GHM - Earnings call transcript Q3 2025

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Operator

Greetings and welcome to the Graham Corporation Fiscal Third Quarter 2025 Financial Results Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded. It is now my pleasure to introduce Tom Cook, Managing Director at ICR. Please go ahead.

Tom Cook

Thank you, Paul, and good morning, everyone. Third Earnings Fiscal Graham's to Quarter Call. XXXX Welcome today Thoren, and CEO, me Malone, on Thome, Dan call the Officer. Operating Officer, With Chris are Chief and Chief President Matt Financial results. we morning, released financial This our

available Our earnings release website accompanying presentation ir.grahamcorp.com. on call to at our today's and are

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

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

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

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

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

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

at of can back You regarding KPIs today's the presentation. disclaimer use our find of a

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

Daniel Thoren

our on [Audio the end a third XX%. additional but our key excited our we increase Many across press leadership markets, first We issued regarding I period. of morning Thanks, Gap] minute over seeing saw defense you with details, Tom, up will results, strength a share notably likely release everyone. I'm and spend prior succession to plan. the good year yesterday X.X% quarter morning, saw

bottom-line sales, by margin by sales. expansion and driven XX.X% improved to And EBITDA volume, of points basis opportunities translated years. our the throughout quarter, by hard leverage basis points, execution. XXX very higher of in high-margin fiscal am on meaningful execution over which expanded entire several our growth, favorable undertaken mix, and I work XXX business. Overall, reaching margin with performance reflects the on into Graham third pleased our adjusted reinforcing improving gross the Our This of X.X% team has margin our focus last the solid finally,

engineered with could more The the and proprietary ahead, highly while not enabling us furthering demand to additional capture our be about excited product future. extremely is long-term global Looking portfolio favorable, I environment reach. Graham's opportunities

focus engaging continue to internally improving and across with implementing organization. key best on our operations, practices We stakeholders, the

strategic stepping will two strategic slide while transition Mike CEO been into CEO. positioning President of for planning. X, vision develop On growth Mike effective Matt appointments that February assume Dixon thoughtfully advisory leadership These Independent transition second initiatives, in Graham is Manager to role evaluated corporate to At of Chief will our an and to continuing approved June we expected Barber-Nichols including our will has appointed growth while as has Jonathan X% over ability by while Chairman, years. growth join business the Barber-Nichols. on focusing time, development that strategic opportunities. talent, XXth, will the and promoted reflect achieving the Executive the Corporation I and ensuring to phase, continuity to Director. Matt Painter while Vice be board. In transition role results, compound board in Lead of Dixon President leadership we will tenure, to annual implementing and double-digit I Throughout Turning that promoted two-phase Xth, role XXXX, our us of are Malone a Operating announced to leadership as exceptional promote our been revenue last structured last his Manager yesterday, internal has playing Officer, the General and thoroughly XX Matt months. since our and while maintained Matt full responsibility revenue P&L future his each impressive of has am integral demonstrated and Barber-Nichols, pleased be General delivering Matt of in was

when think I that and and have done confidence this full of When Graham, took over we it's highlight have transition important myself the became his to I board before. Matt CEO in abilities. Barber-Nichols

on Mike him Additionally, ideally knowledge a Barber-Nichols. brings development will leadership years business require four as this be suited deep Graham which phase lead CEO I'm nearly that product me enjoy, to assuming for time to been for Barber-Nichols Dixon I and years my a next which personal forward will less XX prior experience, role. it's is pleasure what for from this and standpoint, career, Mike industry I focus and of look that. expertise, of institutional my enable family to to happy announce make to that strategy. and away From

next I continue engaged. a to transition and focused for be that several be months, will resource the will the company actively and Over seamless on beyond a

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

Matthew Malone

growth. Having chapter the the everyone. and couple years, developing entire I good team executive Dan, Thank executing our plan Graham am placed board, you, board to over our with closely me morning, last am Dan, by truly trust on I the of for strategic organization. worked and the its and lead grateful entire energized the of in next and into

in place Our foundation markets. operational opportunities adjacent through strategic potential strong improvement initiatives, and firmly tremendous our in on as our robust to I continue build plan pipeline, sales and the team remains

fully We continue in to believe it and while executing are strategy this growth. committed driving sustainable to

opportunities manufacturing manufacturing Batavia will capacity facility, significantly expansion capture relationships, enhance will products rooted excited update on our progressing with for I key customers the organization customer and significant to Navy. operational an defense XX,XXX-square-foot a to of minute in commitment and working schedule Graham to capabilities couple on for the strengthen as key been always Starting facility construction with we that announce spend announced. recently new completion has remains position providing a importantly, this and quality a ahead naval like growth the our of excellence. projects lie team, providing continue talented that June success and planned with U.S. well technology and in work. This entire the our supplier to expansion to year. leading forward our operational Our strong This to look and our support is our and are to of we our service. I'd

state-of-the-art serve is test provide progress solutions centers. and space, to defense, energy, potentially testing construction programs, facility timely, propellant specialized this our hydrogen, alternative even medical liquid oxygen, facility cryogenic new will applications. methane across a toward cost-effective facility, to for existing liquid needing The critical Turning scalable, and to continuing will and liquid

are operational testing Chris mid-calendar long-term that, investments will forward. Chris? We third-quarter our year excellence, focus help details. I in coupled financial to and by drive for initial to expecting our initiatives, it on turn begin R&D XXXX. These over with growth will With

Christopher Thome

the commercial morning, of aftermarket. These and by quarter results projects. last chemical revenue offset was timing of Thanks, everyone. markets, including review driven I for were slide my growth begin Sales year. lower over to X. on our Matt, petrochemical, increase a space, the will increases key by This defense, X.X% across totaled the partially good $XX refining million, end and due

our of strength supported growth are in new projects. of expansion Our was observing X.X% and we continued of and year. was by last execution, improved pricing levels the up over which aftermarket record Further, programs, defense timing the the revenue,

reminder, is reflecting holiday lowest of quarter a typically third season the our fiscal increased the of and As vacation. levels year revenue our quarter,

to Turning X. Slide

XXX for partially primarily higher driven enhanced better This a This the expanded quarter offset by and by favorable incentive points project basis to XX.X%. higher improvement execution. margin was pricing, gross sales mix, volume, compensation. Our was

for quarter profit from benefited also announced $XXX,XXX in the or basis the gross July. welder grant points roughly Alliance XX we training BlueForge Our

defense reminder, the Batavia is the in funding welder nonprofit this $X.X we expect a a the funds next million submarine to balance Navy's in quarters. have our program million training recognize grant industrial and X Alliance To base. and date, equipment. $X.X of that BlueForge grant This received the supports related As supports under U.S.

for we expand pipeline. as talent capabilities We partnership are and our this grateful

Slide X. to Turning

year more for see can diluted to year. the margin year. a our basis. GAAP and quarter million income You prior the a an a increase income XXX-basis period strength the On our share. the share, net historical of quarter $X.XX share net quarter. $X.XX reached for diluted represented $XXX,XXX per increased the per the million the third on X.X% from same quarter a on improvement translating adjusted adjusted of XX% which earnings Similarly, over EBITDA a to totaled and from sales $X.X grew per fiscal XXXX, basis, the XX% million, over the of over basis prior point This prior our for adjusted third was EBITDA, increase $X $X.X

new rise This and these support quarter points of the our as investments at XXX of processes, will at to XXXX. position be acquired SG&A our with people, long-term having basis R&D our $X.X objectives. supplemental system was well Batavia also spend from Technologies million, that out XXXX. primarily $X.X I this the in level or during a our and results growth our Barber-Nichols was of was increased completed us quarter well While point technologies. full our in investments implementation of acquisition revenue that of future fiscal bonus expenses a and our ERP our of this due PX cost increased performance strategic quarter in the the associated the by of included and facility, million end increased should for costs approximately Overall, November as

fiscal provision quarter benefit due rate from year the of return for the period our stock of of fiscal depending months decrease recognized from discrete for vary restricted quarter XXXX adjustments The X partially was XX% XXXX estimates. projected tax rate the to of effective higher offset tax first to was changes third fiscal the in of well a tax foreign the in the to the timing the the rate XXXX as for vesting first and recognized and of related primarily prior amount quarter due on discrete versus by to our effective in tax quarter the year-to-date quarter and subsidiaries in as items. income to XX% the awards, can Our level

XX% we full between rate tax year, continue the our to to expect effective be and XX%. For

Turning to Slide X.

balance see quarter. can debt with million the our end that You sheet outstanding no in at $XX cash and strong of remains the

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

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

on is For includes guided XXXX. defense million in fiscal expansion last budget $XX where XX% be in in will testing and capital we operations all open the go-forward between growth the expect strategic to includes remains XX%. to XXXX, schedule range capital like to and million to included return revenue pursuing Batavia, Barber-Nichols be that pursuing that to approximately in to to expand now in have slated from Navy CapEx spend to of I mid-XXXX. next of a several which to which remind cryogenic in on U.S. million time a per of quarter. CapEx includes $XX also Arvada, year. we we and shipbuilding This also also purchase In X% the all to would expect greater mid-XXXX, basis, previous expenditures $XX facility, we years, our projects we accelerated everyone York, for major million and propellant opportunistic on Colorado, open on major investments that New which that on are are initiatives, $XX these land the $X our customer-supported than plan investment track fiscal It of support several maintenance our million is

X. to Turning Slide

for year of the the quarter. orders business fiscal of the given in and $XX.X lumpiness declined our million orders to level expected, orders, the earlier As

just X-month to book-to-bill of totaled quarter a ended refining, the million XXXX, petrochemical, period the nozzle pleased revenue. am robust equated received of October that an for positive, to defense Xx and orders and the prior order. $XXX.X for of have over million and very year. fiscal and next-gen report I $XX for our has third to response December also increase markets XXXX, However, the were XX, in been Aftermarket ratio remained second the launched XX% our we orders

$XXX provide This visibility by well backlog or to Slide U.S. This backlog continues space X-surface provide increased customers shutdown fiscal strong and and it million due We is pursuing for this cost orders the the noteworthy XXXX cracker benefited degree of the zero order space our attractiveness from air are our condenser opportunities, $X cryogenic X nearly of Mark a a turbine the backlog stability. with for that schedules and a follow-on X first high an represented as based included It additional of the carbon XX% Navy the year America. new order highlights XX. pump a significant defense this a of XX% to customers' emissions XX in business, ensures provide as upon for Mark both system also integrated world's program December significant and months us position. ethylene last year U.S. a which of anchored being that year pumps backlog earlier alternators our the also our as is first totaled for us. into XX market December energy the for million. our to the for XX of large operational torpedo our submarine, backlog, to actively product program North and Orders for excellent a multiple contract launch regulators over contract of delivers. savings option located Navy vehicle, which is and Also domestically for at which announced future the second included net internationally given Columbia-class our

last of XX% expect months, XX following to to over to guidance XX projected backlog Slide majority anticipated We XX what the our are backlog to XX% On next with XX% conversion to defense our an X, from from XXXX we the for sales are which convert refining we additional months the fiscal nature. beyond quarter. approximately of XX% within provided sector, in for months. are the convert The longer-term

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

midpoint is the SG&A guided to range from Other up guidance we I Additionally, year of expense, and at XX% EBITDA now our processes, Dan call $XX $XX and to our previously be over a turn people, to investments adjustments to better-than-expected XX% continue of a margin XX% gross margins, million, increasing expect date to our the to XX% to the XX%, gross to of X.X% our remarks. to we and last the in million continued our to XX%. guidance between we implying which include With over expected be will range the the our now XX% growth upon expect technology. results adjusted sales quarter. margin prior are This and our range. Based of which the for to back that, reflects up closing to XX% in XX% from

Daniel Thoren

strategic and everyone would long-term On of our success. we operational remind will drive like our Chris. priorities Slide to Thanks, XX, that

initiatives our sheet key a invested These are target major on R&D all growth, expanded strategic and both and provide powering the investments. balance any acquisitions. pursue programs investments flexibility our for with for strong opportunistic XX% organically to growth capital capital remain return inorganically exceeding we us as coupled opportunities, of potential with with Our

marks. work of achieve of but a growth goals what revenue of XX% date, We mid-teen EBITDA continuous accomplished coupled open we with With me hit to have can questions. are plan XXXX have lot financial by ahead culture Matt to now per still adjusted in low- have executive we our for led that, confidence we fiscal gives will The the expanded of our year to us and team those that organic call improvement to proud long-term great margins. and we newly our we of X% place, strategic

Operator

first question Oak with Our Dick Instructions] [Operator Ridge Ryan from is Financial.

Richard Ryan

Graham. exciting I'd guys like to on to like you're you Dan, my to the chapters opportunities sounds for you the moving offer and on congratulations, that next within So company. both Matt both and It

on congratulations front. So that

Daniel Thoren

Dick. Thanks, Yes.

Matthew Malone

Dick. you, Thank

Richard Ryan

the Dan, we the shipbuilding challenges continue hear to in market. of side

as that you you're potential kind on Can about square other dynamic the circle you in programs release, of that think some maybe is suppliers discussions how And to out customers. the then your opportunities talking indicated see could into new run news issues. or expansions with you you call, last on I existing some just advanced playing guys?

Daniel Thoren

don't that From all is Yes. by Navy get point, sidetracked we're our regular customers with discussion we a reviews And the from program message have customers time. the the noise. our getting

any with as about it then to We that our have to as they'll our very and do. increase to capacity customers keep productive that floor schedules a not we're able those your and more can coming. additional just hitting about to it it's ships delivery in able say us. conversation. future. we can But in, show to what get equipment conversation, build, additional opportunities what we're what very talking result in discussions positive via showing we're slowdowns, space, soon we're take as we'll a people early We're And and the are our Too you and exactly

And it. so very we're feeling good about

Richard Ryan

defense Or where defense. mean One to the into that in all from growth there. coming And the going strength strong too aftermarket, now long after show you it strong other some expanded refining Or that the still it I side, and on kicking aftermarket? aftermarket we're wasn't was is one the petrochem ago very just that is that continue the year-over-year, seeing in? is early? results

Daniel Thoren

energy on chemical say side. would the I Yes. aftermarket more is and still the

refined fuel, feedstocks us over maintenance petrochem. and they still that mode. fuels, There's definitely for the demand to lot Our transitioning told had for of were customers a domestically, then

going trying So and strong. up their to plants keep everybody running and is

seeing our additional inquiries base installed are from some internationally. We

consumption. plant got now has we've put domestically, interested recently to they smarter, grow, we've nozzle to a efficiently. more and as that." their international And because want continue it faster, next-gen them a allows China this that saying, to "Gosh, our they into and we're really initiative efficiency here just calling see grow steam and India, to reduce and announced So in customers more more big

of So next-gen there's a in interest this nozzle. lot

start then sure our we're to expecting type want Navy really make base internationally so certainly, U.S. [indiscernible]. they've side, in. to to submarines got see the even technology that defense And And especially to bring of to on seeing that the new we're wanting installed their

been sure this equipment to from so push and around high quickly getting maintain And turned make to can that so as they a the can there's availability they we're that Navy as big back them maintain it.

So all really at and strong very aftermarket, Dick, we're point this pleased. for

Richard Ryan

second for mentioned Just that next-gen order the Was nozzle. quickly, the or international? Chris domestic

Christopher Thome

was one That domestic.

Operator

Our next Securities. Russell with Beacon question Stanley from is

Russell Stanley

the the or sales is order Just look best ratio historically, which book-to-bill balance see between reasonable flow, in where ideal you quite given times Where obviously order customers? wondering is if I'm being. natural lead the ensuring for you your lumpiness growth while driving

Daniel Thoren

Yes.

to So XX% to to our year. annual is revenue X% goal, our goal know, Russ, organically increase as -- you annual per is

So a sales of by for we're amount. book-to-bill goal of ourselves our our growing sales backlog order that an -- X.Xx, we which always and a set goal continually means that

And pointed It's point Xx just this As that you year-to-date out. lumpy, orders at tend out, for out order but our also robust you to point lumpy, time. our as period. book-to-bill very ratio be pointed in is is our I pipeline would the

Matthew Malone

a Russ, that. more think, color bit I maybe And little on

this facilities X.X% to future to to our support the recruit revenue are to on people be we the X.X, have growth. and which to means planning that We that ready basically hit and aligning able need

ideal people, in continue So in processes, actually to but pushing In world, all, plants and out that. strategic at and we're to planning deliveries support we're improving not investments our very active deliveries. our an our

there's the strategic activity able side to so a on And lot that. planning to be support of

Russell Stanley

The And your shipbuilders wondering with from challenges. seeing that question. and had funding respect success given makes funding, what talked me BlueFord supply think I'm seeing plans, what you've challenges to X And the chain to given you're to just date? additional my next to potential major you're ongoing labor

Daniel Thoren

Yes.

expand still on the are in plan planning customers has ourselves where government talking for the about And apply development be well next the continuing where need, to to as that they funding as and to supplier able future. be said invest the several So capabilities should funds capacities. to we is for years we our

active it's conversation. So an

investment proposals a sort kind through. we're front just several them and to of does lot have just customers on they've waiting to Graham it We have. from helps It perspective. And in a got our place, projects, really programs I to shovel-ready established priority have for really it at have in looking mean, of and they're it of and kind training which today. a return of requests, helps

Corp. this funding So will to flow Graham continue we're that to cautiously optimistic

Operator

next Our with question Bancroft Tony is from Funds. Gabelli

Tony Bancroft

on your job Nice performance.

to guys the gets heard thing, of impact we are the impacts, side a other XXXX which XX have minus CR, of long-term go don't the one X% senior lecture Navy the like get the $XX Marine billion know, have the around if puts, a a budget, side, which kicked exposure? $XXX Just the, about back any almost programs, beautiful also $X about a the April budget then discussing a on sort other supplemental we but I've the around. was that to above I question dynamics. you what exposure negative -- you being the and attended talked Corps if and the of night on then for upside on the X sort that number of you guest I supplemental so, potential as an would dental the the thoughts being downside are dinner long-term then and billion flip talked implemented. know -- your kind CR Maybe is takes potential you of those And And you if is kicked million? an is, of that what and just

Daniel Thoren

come it's level, Yes. At top-line other of it kind kind might that understand down of and programs. really how hard to affect

of very has. the feel U.S. strategic that some most Navy the in in fortunate we're that programs involved right that You're we

we're visibility funded several that very often we very, ship procurement And by advance some of that in spent approved, advanced feel types funding have of being years that. is of the so actual we given that fortunate

So it's if we If going as probably to overall to strategic. I'm off spending, look put pressure specific that to all being that that By going what on bump able go those one. supplemental, continuing pressure ball our aren't into programs. into crystal the you probably defense they're up takes resolution, might on good effect tell not seeing programs enough programs, it and that have to more

Tony Bancroft

Great job and congratulations, Dan, Matt, and Mike.

Looking forward guys. to you following with

Operator

Our next question with from Gomes is Joe Capital NOBLE Markets.

Unknown Analyst

just what for -- the next just [Indiscernible] obviously, your to on just seeing how is Joe. Mike mentioned guys filling for you But Dan, you you. I'm and order the I Matt, guys, the of back guys you into the in going unfolds roles kind story -- looking want to remarks, forward This congratulate in and prepared new transitions. lumpiness.

why Do looking really is? of of trend. kind you any usually seem maybe have guys that their than kind lower they of usual just kind additional orders, to Just at defense the color

Daniel Thoren

follow-on $XXX year. Well, well submarine the air get orders in turbine year, in to had prior Mark those programs some versus we'll the certainly, year, of some once for of are as for because XX third the last We the the as announced for we that the Columbia-class quarter torpedo. typically, some quarter a won the And we're order on. pump last follow-on related orders we down our of million orders

lumpy nature flow we're be defense it just the contracts, to not long-term but itself in programs. the these really, the just size lends of and order large given concerned now the right So with

Unknown Analyst

usually bit And of things. you kind on guys front, along, the of with market Obviously, of the month side even core just you new in a that kind not the just mentioned maybe tell ago. Can coming before how targets me guys a moving for looking? little chronic administration M&A is progression

of update just So that an on front. bit little a

Daniel Thoren

expand little your Maybe a bit question Yes. just more.

Unknown Analyst

if you're looked side seeing any to I the you potential maybe just at. guys targets have wanted that M&A on maybe see

Daniel Thoren

actively now. plan road out what of of cetera. program et about openness We and M&A put is, to their types have acquisition, active different looking that talking right a we're So a the description companies their we're pretty target we going companies for, to the on

fairly of that like of But say We a what pipeline then see. kind it's would I that is do really reinvent technology IP moat. allows the actually we engineered really on product. generally, moat, that engineered kind comment And products So that per you have like I active. have yourself. an the to can't companies some really some

So if you're capable improving term, long product great of performance, upgrading a that's that's be. and to its place the

innovation, to also a that that aftermarket to you manufacturing engineered that is product nice product and goes So that that. yourself then reinvent same through you've the an be. place then ability Once got base, with have installed

the a look company acquisition. for that in product So It painted full revenue customers. million phase our us were type cycle looking at with the Barber-Nichols of type had then stated the allows like way of in looking life the if through very kind get the to continue conceptual early picture to a for, all design the we ultimately of size $XX you kind with of an of we're it's company that enables of the to to as the up aftermarket. companies and small We maybe earlier in as support them of us

And So acquisitions. to go to we've about sheet talked after types the those be $XX strong $XX able a million very earlier, or as million. Chris balance got of

there really on to fit road what's talk is So the again, there. talking to pipelines, about those today. active early companies and attributes it too We're that

Operator

hand this questions over to I'd time. further call to no Thoren like Daniel for back are There at the comments. any closing

Daniel Thoren

Cowen XXth and or and schedule February on Funds presenting representative interest and to their today in be as Gabelli Emerging everyone, Growth Oppenheimer in investors Symposium you XX Graham. you, Annual I'd group one-on-one week and York Arlington, sales meetings. Interested for then held New Valve in should at Pump as your we that Conference joining will XX next to Thank like Defense us February and Thank Aerospace well on Conference contact Paul. and Virginia, you, Water on virtually register XX, being the the City remind the TD February XX.

As available with website. there. presentation please along always, on reach questions. the live will materials any Have rest webcast as be presentation always, see to out your And Relations day. our with a you Investor hope of a great of We

Operator

today's concludes conference. This

this you your lines may Thank You disconnect at for your participation. time.

Graham (GHM) 7 Feb 252025 Q3 Earnings call transcript