Graham at Wells Fargo Conference: Strategic Growth and Defense Focus

On Thursday, 12 June 2025, Graham Corporation (NYSE:GHM) presented at the Wells Fargo Industrials & Materials Conference 2025, showcasing a robust financial performance and strategic growth initiatives. The company highlighted its diversified portfolio and future growth plans, while also acknowledging challenges in maintaining its growth trajectory.

Key Takeaways

• Graham reported a 13% increase in fiscal year 2025 revenue, reaching $209.9 million.
• The defense segment is a major growth driver, contributing 83% of the backlog.
• The company is transitioning from a "stabilized phase" to an "improving growth phase."
• Fiscal year 2026 revenue is projected between $225 million and $235 million.
• Leadership transition sees Matt Malone as CEO, with Dan Thorin as Executive Chairman.

Financial Results

Graham Corporation reported significant financial growth in fiscal year 2025:

• Revenue increased by 13% to $209.9 million.
• Q4 revenue surged by 21% to $59.3 million.
• Gross margin improved by 330 basis points to 25.2%.
• Adjusted EPS rose by 97% to $1.24.
• Adjusted EBITDA increased by 69% to $22.4 million, with a margin of 10.7%.
• The company forecasts fiscal year 2026 revenue between $225 million and $235 million, and adjusted EBITDA between $22 million and $28 million.

Operational Updates

Graham’s operational focus includes:

• Defense segment revenue grew by 28% in Q4 and 23% for the full year.
• A $136.5 million contract for Virginia class submarines was secured.
• Energy and process segment focuses on emerging markets like small modular nuclear and hydrogen processing.
• Investment in a new facility in Batavia and a cryogenic test facility in Jupiter, Florida.

Future Outlook

Looking ahead, Graham Corporation aims to achieve:

• Adjusted EBITDA margins of 13% to 15% by fiscal year 2027.
• Expansion through M&A, product development, and global reach.
• A seamless leadership transition with Matt Malone as CEO.
• Enhanced aftermarket business through digital transformation.

Q&A Highlights

Key insights from the Q&A session included:

• High demand for the new cryogenic test facility, set to open in July.
• Leadership transition from Dan Thorin to Matt Malone has been smooth.
• Continued focus on defense industry growth and expansion.

In conclusion, Graham Corporation’s presentation at the Wells Fargo Industrials & Materials Conference highlighted a strong strategic direction and financial performance. For more details, refer to the full transcript below.

Full transcript - Wells Fargo Industrials & Materials Conference 2025:

Operator: Good afternoon, everyone, and welcome. Pleased to be joined by Matt Malone and Chris Thome from Graham Corporation. Matt is the President and Chief Executive Officer Chris is Vice President Finance, Chief Financial Officer and Principal Accounting Officer. Matt, I know you have some slides, so I’ll turn it over to you.

Matt Malone, President and Chief Executive Officer, Graham Corporation: Yes. Thank you, everybody, for joining us. And today is actually the day that we’re going to unveil a new presentation on Graham, really highlighting the segmentation as though we’ve sort of changed the landscape of where we’re headed. And I’ll say it’s a very consistent strategy but just a new refresh deck. And so myself, Matt Malone and Chris Thome will go through it.

Chris will hit the financials. So let me tell you more. But just a friendly reminder that today’s presentation does contain forward looking statements, and we encourage you to review the full safe harbor. Now let’s begin with Graham at a glance. So Graham is a global leader in mission critical fluid, power, vacuum and heat transfer solutions for undersea to deep space applications.

Envision the main condenser that sits on board the submarine or an aircraft carrier or the vacuum or the pump system that actually provides the oxygen fan for astronauts. Graham is diversified with focus in three core end markets, including defense, energy and process in space, with greater than $1,000,000,000 of installed product globally, so it’s a large installed base. We’re disrupting these core markets through a combination of proven heritage and introducing new modernized solutions to the existing markets through R and D. Graham was founded in 1936, so has a long runway of performance and currently has 600 employees globally. Headquarters is in Batavia with locations in Jupiter, Florida and Colorado and then a few remote locations globally in China and India.

We currently have a $487,000,000 market cap with 21% CAGR since our strategy that we unveiled in 2021. Next, you should invest in Graham because Graham’s recent successes and continued momentum are built on a solid foundation with high future potential. we serve diversified end markets with solid tailwinds and some level of counter cyclicality today. our backlog has reached the point of $412,000,000 and continues to grow, which enables long term and strategic capital allocation. we’ve been focused on deploying 25% or 20% ROIC or greater capital implementation, both organically, inorganically, which outpaces many of our peers.

Lastly, our leadership team is growth oriented with focus on the future in new product introduction, business development, continuous improvement in M and A. With these foundations, we’re on track to our guidance in fiscal year twenty twenty seven of 13% to 15% adjusted EBITDA. Let me provide a brief introduction to who we are and what we do. Graham’s portfolio is diversified across three core markets: defense, energy and process and space. We provide highly engineered mission critical products to each of these segments, and we leverage each of these technologies across segments.

We have protected IP that allows us to push boundaries and claim a competitive moat. An example of this is in our cryogenic pumps, which we use for radar cooling and defense, AI data center cooling in the energy and process space and then rocket propellant and launch vehicles on the space sector. Our mission is to enhance system efficiency with these critical systems, and we’re uniquely positioned through our differentiated technology, deep customer relationships and proven track record. In the next slide, I’ll tap further into the defense portfolio. Graham’s defense portfolio is experiencing strong demand supported by, of all, increased U.

S. Allocation of funds due to geopolitical tensions and two, the acceleration in shipbuilding plans. Approximately 80% of Graham’s portfolio is sole sourced with high entries to barrier and is primarily linked to naval nuclear submarines and weapon systems. And as you can see, over the last four years, we’ve experienced about 25% CAGR with continued growth expected. Thanks to decades of high quality and on time performance, the defense portfolio is scaled with is scaling within the existing U.

S. Navy framework as well as new opportunities in adjacent spaces. An existing example or an example of where we’re moving into is next generation radar systems that require and provide three sixty degree of visibility on the battlefield. Graham is providing the main cooling pumps that have 50% less weight and 40% less size than the conventional legacy solution. What’s interesting about that is we’re actually adopting a lot of that technology from the space market because weight and size are paramount into ground based defense.

Within the defense market, Graham is nimble and cost effective, which positions us perfectly to duly serve: one, the conventional big space or defense primes and two, all these up and coming disruptors that you see coming. With that, let me dive deeper into the Navy nuclear side. The core of our defense business is focused around long cycle U. S. Navy, submarines, carriers and torpedo programs.

These programs not only are critical to national security, but they provide long visibility into revenue as well as profitability with approximately $1,700,000,000 of long forecasted opportunity for these programs that are mentioned. It allows us to do a really nice job at future planning for capital allocation as well as driving operational efficiency within the business. In recent news, we just announced $136,500,000 contract for a follow on order for Virginia class submarines. And we’re actually finishing up a new facility in Batavia that allows for accelerated production where our customer actually granted $13,500,000 of funding for that facility. These two examples demonstrate the long term importance of our offering to the Navy.

Now a glimpse into the energy and process market. Our energy and process portfolio is comprised both conventional and emerging applications. Conventional, including refining, petrochemical, power generation and edible oils emerging, including small modular nuclear, geothermal and cryogenics. This balance allows for maximum value extraction during cyclical upcycles while ensuring we’re well positioned for emerging markets in the energy diversification. On the energy side, on the legacy side of the business, Graham has established itself as an industry leader since the 1930s, providing mission critical vacuum and heat transfer solutions.

Over that time frame, we’ve developed about $1,000,000,000 of installed product globally. On the emerging energy side, Graham is utilizing core vacuum technology used in the old petrochemical side to redefine emerging markets such as hydrogen processing and lithium battery extraction. In addition, we’re producing hydrogen pumps to minimize cryogenic boil off, helium circulators for small modular nuclear and cryogenic pumps for data AI cooling. The competitive moat is established through homegrown design tool sets, patented technology and highly engineered manufacturing process developed over the last ninety years. Lastly, the Space portfolio.

While the smallest segment at 7%, it is still a meaningful part of the portfolio for margin extraction. The Space portfolio is steadily growing for two reasons. geopolitical tensions are transitioning and allowing for a space race within the world. launch capacity is maturing, and therefore, opportunities that are existing in space like satellites are maturing. When Graham acquired Barber Nichols in 2021, it enabled the entry into the space market, built on a long and successful heritage, supplying rocket engine hardware to the likes of NASA, SpaceX and many more.

Since, Graham has significantly grown the space portfolio into cryogenic and propellant management pumps, oxygen fans for astronaut life support and satellite cooling pumps. Each space product requires analytical excellence combined with validation pedigree, which really locks the OEM into that final solution. Our diversified portfolio that I just reviewed across defense, energy and process in space offers stability for our investors. Transitioning from the business overview, next, I will provide a snapshot of where we are going centered around growth enablement. And this is a very new piece of content that we’re sort of sharing as an entry look into what the improving growth phase look like for Graham.

In fiscal year ’twenty two, Graham leadership led by our now Executive Chairman, Dan Thorin, laid out a five year strategic vision for investors to give insight on where we are headed. Over the past few years, we have completed the stabilized phase with focus on resetting the strategy with respect to people, processes, structure and fundamentals all wrapped around continuous improvement. We remain on track to our ambitious fiscal year ’twenty seven targets. With the turnaround complete, now we can focus on the next phase, which is the improving growth phase, which is what we’re going to start introducing today. We are in the early innings as depicted by the today marker.

On the next few slides, I’ll give insight into these phases, stabilize, improve and growth. before we pivot forward, let’s look back. The stabilized phase focused on resetting our strategy and positioning ourselves for the future. We’ve consistently delivered results since fiscal year ’twenty two, in line with expectations to The Street. A few highlights as shown on this slide.

So the revenue more than doubled and we balanced the portfolio between commercial and defense, which previously was 25% defense and most commercial. The we executed numerous organic capital projects, all exceeding our 20% ROIC hurdle rate, which we continue to fill opportunities. The backlog tripled from $138,000,000 to $412,000,000 which gives us great visibility and allows for disciplined capital allocation. And adjusted EBITDA margins continue to improve with focus and a clear path towards our low to mid teens EBITDAs as presented. The stabilized phase is complete and we’re built on a solid foundation as we transition to the improving growth phase.

Like crawl, walk, run for a little kid, have a very approach to sustainable long term growth. in the improved phase, we focused on realizing benefits from our already in process investments. So as I mentioned, we’ve been deploying 20% ROIC projects for the last two years. The majority of those are coming online in the next six months and will soon thereafter, after this calendar year, realize those benefits. Examples of those across our core markets, in the defense side, we’ve made the investment, as mentioned, of $17,500,000 $13,500,000 of which was sponsored by a customer.

And that’s for a 30,000 square foot Navy facility that will provide some critical hardware to these long term programs. It has optimized product flow, automated welders throughout and a state of the art machining centers to accelerate throughput. Similarly, in the energy and process market, we are investing in the improved phase with facility expansion, new product introduction and international expansion. An example is the next gen nozzle. So on our current installed base of $1,000,000,000 we’ve actually upgraded the nozzle design to what is a state of the art best in class design.

And it allows for 10% steam savings for our customers and or about 10% throughput enhancement to end users. So if you think about a petrochemical facility, you can actually increase the performance and output of that facility by up to 10%. And as you can imagine, a facility like that, the ROI is quite significant. So rather than just stimulating our installed base with in kind product, we’re also bringing modernized solutions today. That particular opportunity has a multiyear revenue potential of up to $50,000,000 In addition to the market specific initiatives, we’re also focused on operational excellence at the corporate level.

And an example of that is the 50,000,000 credit facility that we’ve gotten in place with Wells Fargo as well as a new ERP system that’s coming online in our main factory in Batavia in October of this year. As a means to introduce the concept to growth though, we’re thinking forward. So we’re actually while we’re in the improve phase and working through these project implementations, we’re also thinking forward to the future. So today, I’ll provide a little bit of a teaser. The growth phase is centered around expanding our product life cycle.

For simplicity, we decomposed the product life cycle into three phases, including value identification, value creation and value extraction. To date, Graham has excelled at value creation. This phase is where you bring a highly engineered solution to a critical end user application. We will continue to do this, and we will multiply our reach through value identification and extraction. So what does that mean?

we are looking to move to a more proactive business development nature. And Dan Thorin, the Chairman of the Board, will be actually leading that activity. Rather than letting the phone ring, we will be studying our core markets, listening to our customers and mapping out our solutions how they solve their needs. An example of this is with our patented multichannel diffuser that significantly increases pump efficiency. Our focus will be revolutionizing all twenty fourseven hour pumps that operate, water treatment, pool pumps, HVAC chillers, we are going to bring new technology to those markets that push the OEMs forward.

is a go to market strategy for commercial scale. Over decades, we have developed extensive product library. The challenge is they’ve been a single solution for a single end use. We are going to focus on product market fit, assessments to further expand the reach of these products into new markets and new opportunities because we know that those products fit in new applications. is global expansion.

We intend to use India for rest of world where price is critical and localized manufacturing is preferential. Today, we have sales, engineering and local fabrication footprint across the world. We are doubling down in this commitment by expanding our team, centralizing our presence near customers and developing extended manufacturing footprint. Lastly is digital transformation. I mentioned we have $1,000,000,000 installed base.

We are going to bring artificial intelligence coupled with digitized business automation systems to turn a reactive aftermarket with high profitability today into a proactive aftermarket built around turnarounds for our install base. Once we figure it out on the commercial side of the business, we will deploy it to all of the other businesses within the Graham portfolio. Today, this is just a conceptual introduction of the growth phase, but the future is bright, momentum is building and we are just getting started. Lastly, as part of the growth phase, we continue to explore opportunistic M and A deals with moded engineered products aligned to our core markets. We will expand the M and A scope to include deals that accelerate our product life cycle.

We are in the early yet productive discussions with potential targets that allow that are aligned with our outlined criteria shown here. With that, Chris, financials?

Chris Thome, Vice President Finance, Chief Financial Officer and Principal Accounting Officer, Graham Corporation: Sure. Thanks, Matt. So earlier this week, we released our fourth quarter and full year fiscal twenty twenty five results. We are on March 31 year end and showing another strong quarter with 13% revenue growth to I’m sorry, 21% revenue growth to $59,300,000 capping off a very strong year of 13% revenue growth to $209,900,000 This growth is being driven by our defense market, which is up 28% for the quarter and 23% for the full year. And that growth is in existing programs, through improved pricing as well as better execution.

But what’s nice is that we’re seeing growth across all our markets, not just defense. And although our aftermarket business was down 8% from the record levels in fiscal year twenty twenty four, it still remains very strong in being one of our highest margin businesses and was about $40,000,000 for fiscal year twenty twenty five. So this chart shows how the higher revenue is leading to improved margins as we leverage our fixed overhead. Additionally, because of our better execution, because of the improvements in the investments we’ve made that Matt just talked about as well as the improved pricing, for fiscal year twenty twenty five, we’re able to increase our gross margin by three thirty basis points to 25.2%. So seeing some very nice results from the investments that we’ve made.

In turn, this improved margin is flowing through to the bottom line. For fiscal year twenty twenty five, we had a 97% increase in adjusted EPS to $1.24 And similarly, our adjusted EBITDA increased 69% to 22,400,000.0 which equates to a 10.7 adjusted EBITDA margin, which was up three fifty basis points over the previous year. So I should point out that the last several years, our results have been impacted by a supplemental earn out bonus that was put in place with the Barber Nichols acquisition. That bonus program is set to expire after fiscal year twenty twenty six, the year we’re in right now, and will add about 200 basis points to our margin that you see here on this slide. As you can see, we’ve made some nice improvements under our company wide culture of continuous improvement, but we still have some work to do to get to the low to mid teen EBITDA margins that we guided to for fiscal year twenty twenty seven, which is less than a year away at this point.

So despite the increase in revenue, backlog increased 5% for the year as our orders were $412,000,000 which was primarily being driven by our defense business. Our book to bill ratio for fiscal year twenty twenty five was 1.1x and marks the year in a row that we’ve been able to have a greater than one book to bill ratio. So seeing some very nice growth there. Orders for fiscal year twenty twenty five included $50,000,000 of the $136,500,000 contract that Matt was talking about for the Virginia class submarine, and the remaining $86,500,000 of that contract was recorded in the first quarter of fiscal year twenty twenty six. So we’re off to a good start for the current year.

I should point out that our orders can be very lumpy given the nature of our business and the size of our large defense contracts. But if you look on an annualized basis, the orders are seeing some very nice growth. Approximately 83% of our $412,000,000 backlog is to the defense industry, which gives us tremendous visibility and stability, and it allows us to reinvest and make these investments back in our business. We currently expect about 45% of our backlog to convert to revenue in the next year, so setting us up very well for fiscal year twenty twenty six. And despite the global uncertainty that’s there right now, our aftermarket business remains strong in the energy and process and defense markets as our orders, for the aftermarket were $46,500,000 for fiscal year twenty twenty five, which was an increase of 8%.

So if you look at our capital structure, we have a very strong capital position. As of the March, we had no debt outstanding. We had $22,000,000 of cash on hand, and we had access to our $50,000,000 line of credit, thanks to our friends at Wells Fargo here. We had very strong cash flow from operations of 24,000,000 during fiscal year twenty twenty five, which we then, in turn, took back and invested into the business. In fiscal year twenty twenty five, we spent $19,000,000 on CapEx, which Matt talked a little bit about.

And just to repeat what Matt said, all of our major capital expenditure projects have over a 20% ROIC associated with them. We’ve guided that for the next several years, we are going to continue to spend 7% to 10% of revenue on CapEx as we’re investing in all these organic growth opportunities that we have. Additionally, we plan on gradually increasing our R and D spend to the 1% to 2% of revenue level to continue to invest in our technology and be disruptive and innovative, but only if these projects have the proper return on investment. And our intention is to offset some of this R and D increase, through process improvement and operational efficiencies. So with the release of earnings, we provided our guidance for fiscal year twenty twenty six.

We guided to revenue in the range of $225,000,000 to $235,000,000 which represents a 10% increase at the midpoint of that guidance. And we also adjusted we also guided to our adjusted EBITDA increasing to $22,000,000 to $28,000,000 which represents a 12% increase at the midpoint and equates to approximately an 11% adjusted EBITDA margin, so still seeing some nice improvement. And although the situation is very fluid, going to be material to our business. We estimate that the impact of tariffs as we sit here today is approximately $2,000,000 to $5,000,000 as approximately 80% of our revenue is to The U. S.

And the remaining 20% of our revenue, a large portion of that is manufactured in country. So not a lot of tariff exposure there. And we’re also very well protect we have a lot of contract language in very favorable shipping terms that also protects us from the impact of tariffs. So to summarize everything we’ve kind of talked about here today, when we laid out our strategic plan three years ago, we said we would we wanted to achieve 8% to 10% organic revenue growth per year and get to the low to mid teen EBITDA margins by 2027. As Matt said, we are firmly on track to hit that.

We’ve hit and even exceeded the 8% to 10% organic revenue growth each of the last three years. And as I mentioned, once the impact of the supplemental Barber Nichols earn out bonus goes away after this year, we’ll immediately get a 200 basis point lift to our margins. So we’re very proud of the accomplishments that we’ve had to date, but we still have a lot of opportunity to improve and grow, as Matt kind of laid out for you today. And based upon the investments we are making in our business, we feel very comfortable with our fiscal year twenty twenty seven targets, which, as I said, is less than one year away. So with that, we will open up the floor to any questions.

Operator: Okay. If no one has questions, excuse me, immediately, I’ll ask the one. Could you give us an update on the progress and the potential opportunities for the cryogen facility that is in process in Florida?

Matt Malone, President and Chief Executive Officer, Graham Corporation: Yes. So we’re investing in a large propellant and cryogenic test facility in Jupiter, Florida. It’s two months away from opening, so it’s very close. The reason why we went forward with this investment is because NASA, specifically Stennis, is the only facility in The U. S.

That can carry out some of the testing that we’re looking to be able to support, which means that the space products and transportation products on the energy and process side cannot be tested except in the final application. We were intending to utilize that facility for our own internal product testing. And what we’re finding is the demand is so high that we will likely use it for a immediately for several key programs with our customers on large applications. So the inquiries are very high. One of the big reasons for that is it has on-site power.

So it has three phase large scale power, which is a key differentiator for that facility. So everything that we had envisioned as to what it could do is coming to life, and it’s right on track to sort of commission in the July timeframe.

Operator: Great. Next one, you just completed a leadership transition earlier this week that you announced in February. Chris, maybe this is best for you directed to How has that gone? What are your thoughts at this point?

Chris Thome, Vice President Finance, Chief Financial Officer and Principal Accounting Officer, Graham Corporation: I know it’s very early. Yes. No, it is very early, but it’s been really a seamless transition. It’s been great working with Matt as he’s been moving into his new role. Dan Thorne is not going away.

He moved into the Executive Chairman role, and will be actively pursuing some of our business development opportunities that Matt talked about. But it really has been a seamless transition. I’ve worked with Matt here for the last three years. He was with Barber Nichols, ten years prior to the acquisition. He’s led Barber Nichols for the last four years while Dan took over as CEO.

And during that time, Barber Nichols experienced a 10% CAGR during that time, double digit CAGR, And it’s really been a joy. Matt brings a certain amount of energy and positivity and really is breathing new energy into the company. So it’s been great.

Matt Malone, President and Chief Executive Officer, Graham Corporation: Yes. And from my perspective, there’s such a stable foundation. The four leadership the four leaders within the corporate team had set the strategy in 2022, so it’s the same team. And so I’m just nurturing it forward, which is fun. Dan worked through the stabilized phase, which is a great opportunity for him to lead from the front and opportunity for me to lead through the improving growth phase, which is really where I look forward to false multiplying the vision that we have.

Operator: Great. Thank you. If there’s

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