Graham Corporation Reports Record Revenue of $53.6 Million and Strong Margin Expansion in Second Quarter Fiscal 2025
-
Revenue increased 19% to
$53.6 million , driven by strength across its markets - Margin expansion fueled by sales growth and execution: Gross margin improved 790 basis points to 23.9% of sales, net margin increased 520 basis points to 6.1% of sales, and adjusted EBITDA1 margin expanded 550 basis points to 10.5% of sales
-
Net income per diluted share was
$0.30 in the second quarter; adjusted net income per diluted share¹ was$0.31 -
Strong orders of
$63.7 million , driven by demand from defense, space, and refining, resulted in a book-to-bill ratio of 1.2x and a record backlog of$407 million 1 -
Strong balance sheet with no debt,
$32.3 million in cash, and access to$43 million under its revolving credit facility at quarter end to support growth initiatives - Raised full year guidance for gross margin and adjusted EBITDA¹ to reflect improved profitability
“Our team’s efforts to diversify and strengthen the business over the past few years are clearly yielding results, as shown by our record second-quarter performance,” commented
Second Quarter Fiscal 2025 Performance Review
(All comparisons are with the same prior-year period unless noted otherwise.)
($ in thousands except per share data) | Q2 FY25 | Q2 FY24 | $ Change | % Change | ||||||||
Net sales |
$ |
53,563 |
|
$ |
45,076 |
|
$ |
8,487 |
19% |
|||
Gross profit |
$ |
12,799 |
|
$ |
7,191 |
|
$ |
5,608 |
78% |
|||
Gross margin |
|
23.9 |
% |
|
16.0 |
% |
+790 bps |
|||||
Operating profit |
$ |
4,235 |
|
$ |
803 |
|
$ |
3,432 |
427% |
|||
Operating margin |
|
7.9 |
% |
|
1.8 |
% |
+610 bps |
|||||
Net income |
$ |
3,281 |
|
$ |
411 |
|
$ |
2,870 |
698% |
|||
Net income margin |
|
6.1 |
% |
|
0.9 |
% |
+520 bps |
|||||
Net income per diluted share |
$ |
0.30 |
|
$ |
0.04 |
|
$ |
0.26 |
650% |
|||
Adjusted net income* |
$ |
3,414 |
|
$ |
754 |
|
$ |
2,660 |
353% |
|||
Adjusted net income per diluted share* |
$ |
0.31 |
|
$ |
0.07 |
|
$ |
0.24 |
343% |
|||
Adjusted EBITDA* |
$ |
5,615 |
|
$ |
2,242 |
|
$ |
3,373 |
150% |
|||
Adjusted EBITDA margin* |
|
10.5 |
% |
|
5.0 |
% |
+550 bps |
*Graham believes that, when used in conjunction with measures prepared in accordance with
Record quarterly net sales of
Gross margin expanded 790 basis points to 23.9%, driven by the leverage on higher volume, a favorable mix toward higher margin projects, improved pricing, and better execution. Additionally, gross profit for the quarter benefited
Selling, general and administrative expense (“SG&A”), including amortization, totaled
Included in other operating income for the second quarter of fiscal 2025 was a
Cash Management and Balance Sheet
Cash provided by operating activities totaled
Capital expenditures of
The Company had no debt outstanding at
Orders, Backlog, and Book-to-
See
supplemental data filed with the
(in millions) |
Q2 24 | Q3 24 | Q4 24 | FY24 | Q1 25 | Q2 25 | YTD FY25 | |||||||||||||
Orders |
$ |
36.5 |
$ |
123.3 |
$ |
40.8 |
$ |
268.4 |
$ |
55.8 |
$ |
63.7 |
$ |
119.4 |
||||||
Backlog |
$ |
313.3 |
$ |
399.2 |
$ |
390.9 |
$ |
390.9 |
$ |
396.8 |
$ |
407.0 |
$ |
407.0 |
Orders for the three-month period ended
Backlog at quarter end reached a record
Fiscal 2025 Outlook
The Company’s outlook for 2025 was updated as follows:
(as of |
Updated Fiscal 2025 Guidance |
Previous Guidance |
|
|
|
Gross Margin |
23% to 24% of sales |
22% to 23% of sales |
SG&A expense (including amortization)(1) |
17.0% to 18.0% of sales |
16.5% to 17.5% of sales |
Adjusted EBITDA(2) |
|
|
Effective Tax Rate |
20% to 22% |
20% to 22% |
Capital Expenditures |
|
|
(1) |
Includes approximately |
|
(2) |
Excludes net interest expense, income taxes, depreciation, and amortization from net income, as well as approximately |
Webcast and Conference Call
GHM’s management will host a conference call and live webcast on
A question-and-answer session will follow the formal presentation. GHM’s conference call can be accessed by calling (201) 689-8560. Alternatively, the webcast can be monitored from the events section of GHM’s investor relations website.
A telephonic replay will be available from
About
Graham is a global leader in the design and manufacture of mission critical fluid, power, heat transfer and vacuum technologies for the defense, space, energy, and process industries.
Safe Harbor Regarding Forward Looking Statements
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements are subject to risks, uncertainties and assumptions and are identified by words such as “expects,” “future,” “outlook,” “anticipates,” “believes,” “could,” “guidance,” ”may”, “will,” “plan” and other similar words. All statements addressing operating performance, events, or developments that
Should one or more of these risks or uncertainties materialize or should any of Graham Corporation’s underlying assumptions prove incorrect, actual results may vary materially from those currently anticipated. In addition, undue reliance should not be placed on Graham Corporation’s forward-looking statements. Except as required by law,
Non-GAAP Financial Measures
Adjusted EBITDA is defined as consolidated net income (loss) before net interest expense, income taxes, depreciation, amortization, other acquisition related expenses, and other unusual/nonrecurring expenses. Adjusted EBITDA margin is defined as Adjusted EBITDA as a percentage of sales. Adjusted EBITDA and Adjusted EBITDA margin are not measures determined in accordance with generally accepted accounting principles in
Adjusted net income and adjusted net income per diluted share are defined as net income and net income per diluted share as reported, adjusted for certain items and at a normalized tax rate. Adjusted net income and adjusted net income per diluted share are not measures determined in accordance with GAAP, and may not be comparable to the measures as used by other companies. Nevertheless, Graham believes that providing non-GAAP information, such as adjusted net income and adjusted net income per diluted share, is important for investors and other readers of the Company’s financial statements and assists in understanding the comparison of the current quarter’s and current fiscal year's net income and net income per diluted share to the historical periods' net income and net income per diluted share. Graham also believes that adjusted net income per share, which adds back intangible amortization expense related to acquisitions, provides a better representation of the cash earnings of the Company.
Forward-Looking Non-GAAP Measures
Forward-looking adjusted EBITDA and adjusted EBITDA margin are non-GAAP measures. The Company is unable to present a quantitative reconciliation of these forward-looking non-GAAP financial measures to their most directly comparable forward-looking GAAP financial measures because such information is not available, and management cannot reliably predict the necessary components of such GAAP measures without unreasonable effort largely because forecasting or predicting our future operating results is subject to many factors out of our control or not readily predictable. In addition, the Company believes that such reconciliations would imply a degree of precision that would be confusing or misleading to investors. The unavailable information could have a significant impact on the Company’s fiscal 2025 financial results. These non-GAAP financial measures are preliminary estimates and are subject to risks and uncertainties, including, among others, changes in connection with purchase accounting, quarter-end, and year-end adjustments. Any variation between the Company’s actual results and preliminary financial estimates set forth above may be material.
Key Performance Indicators
In addition to the foregoing non-GAAP measures, management uses the following key performance metrics to analyze and measure the Company’s financial performance and results of operations: orders, backlog, and book-to-bill ratio. Management uses orders and backlog as measures of current and future business and financial performance, and these may not be comparable with measures provided by other companies. Orders represent written communications received from customers requesting the Company to provide products and/or services. Backlog is defined as the total dollar value of net orders received for which revenue has not yet been recognized. Management believes tracking orders and backlog are useful as they often times are leading indicators of future performance. In accordance with industry practice, contracts may include provisions for cancellation, termination, or suspension at the discretion of the customer.
The book-to-bill ratio is an operational measure that management uses to track the growth prospects of the Company. The Company calculates the book-to-bill ratio for a given period as net orders divided by net sales.
Given that each of orders, backlog, and book-to-bill ratio are operational measures and that the Company's methodology for calculating orders, backlog and book-to-bill ratio does not meet the definition of a non-GAAP measure, as that term is defined by the
FINANCIAL TABLES FOLLOW.
Consolidated Statements of Operations - Unaudited (Amounts in thousands, except per share data) |
|||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
|
|
||||||||||||||||
|
2024 |
|
|
2023 |
|
% Change |
|
2024 |
|
|
2023 |
|
% Change | ||||
Net sales |
$ |
53,563 |
|
$ |
45,076 |
|
19% |
$ |
103,514 |
|
$ |
92,645 |
|
12% |
|||
Cost of products sold |
|
40,764 |
|
|
37,885 |
|
8% |
|
78,347 |
|
|
74,477 |
|
5% |
|||
Gross profit |
|
12,799 |
|
|
7,191 |
|
78% |
|
25,167 |
|
|
18,168 |
|
39% |
|||
Gross margin |
|
23.9 |
% |
|
16.0 |
% |
|
|
24.3 |
% |
|
19.6 |
% |
|
|||
|
|
||||||||||||||||
Operating expenses and income: |
|
|
|||||||||||||||
Selling, general and administrative |
|
8,723 |
|
|
6,115 |
|
43% |
|
17,561 |
|
|
13,134 |
|
34% |
|||
Selling, general and administrative – amortization |
|
437 |
|
|
273 |
|
60% |
|
873 |
|
|
547 |
|
60% |
|||
Other operating income |
|
(596 |
) |
|
- |
|
NA |
|
(726 |
) |
|
- |
|
NA |
|||
Operating profit |
|
4,235 |
|
|
803 |
|
427% |
|
7,459 |
|
|
4,487 |
|
66% |
|||
Operating margin |
|
7.9 |
% |
|
1.8 |
% |
|
|
7.2 |
% |
|
4.8 |
% |
|
|||
|
|
||||||||||||||||
Other expense, net |
|
91 |
|
|
94 |
|
(3%) |
|
182 |
|
|
187 |
|
(3%) |
|||
Interest (income) expense, net |
|
(153 |
) |
|
55 |
|
NA |
|
(314 |
) |
|
240 |
|
NA |
|||
Income before provision for income taxes |
|
4,297 |
|
|
654 |
|
557% |
|
7,591 |
|
|
4,060 |
|
87% |
|||
Provision for income taxes |
|
1,016 |
|
|
243 |
|
318% |
|
1,344 |
|
|
1,009 |
|
33% |
|||
Net income |
$ |
3,281 |
|
$ |
411 |
|
698% |
$ |
6,247 |
|
$ |
3,051 |
|
105% |
|||
|
|
||||||||||||||||
Per share data: |
|
|
|||||||||||||||
Basic: |
|
|
|||||||||||||||
Net income |
$ |
0.30 |
|
$ |
0.04 |
|
650% |
$ |
0.57 |
|
$ |
0.29 |
|
97% |
|||
Diluted: |
|
|
|||||||||||||||
Net income |
$ |
0.30 |
|
$ |
0.04 |
|
650% |
$ |
0.57 |
|
$ |
0.28 |
|
104% |
|||
Weighted average common shares outstanding: | |||||||||||||||||
Basic |
|
10,887 |
|
|
10,699 |
|
|
10,875 |
|
|
10,675 |
|
|||||
Diluted |
|
11,024 |
|
|
10,810 |
|
|
10,995 |
|
|
10,761 |
|
|||||
NA: Not Applicable |
Consolidated Balance Sheets – Unaudited (Amounts in thousands, except per share data) |
|||||||
|
|
||||||
|
2024 |
|
|
2024 |
|
||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents |
$ |
32,318 |
|
$ |
16,939 |
|
|
Trade accounts receivable, net of allowances ( |
|
29,083 |
|
|
44,400 |
|
|
Unbilled revenue |
|
40,730 |
|
|
28,015 |
|
|
Inventories |
|
31,536 |
|
|
33,410 |
|
|
Prepaid expenses and other current assets |
|
4,414 |
|
|
3,561 |
|
|
Income taxes receivable |
|
124 |
|
|
- |
|
|
Total current assets |
|
138,205 |
|
|
126,325 |
|
|
Property, plant and equipment, net |
|
36,602 |
|
|
32,080 |
|
|
Prepaid pension asset |
|
6,513 |
|
|
6,396 |
|
|
Operating lease assets |
|
6,757 |
|
|
7,306 |
|
|
|
|
25,520 |
|
|
25,520 |
|
|
Customer relationships, net |
|
13,729 |
|
|
14,299 |
|
|
Technology and technical know-how, net |
|
10,688 |
|
|
11,065 |
|
|
Other intangible assets, net |
|
7,019 |
|
|
7,181 |
|
|
Deferred income tax asset |
|
2,883 |
|
|
2,983 |
|
|
Other assets |
|
1,614 |
|
|
724 |
|
|
Total assets |
$ |
249,530 |
|
$ |
233,879 |
|
|
Liabilities and stockholders’ equity | |||||||
Current liabilities: | |||||||
Current portion of finance lease obligations |
$ |
20 |
|
$ |
20 |
|
|
Accounts payable |
|
21,887 |
|
|
20,788 |
|
|
Accrued compensation |
|
13,097 |
|
|
16,800 |
|
|
Accrued expenses and other current liabilities |
|
5,102 |
|
|
6,666 |
|
|
Customer deposits |
|
86,483 |
|
|
71,987 |
|
|
Operating lease liabilities |
|
1,142 |
|
|
1,237 |
|
|
Income taxes payable |
|
77 |
|
|
715 |
|
|
Total current liabilities |
|
127,808 |
|
|
118,213 |
|
|
Finance lease obligations |
|
57 |
|
|
65 |
|
|
Operating lease liabilities |
|
5,922 |
|
|
6,449 |
|
|
Accrued pension and postretirement benefit liabilities |
|
1,258 |
|
|
1,254 |
|
|
Other long-term liabilities |
|
2,011 |
|
|
2,332 |
|
|
Total liabilities |
|
137,056 |
|
|
128,313 |
|
|
Stockholders’ equity: | |||||||
Preferred stock, |
|
- |
|
|
- |
|
|
Common stock, |
|
1,106 |
|
|
1,099 |
|
|
Capital in excess of par value |
|
33,120 |
|
|
32,015 |
|
|
Retained earnings |
|
88,246 |
|
|
81,999 |
|
|
Accumulated other comprehensive loss |
|
(6,610 |
) |
|
(7,013 |
) |
|
|
|
(3,388 |
) |
|
(2,534 |
) |
|
Total stockholders’ equity |
|
112,474 |
|
|
105,566 |
|
|
Total liabilities and stockholders’ equity |
$ |
249,530 |
|
$ |
233,879 |
|
Consolidated Statements of Cash Flows – Unaudited (Amounts in thousands) |
||||||||
Six Months Ended | ||||||||
|
||||||||
|
2024 |
|
|
2023 |
|
|||
Operating activities: | ||||||||
Net income |
$ |
6,247 |
|
$ |
3,051 |
|
||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation |
|
1,721 |
|
|
1,549 |
|
||
Amortization |
|
1,109 |
|
|
891 |
|
||
Amortization of unrecognized prior service cost and actuarial losses |
|
391 |
|
|
421 |
|
||
Amortization of debt issuance costs |
|
- |
|
|
119 |
|
||
Equity-based compensation expense |
|
778 |
|
|
625 |
|
||
Change in fair value of contingent consideration |
|
(726 |
) |
|
- |
|
||
Deferred income taxes |
|
2 |
|
|
1,162 |
|
||
(Increase) decrease in operating assets, net of acquisitions: | ||||||||
Accounts receivable |
|
15,387 |
|
|
(4,947 |
) |
||
Unbilled revenue |
|
(12,746 |
) |
|
4,620 |
|
||
Inventories |
|
1,886 |
|
|
(734 |
) |
||
Prepaid expenses and other current and non-current assets |
|
(1,738 |
) |
|
(1,343 |
) |
||
Income taxes receivable |
|
(124 |
) |
|
(489 |
) |
||
Operating lease assets |
|
643 |
|
|
589 |
|
||
Prepaid pension asset |
|
(117 |
) |
|
(144 |
) |
||
Increase (decrease) in operating liabilities, net of acquisitions: | ||||||||
Accounts payable |
|
1,505 |
|
|
(6,451 |
) |
||
Accrued compensation, accrued expenses and other current and non-current liabilities |
|
(4,801 |
) |
|
5 |
|
||
Customer deposits |
|
14,485 |
|
|
13,503 |
|
||
Operating lease liabilities |
|
(623 |
) |
|
(529 |
) |
||
Income taxes payable |
|
(634 |
) |
|
- |
|
||
Long-term portion of accrued compensation, accrued pension liability and accrued postretirement benefits |
|
4 |
|
|
- |
|
||
Net cash provided by operating activities |
|
22,649 |
|
|
11,898 |
|
||
Investing activities: | ||||||||
Purchase of property, plant and equipment |
|
(6,464 |
) |
|
(3,312 |
) |
||
Proceeds from disposal of property, plant and equipment |
|
- |
|
|
38 |
|
||
Acquisition of |
|
(170 |
) |
|
- |
|
||
Net cash used by investing activities |
|
(6,634 |
) |
|
(3,274 |
) |
||
Financing activities: | ||||||||
Principal repayments on debt |
|
- |
|
|
(1,020 |
) |
||
Principal repayments on finance lease obligations |
|
(157 |
) |
|
(147 |
) |
||
Issuance of common stock |
|
334 |
|
|
225 |
|
||
Purchase of treasury stock |
|
(854 |
) |
|
(57 |
) |
||
Net cash used by financing activities |
|
(677 |
) |
|
(999 |
) |
||
Effect of exchange rate changes on cash |
|
41 |
|
|
(82 |
) |
||
Net increase in cash and cash equivalents |
|
15,379 |
|
|
7,543 |
|
||
Cash and cash equivalents at beginning of period |
|
16,939 |
|
|
18,257 |
|
||
Cash and cash equivalents at end of period |
$ |
32,318 |
|
$ |
25,800 |
|
Adjusted EBITDA Reconciliation (Unaudited, $ in thousands) |
|||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
|
|
||||||||||||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net income |
$ |
3,281 |
|
$ |
411 |
|
$ |
6,247 |
|
$ |
3,051 |
|
|||
Acquisition & integration income |
|
(587 |
) |
|
- |
|
|
(680 |
) |
|
- |
|
|||
ERP Implementation costs |
|
205 |
|
|
- |
|
|
547 |
|
|
- |
|
|||
Net interest (income) expense |
|
(153 |
) |
|
55 |
|
|
(314 |
) |
|
240 |
|
|||
Income tax expense |
|
1,016 |
|
|
243 |
|
|
1,344 |
|
|
1,009 |
|
|||
Equity-based compensation expense |
|
434 |
|
|
332 |
|
|
778 |
|
|
625 |
|
|||
Depreciation & amortization |
|
1,419 |
|
|
1,201 |
|
|
2,830 |
|
|
2,440 |
|
|||
Adjusted EBITDA(1) |
$ |
5,615 |
|
$ |
2,242 |
|
$ |
10,752 |
|
$ |
7,365 |
|
|||
Net sales |
$ |
53,563 |
|
$ |
45,076 |
|
$ |
103,514 |
|
$ |
92,645 |
|
|||
Net income margin |
|
6.1 |
% |
|
0.9 |
% |
|
6.0 |
% |
|
3.3 |
% |
|||
Adjusted EBITDA margin |
|
10.5 |
% |
|
5.0 |
% |
|
10.4 |
% |
|
7.9 |
% |
(1) Beginning in the fourth quarter of fiscal 2024, Adjusted EBITDA no longer excludes the Barber- |
Adjusted Net Income and Adjusted Net Income per Diluted Share Reconciliation (Unaudited, $ in thousands, except per share amounts) |
|||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
|
|
||||||||||||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net income |
$ |
3,281 |
|
$ |
411 |
|
$ |
6,247 |
|
$ |
3,051 |
|
|||
Acquisition & integration income |
|
(587 |
) |
|
- |
|
|
(680 |
) |
|
- |
|
|||
Amortization of intangible assets |
|
555 |
|
|
445 |
|
|
1,109 |
|
|
891 |
|
|||
ERP Implementation costs |
|
205 |
|
|
- |
|
|
547 |
|
|
- |
|
|||
Normalized tax rate(1) |
|
(40 |
) |
|
(102 |
) |
|
(224 |
) |
|
(205 |
) |
|||
Adjusted net income(2) |
$ |
3,414 |
|
$ |
754 |
|
$ |
6,999 |
|
$ |
3,737 |
|
|||
GAAP net income per diluted share |
$ |
0.30 |
|
$ |
0.04 |
|
$ |
0.57 |
|
$ |
0.28 |
|
|||
Adjusted net income per diluted share(2) |
$ |
0.31 |
|
$ |
0.07 |
|
$ |
0.64 |
|
$ |
0.35 |
|
|||
Diluted weighted average common shares outstanding |
|
11,024 |
|
|
10,810 |
|
|
10,995 |
|
|
10,761 |
|
(1) Applies a normalized tax rate to non-GAAP adjustments, which are pre-tax, based upon the statutory tax rate. | |||||||
(2) Beginning in the fourth quarter of fiscal 2024, Adjusted Net Income no longer excludes the Barber- |
Acquisition and Integration (Income) Costs are incremental costs that are directly related to the P3 acquisition. These costs (income) may include, among other things, professional, consulting and other fees, system integration costs, and fair value adjustments relating to contingent consideration. ERP Implementation Costs relate to consulting costs incurred in connection with the new ERP system being implemented throughout our
___________________________
1Adjusted EBITDA margin, Adjusted Net Income per Diluted Share and Adjusted EBITDA are non-GAAP measures. See attached tables and other information on pages 10 and 11 for important disclosures regarding Graham’s use of these non-GAAP measures.
2Orders, backlog and book-to-bill ratio are key performance metrics. See “Key Performance Indicators” below for important disclosures regarding Graham’s use of these metrics.
3Su
pplemental performance bonus is related to the 2021 acquisition of
View source version on businesswire.com: https://www.businesswire.com/news/home/20241108640700/en/
For more information:
Vice President - Finance and CFO
Phone: (585) 343-2216
Alliance Advisors IR
716-843-3908 / 716-843-3832
dpawlowski@allianceadvisors.com
cmychajluk@allianceadvisors.com
Source: