally. is there it -- becomes continual wise and in I'll bank then our of you continue investing. kind extremely as like and specific you hit business in It's incrementally our and your business, me and we're continually put compounding of money some kind like important. compound. let account does investing to This wisely in in And

loved in So this everything continuing in the better means of it's building to that invest starts and the ourselves we called notion we there's term -- a come company to an -- If apart. don't, entropy, basically process. engineering

processes ultimately, you don't performance So your you drift, have as inflation have that entropy. well is trained investing, and lower employees, in

not you're less. of If the investment to your to continuing starts invest, become value

of they go which So kind hand of really interesting. kind hand of in is kind

in are our to continuing we So businesses. invest

Just to me facility going into we some Malone to the Mark about Matt a XX capacity that, facility is week live. last our money that is significant within Denver in Navy GM year, program. support their The And it. excited told put has expand Barber-Nichols of

that we've is is essentially that. that serve really of it. the and tensions SAIC about more as to geopolitical kind to And our Our the read and customer investing rise, foresight excited going all direct customer, well of continue in more about Navy

So investment we've made. one that was that

areas and processes kind path will to faster, at really these look our have complex wells are is one welding and weld automated tough to manufacturing our and more we've welder as these And this in equipment. quality very -- very got to automated equipment be in Graham a really expand, better that we've ultimately enable us very, within expertise Another follow identified defects, consistent, of welding for a welds. on less hard think it'll review more review we the and go to challenging products actually person that

most And payback important. is good investment, the by sense that this it can so investing where in like you extremely get equipment where makes

between The business same throughout working process, we ERP be or opportunities handoffs about, And goes upgrade are. asked it more flow that quicker business, there's or a in especially mistakes and extremely the business, mistakes with whatever. is the there's confusion, people, the if and the and information for automate in add of And can you lots there value less the more, important. lots manufacturing had any this the as of

able product we mistakes system And really to have the the that so upgrade about ERP as well seen. on excited through or some of of Batavia. improvement going a significant have We reduce process our think that reworks we're the being factory to as flow it's essentially in

and information equipment. that getting compliance. our up it And tougher is proof compliance is it wanting So high as want customers tougher are high whole they that back realm the to

digital is along there's making so And a communicable and our trackable And and hardware. information in of and available important. within it that findable ton goes with a platform really

about And so systems really then we forget -- product, continue we've investments and and product, the and to business think saying those about and because don't we in people process our and got unit have some cool opportunities.

us really can nice a that stockholders are so, growth opportunities we give capital that we a ton investment as on of we front return believe Chris's there in that appropriately. organic point, to And of allocate the

Brett Kearney

seeing funnel you in I are opportunity, new [ph] magnitude developments organization. both guys with Excellent. market was this the or and And energy on I potential you traditional or then And seeing across about I personnel opportunity yes, there? how follow-up set. all what with resources, geothermal lithium actually thinking the of guess, broadly the guys opportunity new energy of capacity had kind you're potentially the I the guess, expanded guess back, markets Curious and the prioritization, coming are

Dan Thoren

great Yes, it's question. a

of higher more down best right and the it shareholders, And choosing more and kind now. our people those out of capable, come you programs that want importance, that As does higher for the on you're world strategic of after the you are for show the can more have that that prioritization to the you. ones price benefit the returns to we're ones ones focusing go

the been opportunities process. those hydrogen, investors really this has a of other for out additional lot makes power Again, you But of time. cool around processes, in comes it that than that because all the point coupling a power that a for there's kind sudden long, long some out better that of geothermal with lithium extraction yield

So better applications to customers your with suited be equipment, work new develop that's out, including new being for to flexible hydrogen. these come able that

what product, as them that is a have work opportunities. sure develop trying business awesome with ultimately, the customers ability -- to Our our and modify some of into make product, that these follow to to we're we strong do capability, existing new really

down a our and strategic, right us opportunities lot benefit of and well to as it's stockholders. highly profitable opportunity, benefit long-term, it that ones as comes the the So that picking i.e. prioritization

Brett Kearney

Excellent.

Chris Thome

we notch at And, within Brett, in year, just XX% our right, and market. Since and XX% both human very increased difficult Batavia workforce comment total our workforce our top resources, a increased a have that about welding resources by Arvada Graham by really locations. we all last to address we function our your

to to such look we're to for So, going improve, our different welder ways training as program. continue

really the going of some of the allow place programs we and our to apprenticeship colleges and trade working this us, some front us and And local schools. other that's in we're growth. have to about community excited that with achieve And in that have we of opportunities

Brett Kearney

Dan. Excellent. Thanks so much, Chris and

Chris Thome

Brett. thanks, Yes,

Operator

Please Baldwin Our comes of proceed line the from Anthony next question questions. Bill with with Securities. your Baldwin

Bill Baldwin

focus I much. on, got could, like and very areas if Dan I a here, to Chris. Thank I couple you of

the aftermarket entirely refining in a business, Graham business for primarily petrochemical area. the On domestic and almost

Dan Thoren

Yes. Yes.

Bill Baldwin

refining majority of And refining? the is the side? the the petroleum comprise that aftermarket that beyond heavily towards weighted Would

Chris Thome

yes. petrochemical, And

Bill Baldwin

half roughly …? or half that would petroleum between and and just how petrochemicals break So out refinery

Dan Thoren

going be towards Bill. to refinery, heavier It's the

I yes. You're break down that have exactly the know between we right. -- that don't

Bill Baldwin

that business petroleum the to inquiries business be out. heavy Well, the a the just are expect that Is is going were and eventually unfold where trying far inquires refinery weighted as get would And would for projects breaks you capital of is I'm most how as primarily to heavier your refineries? aftermarket feel side? forward, on

Dan Thoren

Yes, equipment been of the follows it's historically, source. we that, on the majority side. the installed our of has expect would aftermarket the the inquiry because base, that's that refinery the And source

Bill Baldwin

right. Right,

Dan Thoren

absolutely. Yes,

Bill Baldwin

-- that on is how execution With that? impacting is ability your you aftermarket, efficiently are very here with are and again pretty Would there like and you the on a as Or much in Chris, picture Dan order material so to? handle to side? businesses forth shortages raw strong you say, the time deliveries labor your that you'd on and performing

Chris Thome

the Bill. the head, Yes, nail hit you right on

delivery on-time because labor the long and times. we'd to like be isn't it nowhere of lead Our the

quarter, regards In cylinders which $X.X with of we million a is the record on to firing aftermarket we're sales, current aftermarket. had However, all for us.

productivity team execute in forces we continues we're some to what really and do, now. these they some improvement and place. the of once all forward to So, right is And cylinders can get and firing these external free at on just initiatives of maybe up process looking

Bill Baldwin

delivery think and lose these competition, now? you issues you competitive to on forward you're you're So potential your would that say likely going though, of right because compared definitely business any not to

Dan Thoren

think Yes, with so -- I struggling supply chain. the everybody is some areas in

the that forgings of right And a so quite some lot forging struggling -- the of houses bit a now. are

Bill Baldwin

Right.

Dan Thoren

You end up some baskets kind like the materials weirdness of specialty or of instance. around seeing for some

-- and in up high compliance quite components, being high And struggling with tolerance, so, those. bit. are high specialty high a strength, companies some cases, are They people types of end fastener struggling

pricing and trying a weird, raw And get it's but to lead buy, can't being the kind well components like, not more we're in that And can't bit built little lot you months. in that has times, We whole material, a into people's very inventory while into buy once for so that run X stable, you Bill. something longer of every is just then see okay, get up and yet. a in-house

and supply deliveries. running still chain we're and So into challenges

Chris Thome

are of Bill, challenges experiencing. everyone know, to its these you as unique But that's none us,

Bill Baldwin

Right. Right.

unbilled lumpiness revenue, clicked that bit deposit to a -- situation. your on the a When quite those big deposits look that a as your were cash source your were kind Regarding Because what you revenues, pretty large. you. customer of were unbilled flow, of like on revenues offset drain your of revenues

Chris Thome

Yes, absolutely.

Bill Baldwin

out So your balance of does time, kind flow? cash that serve over

Chris Thome

team's, the since unbilled will a of that's up Yes, one the mine have cash out. the generator I upside started some and of astutely we you as course and of over we going focus year, for ever free us. think to as as the positive pointed start this levels That's to well of been on think definitely we areas be

Bill Baldwin

good. Very

Chris Thome

flows so these be unbilled changes and the very cash to our size and but given far over the our do As these deposits contracts as the expect we in lumpy, cash revenue, customer of flow, more time, the our increasing. in we're be nature. I of level, and lumpy take time, that look is It improving EBITDA think reflective we'll at cash if that's very generating. a just you Over

Bill Baldwin

lastly, And post potential any around you numbers XXXX? can wrap the out turn liability [ph]

Chris Thome

Sure.

Bill Baldwin

back I a on something you a … announced Is that? that there cap know while on quite

Chris Thome

certainly released, so about publicly can talk we it. speakers] [Multiple

Bill Baldwin

it. locate I couldn't

… So

Chris Thome

let it. you Yes, okay. through walk no That’s problem, me

So it's program 'XX. starting our fiscal X-year a in

level million of a 'XX, 'XX, So and max $X is fiscal $X up 'XX, million year. threshold each the to

So period, in is additional acquisition $XX And this in million a negotiated speakers]. to normal million [multiple $X after bonuses. all was X-year employee addition the over max all shortly to the potential the payouts

Bill Baldwin

remember that. find remember just [indiscernible] the one. I I I that, yes. detailed Right.

Chris Thome

a There's right. growing markets [Indiscernible], EBITDA target.

target that million million 'XX then for So up is fiscal $X.XX fiscal $X.X XXXX, million fiscal $XX.X for the goes and 'XX. and to for

EBITDA a get going is higher to it to see it. a -- though goes expense, we're higher along be it even to So level we're with that going going

performance So all it's based.

Bill Baldwin

Okay. Well, I a here. your heck for. a what are was looking team you company in the building job and fellows doing That's of

best So congratulations, and of success.

Dan Thoren

you, Bill. Thank

Chris Thome

Thanks, Bill.

Operator

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

Gary Schwab

with any has you the are you with on Hi, that overseas? Yes. Chris. U.S about lithium, of said. Are everybody or Great talking Question companies a Dan, extraction. lithium there's the number job direct this. in Are involved companies like other the --

Dan Thoren

a general, lot to different cycles. their companies in power need of that say I So, condensers would talked that we surface for

a application of folks. end to few Shelton do unique. So those is The C talking It's quite up exciting. really of kind yes, we

equipment we're for. that customer successful, So repeat this that they've press. providing is and to about And I talked first when wants the it know it's that our one in the

of it perspective, into lot put cleaner, to tough So standard coupling, that from I money really economic extraction nice and evaporate more endeavor. lake with a this this think water. all -- geothermal a a and power power, an opportunity geothermal bed kind to than support in start that. ongoing It's make low It efficient is again, to process out lithium is there's but the that process the itself is is margin continue to

fun And of it's it's reasons. to that with be connected for lot cool. different pretty So a

Gary Schwab

Okay.

presentation, mentioned Can You but think you in you kind didn't really on projects hydrogen, the I -- three are working that. expand what of you times on hydrogen? in

Dan Thoren

Yes.

challenging. hydrogen pretty as So, be can know, you

And that First can of all, use in material in from material of perspective, there's a form. cold types it's liquid a hydrogen. you limited then its

used some up in operations. that being equipment ends specialty hydrogen pretty it so, is And

is a Barber-Nichols cryogenic house built they turbomachinery years. over gosh, So have and pumps for XX

Barber-Nichols players. been players so, with pumps, products major stuff. the turbomachinery air supplied And argon, has types all cryogenic helium products involved air hydrogen, of those major to of providing And liquid in types have

them, capability And opportunities has And see with see exchange but it's temperature name turbomachinery. from service. handle hydrogen specific, so, we can't that And Graham then anything we exchanger unique heat some I extreme to Heliflow provide applicable their opportunities them really and can with very heat some ranges. to

economy. solution the everybody of best are in kind production, working transportation, various companies the we fueling so, their been is the supplying the again, enabling have of the economy, that involved and heat to exchangers to distribution, hydrogen side And hydrogen on these

big in the As you've of support a some lot are capability dollars seen, people this to to develop And invest it. spending market. it there's and chatter in

there come at But place it. time. we're again, be great of early participating and we're still to this so, And in out in too will point say, what to

Gary Schwab

Okay, great.

bookkeeping ask just me couple a of questions. Let

approximately proceedings the about the talking any depending of in Depending remains time, 'XX exposure. outcome impact in [ph], you beyond. these potential this or and asset in sales, On outcome million to at these $X says, -- expect related company it Virgin on further K to Orbit proceedings the on the $X of asset We're the however, million the the space sale, additional there said does customer. not

So $X million million that $X the does mean could recaptured? to be that

Chris Thome

confusing, Yes, I a Gary. little it's know, bit

So it. let me walk you through

charge the a quarter, $XXX,XXX $X we our are accounts Virgin reserve all Orbit. reduction for based $X.X during compensation, related So performance-based. since receivable bonus million to programs and That million in in performance inventory resulted

to the So the was the and quarter net million. year impact $X.X

themselves proceedings are bankruptcy know, take and to out. you work they As some complicated, time

XXXX. our bit the of little so comfortable But still what that qualifier least we during put which have a any uncertain. with say there. end never never, we But have us exposure left what left balance quarter. on feel and being at to very reserved on quarter reserved feel But able So we we wanted these our proceedings balance don't value sheet of to at comfortable the capture is we're we sheet, from the with again, for and impact we out where see more very

Gary Schwab

Okay, recapture. there's no so

don't just You expect any reserve? more

Chris Thome

Yes.

get is wanted to the to going recaptured. And But So an adequately is we team if reserved. focused we're to this. on it go were let's ability say it's going make soon after, recapture, that to XXX% we and to try there we're tell just and to too sure

Gary Schwab

in XX were the that about be months. your that should XX%, of last converted and to quarter, backlog, XX% thing. Okay. third you one And talking In backlog, said you then

XX% Now, to delivery sped this quarter, What XX% you're up weren't schedule? to to the saying that XX% from XX%? you going

Chris Thome

of that there. the out just we mix a contracts It's have

fiscal the through going work we recall, which 'XX that some third like, we're larger 'XX. in until, on you received, had to quarter, we As defense programs fiscal not

back So that we the XX the extended then it quarter But current bit. bit. a out a so in Mark little modification, that in it little received brought

typically going XX% numbers around ship those a too can [indiscernible]. little vary But bit. typically, So, see over much that's to won't convert but we time, level that

Gary Schwab

Okay.

And in talking involved in Okay. Barber-Nichols 'XX, for Artemis is then anyway? Moon that things. there was one been they've 'XX. the In actually about And -- of the program scheduled the

Dan Thoren

for don't so. that sure. stumped I You on I But one. think know me don't that

Gary Schwab

I Okay. right. Thanks have. that's all All very Well, much.

Dan Thoren

Gary. Thanks,

Operator

We I this to like at floor the comments. closing to questions have for time. turn no management further over would back

Dan Thoren

themes, I you, want time. just take Thank hope everybody for we your reiterate you from three our away the key Thank you. to call.

get the fiscal while First, we to our on achieve are our promises. several our we we're ability XXXX have there. And goals, demonstrating to delivering years

year. we the Second and that have have we one still for absorb the business customer space is able diversified expanded one base. with our event and successfully customer, deliver Even with were to the our

I large set very a your and rest you drive much. hope and improve And in of the have have continue growth team of you the we strategy opportunity to we Thank is us. enjoy front Third day. all profitability. to

Operator

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

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

Graham (GHM) 8 Jun 232023 Q4 Earnings call transcript