Graham Corporation Reports Sales Growth of 32% Drove Diluted Earnings per Share of $0.25 for First Quarter of Fiscal 2024
- Revenue of $47.6M, up 32% YoY
- Net income of $2.6M, up 300% YoY
- Orders of $67.9M, up $27.6M YoY
- Backlog of $322.0M, up 24% YoY
- Raises fiscal 2024 revenue guidance to $170M-$180M
- None.
-
First Quarter Revenue Established a Quarterly Record of
Which Benefitted From Project Timing$47.6 Million -
Sales Growth Driven by Defense Market Which Increased
133% Including Strength Across Defense Product Offerings -
Gross Margin Increased 440 Basis Points to
23.1% on Better Mix of Higher Margin Projects, Better Pricing, and Improving Execution -
Achieved Net Income of
; Earnings Per Diluted Share Increased More Than$2.6 Million 300% Over the Prior-Year Period to$0.25 -
Received Orders of
in the Quarter, up$67.9 Million Year-Over-Year; Included$27.6 Million of Strategic Investment and Follow-on Orders From Major Defense Customer$22 Million -
Drove Record Backlog of
, up$322.0 Million 24% Year-Over-Year - Raises Fiscal 2024 Guidance Based on Strong First Quarter Performance
Daniel J. Thoren, President and Chief Executive Officer, commented, “We had a better-than-expected start to the year with strong first quarter results. We had improved execution, utilized our expanded capacity and are timely delivering to customer requirements, even as schedules may shift. We also benefited in the quarter from an unusually better mix of business and the timing of projects flowing through production. Importantly, we continue to strengthen our relationships with our defense customers, advance opportunities in the space industry and are positioning the business to serve the new energy markets with cryogenic solutions. The investments we made to meet defense customers’ delivery requirements have proven to be effective and was validated by the
Separately, the Company announced today that it had received a strategic investment by a customer to expand production capabilities at its
He added, “While we delivered in the quarter, there is still much work to do to get where we need to be as an organization. We are making investments in infrastructure, information systems and people. We are evolving the culture of the Company as well. I have been excited to see how our teams are questioning and challenging each other. Everyone is stepping up to own our future. While we have made measurable progress these last two years, we will continue to drive to advance our operations to deliver on our goals to exceed
First Quarter Fiscal 2024 Performance Review (All comparisons are with the same prior-year period unless noted otherwise.)
($ in millions except per share data) | Q1 FY24 |
Q1 FY23 |
Change |
||||||
Net sales | $ |
47.6 |
$ |
36.1 |
$ |
11.5 |
|||
Gross profit | $ |
11.0 |
$ |
6.7 |
$ |
4.3 |
|||
Gross margin |
|
|
|
|
|||||
Operating profit | $ |
3.7 |
$ |
1.0 |
$ |
2.7 |
|||
Operating margin |
|
|
|
|
|||||
Net income | $ |
2.6 |
$ |
0.7 |
$ |
1.9 |
|||
Diluted earnings per share | $ |
0.25 |
$ |
0.06 |
$ |
0.19 |
|||
Adjusted net income* | $ |
3.6 |
$ |
1.3 |
$ |
2.3 |
|||
Adjusted diluted earnings per share | $ |
0.33 |
$ |
0.12 |
$ |
0.21 |
|||
Adjusted EBITDA* | $ |
5.6 |
$ |
2.7 |
$ |
2.9 |
|||
Adjusted EBITDA margin* |
|
|
|
|
*Graham believes that adjusted EBITDA (defined as consolidated net income before net interest expense, income taxes, depreciation, amortization, other acquisition related expenses (income), and other unusual/nonrecurring expenses), and adjusted EBITDA margin (adjusted EBITDA as a percentage of net sales), which are non-GAAP measures, help in the understanding of its operating performance. Moreover, Graham’s credit facility also contains ratios based on adjusted EBITDA as defined in the lending agreement. Graham also believes that adjusted net income and adjusted diluted net income per share, which excludes intangible amortization, other costs related to the acquisition, and other unusual/nonrecurring (income) expenses, provides a better representation of the cash earnings of the Company. See the attached tables and other information on pages 10 and 11 for important disclosures regarding Graham’s use of adjusted EBITDA, adjusted EBITDA margin, adjusted net income, and adjusted diluted net income (loss) per share, as well as the reconciliation of net income to adjusted EBITDA, adjusted net income, and adjusted diluted net income per share.
Net sales of
Compared with the prior year period, the
Selling, general and administrative expense (“SG&A”), inclusive of amortization, in the first quarter of fiscal 2024 was
Net income nearly tripled to
Cash Management and Balance Sheet
Cash generated from operations in the first quarter was
Debt at quarter end was down
Orders and Backlog
(See supplemental data filed with the securities and Exchange Commission on Form 8-K and provided on the Company’s website for a further breakdown of orders and backlog by market)
($ in millions).
Q1 23 | Q2 23 | Q3 23 | Q4 23 | FY23 | Q1 24 | |||||||||||||
Orders | $ |
40.3 |
$ |
91.5 |
$ |
20.0 |
$ |
50.9 |
$ |
202.7 |
$ |
67.9 |
||||||
Backlog | $ |
260.7 |
$ |
313.3 |
$ |
293.7 |
$ |
301.7 |
$ |
301.7 |
$ |
322.0 |
Orders for the three-month period ended June 30, 2023, were up
Aftermarket orders for the refining and petrochemical markets were
Backlog for the quarter was
Christopher J. Thome, Vice President and Chief Financial Officer, noted, “The strategic investment we received from our defense customer is recorded in backlog and represents pre-payment on current and potential future orders. The cash investment will be used to expand our capabilities and positions us to meet our customer’s requirements and support the
Fiscal 2024 Outlook
The Company has increased guidance for fiscal 2024 as follows:
(as of August 7, 2023) |
Updated Fiscal 2024 Guidance |
Previous Guidance |
Revenue: |
|
|
Gross margin: |
~ |
~ |
SG&A expense(1) |
Unchanged |
~ |
Adjusted EBITDA(2) |
|
|
Effective tax rate |
Unchanged |
~ |
Capital expenditures(3) |
|
|
(1) |
Annual SG&A expense as a % of sales includes approximately |
|
(2) |
Annual adjusted EBITDA excludes approximately |
|
(3) |
The increase in capital expenditures reflects the application of the strategic investment purchase order received from a customer to expand production capabilities in the Company’s |
Webcast and Conference Call
GHM’s management will host a conference call and live webcast today at 11:00 a.m. Eastern Time (“ET”) to review its financial condition and operating results, as well as its strategy and outlook. The review will be accompanied by a slide presentation, which will be made available immediately prior to the conference call on GHM’s investor relations website.
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 3:00 p.m. ET on the day of the teleconference through Monday, August 21, 2023, at 11:59 p.m. ET. To listen to the archived call, dial (412) 317-6671 and enter conference ID number 13739641 or access the webcast replay via the Company’s website at ir.grahamcorp.com, where a transcript will also be posted once available.
About Graham Corporation
GHM 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. The Graham Manufacturing and Barber-Nichols’ global brands are built upon world-renowned engineering expertise in vacuum and heat transfer, cryogenic pumps, and turbomachinery technologies, as well as its responsive and flexible service and the unsurpassed quality customers have come to expect from the Company’s products and systems.
Graham Corporation routinely posts news and other important information on its website, grahamcorp.com, where additional information on Graham Corporation and its businesses can be found.
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,” “outlook,” “anticipates,” “believes,” “could,” “guidance,” “should,” ”may”, “will,” “goals,” “plan” and other similar words. All statements addressing operating performance, events, or developments that Graham Corporation expects or anticipates will occur in the future, including but not limited to, profitability of future projects and the business, its ability to deliver to plan, its ability to meet customers’ shipment and delivery expectations, its ability to continue to strengthen relationships with customers in the defense industry, its ability to position itself to take advantage of the new energy market with cryogenic solutions, expected expansion and growth opportunities within its domestic and international markets, anticipated sales, revenues, adjusted EBITDA, adjusted EBITDA margins, capital expenditures and SG&A expenses, the timing of conversion of backlog to sales, orders, market presence, profit margins, tax rates, foreign sales operations, its ability to improve cost competitiveness and productivity, customer preferences, changes in market conditions in the industries in which it operates, changes in general economic conditions and customer behavior, forecasts regarding the timing and scope of the economic recovery in its markets, and its acquisition and growth strategy, are forward-looking statements. Because they are forward-looking, they should be evaluated in light of important risk factors and uncertainties. These risk factors and uncertainties are more fully described in Graham Corporation’s most recent Annual Report filed with the Securities and Exchange Commission (the “SEC”), included under the heading entitled “Risk Factors”, and in other reports filed with the SEC.
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, Graham Corporation disclaims any obligation to update or publicly announce any revisions to any of the forward-looking statements contained in this news release.
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 2024 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, and backlog. 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 it often times is a leading indicator of future performance. In accordance with industry practice, contracts may include provisions for cancellation, termination, or suspension at the discretion of the customer.
Given that each of orders and backlog are operational measures and that the Company's methodology for calculating orders and backlog does not meet the definition of a non-GAAP measure, as that term is defined by the
FINANCIAL TABLES FOLLOW.
Graham Corporation |
||||||||
Consolidated Statements of Operations - Unaudited |
||||||||
(Amounts in thousands, except per share data) |
||||||||
Three Months Ended |
|
|
||||||
June 30, |
|
|
||||||
2023 |
|
2022 |
|
% Change |
||||
Net sales | $ |
47,569 |
$ |
36,075 |
|
|||
Cost of products sold |
|
36,592 |
|
29,331 |
|
|||
Gross profit |
|
10,977 |
|
6,744 |
|
|||
Gross margin |
|
|
|
|
|
|||
|
||||||||
Other expenses and income: |
|
|||||||
Selling, general and administrative |
|
7,019 |
|
5,485 |
|
|||
Selling, general and administrative – amortization |
|
274 |
|
274 |
|
|||
Operating profit |
|
3,684 |
|
985 |
|
|||
Operating margin |
|
|
|
|
|
|||
|
||||||||
Other expense (income), net |
|
93 |
|
(63) |
N/A |
|||
Interest expense, net |
|
185 |
|
157 |
|
|||
Income before provision for income taxes |
|
3,406 |
|
891 |
|
|||
Provision for income taxes |
|
766 |
|
215 |
|
|||
Net income | $ |
2,640 |
$ |
676 |
|
|||
|
||||||||
Per share data: |
|
|||||||
Basic: |
|
|||||||
Net income | $ |
0.25 |
$ |
0.06 |
|
|||
Diluted: |
|
|||||||
Net income | $ |
0.25 |
$ |
0.06 |
|
|||
Weighted average common shares outstanding: | ||||||||
Basic |
|
10,653 |
|
10,610 |
||||
Diluted |
|
10,719 |
|
10,630 |
||||
N/A: Not Applicable |
Graham Corporation |
||||||||
Consolidated Balance Sheets – Unaudited |
||||||||
(Amounts in thousands, except per share data) |
||||||||
June 30, |
|
March 31, |
||||||
2023 |
|
2023 |
||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ |
24,662 |
|
$ |
18,257 |
|
||
Trade accounts receivable, net of allowances ( |
||||||||
at June 30 and March 31, 2023, respectively) |
|
29,544 |
|
|
24,000 |
|
||
Unbilled revenue |
|
34,467 |
|
|
39,684 |
|
||
Inventories |
|
25,490 |
|
|
26,293 |
|
||
Prepaid expenses and other current assets |
|
2,675 |
|
|
1,534 |
|
||
Income taxes receivable |
|
509 |
|
|
302 |
|
||
Total current assets |
|
117,347 |
|
|
110,070 |
|
||
Property, plant and equipment, net |
|
25,910 |
|
|
25,523 |
|
||
Prepaid pension asset |
|
6,179 |
|
|
6,107 |
|
||
Operating lease assets |
|
8,071 |
|
|
8,237 |
|
||
Goodwill |
|
23,523 |
|
|
23,523 |
|
||
Customer relationships, net |
|
10,571 |
|
|
10,718 |
|
||
Technology and technical know-how, net |
|
9,048 |
|
|
9,174 |
|
||
Other intangible assets, net |
|
7,438 |
|
|
7,610 |
|
||
Deferred income tax asset |
|
1,792 |
|
|
2,798 |
|
||
Other assets |
|
149 |
|
|
158 |
|
||
Total assets | $ |
210,028 |
|
$ |
203,918 |
|
||
Liabilities and stockholders’ equity | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt | $ |
2,000 |
|
$ |
2,000 |
|
||
Current portion of finance lease obligations |
|
26 |
|
|
29 |
|
||
Accounts payable |
|
15,085 |
|
|
20,222 |
|
||
Accrued compensation |
|
10,334 |
|
|
10,401 |
|
||
Accrued expenses and other current liabilities |
|
5,706 |
|
|
6,434 |
|
||
Customer deposits |
|
56,016 |
|
|
46,042 |
|
||
Operating lease liabilities |
|
1,114 |
|
|
1,022 |
|
||
Income taxes payable |
|
62 |
|
|
16 |
|
||
Total current liabilities |
|
90,343 |
|
|
86,166 |
|
||
Long-term debt |
|
9,303 |
|
|
9,744 |
|
||
Finance lease obligations |
|
77 |
|
|
85 |
|
||
Operating lease liabilities |
|
7,278 |
|
|
7,498 |
|
||
Deferred income tax liability |
|
1 |
|
|
108 |
|
||
Accrued pension and postretirement benefit liabilities |
|
1,337 |
|
|
1,342 |
|
||
Other long-term liabilities |
|
1,968 |
|
|
2,042 |
|
||
Total liabilities |
|
110,307 |
|
|
106,985 |
|
||
Stockholders’ equity: | ||||||||
Preferred stock, |
|
- |
|
|
- |
|
||
Common stock, |
||||||||
10,818 and 10,774 shares issued and 10,675 and 10,635 shares | ||||||||
outstanding at June 30 and March 31, 2023, respectively |
|
1,082 |
|
|
1,075 |
|
||
Capital in excess of par value |
|
28,641 |
|
|
28,061 |
|
||
Retained earnings |
|
80,083 |
|
|
77,443 |
|
||
Accumulated other comprehensive loss |
|
(7,551 |
) |
|
(7,463 |
) |
||
Treasury stock (143 and 138 shares at June 30 and March 31, 2023, | ||||||||
respectively) |
|
(2,534 |
) |
|
(2,183 |
) |
||
Total stockholders’ equity |
|
99,721 |
|
|
96,933 |
|
||
Total liabilities and stockholders’ equity | $ |
210,028 |
|
$ |
203,918 |
|
Graham Corporation |
||||||||
Consolidated Statements of Cash Flows – Unaudited |
||||||||
(Amounts in thousands) |
||||||||
Three Months Ended |
||||||||
June 30, |
||||||||
2023 |
|
2022 |
||||||
Operating activities: | ||||||||
Net income | $ |
2,640 |
|
$ |
676 |
|
||
Adjustments to reconcile net income to net cash provided (used) by | ||||||||
operating activities: | ||||||||
Depreciation |
|
793 |
|
|
856 |
|
||
Amortization |
|
446 |
|
|
619 |
|
||
Amortization of actuarial losses |
|
211 |
|
|
168 |
|
||
Amortization of debt issuance costs |
|
59 |
|
|
34 |
|
||
Equity-based compensation expense |
|
293 |
|
|
114 |
|
||
Deferred income taxes |
|
855 |
|
|
225 |
|
||
(Increase) decrease in operating assets: | ||||||||
Accounts receivable |
|
(5,769 |
) |
|
(34 |
) |
||
Unbilled revenue |
|
5,171 |
|
|
(2,580 |
) |
||
Inventories |
|
780 |
|
|
(930 |
) |
||
Prepaid expenses and other current and non-current assets |
|
(1,065 |
) |
|
(745 |
) |
||
Income taxes receivable |
|
(159 |
) |
|
(6 |
) |
||
Operating lease assets |
|
293 |
|
|
467 |
|
||
Prepaid pension asset |
|
(72 |
) |
|
(163 |
) |
||
Increase (decrease) in operating liabilities: | ||||||||
Accounts payable |
|
(4,745 |
) |
|
3,016 |
|
||
Accrued compensation, accrued expenses and other current and | ||||||||
non-current liabilities |
|
(868 |
) |
|
(878 |
) |
||
Customer deposits |
|
10,002 |
|
|
(504 |
) |
||
Operating lease liabilities |
|
(256 |
) |
|
(431 |
) |
||
Long-term portion of accrued compensation, accrued pension liability | ||||||||
and accrued postretirement benefits |
|
(6 |
) |
|
(593 |
) |
||
Net cash provided (used) by operating activities |
|
8,603 |
|
|
(689 |
) |
||
Investing activities: | ||||||||
Purchase of property, plant and equipment |
|
(1,499 |
) |
|
(284 |
) |
||
Net cash used by investing activities |
|
(1,499 |
) |
|
(284 |
) |
||
Financing activities: | ||||||||
Principal repayments on debt |
|
(500 |
) |
|
(2,500 |
) |
||
Proceeds from the issuance of debt |
|
- |
|
|
2,000 |
|
||
Principal repayments on finance lease obligations |
|
(11 |
) |
|
(6 |
) |
||
Repayments on lease financing obligations |
|
(74 |
) |
|
(67 |
) |
||
Payment of debt issuance costs |
|
- |
|
|
(122 |
) |
||
Purchase of treasury stock |
|
(57 |
) |
|
(22 |
) |
||
Net cash used by financing activities |
|
(642 |
) |
|
(717 |
) |
||
Effect of exchange rate changes on cash |
|
(57 |
) |
|
(146 |
) |
||
Net increase (decrease) in cash and cash equivalents |
|
6,405 |
|
|
(1,836 |
) |
||
Cash and cash equivalents at beginning of period |
|
18,257 |
|
|
14,741 |
|
||
Cash and cash equivalents at end of period | $ |
24,662 |
|
$ |
12,905 |
|
Graham Corporation |
||||||
Adjusted EBITDA Reconciliation |
||||||
(Unaudited, $ in thousands, except per share amounts) |
||||||
Three Months Ended |
||||||
June 30, |
||||||
2023 |
|
2022 |
||||
Net income | $ |
2,640 |
$ |
676 |
||
Acquisition & integration costs |
|
- |
|
54 |
||
Barber- |
|
767 |
|
- |
||
Debt amendment costs |
|
- |
|
153 |
||
Net interest expense (income) |
|
185 |
|
157 |
||
Income taxes |
|
766 |
|
215 |
||
Depreciation & amortization |
|
1,239 |
|
1,475 |
||
Adjusted EBITDA | $ |
5,597 |
$ |
2,730 |
||
Adjusted EBITDA margin % |
|
|
|
|
Adjusted Net Income (Loss) and Adjusted Diluted Earnings (Loss) per Share Reconciliation |
||||||||
(Unaudited, $ in thousands, except per share amounts) |
||||||||
Three Months Ended |
||||||||
June 30, |
||||||||
2023 |
|
2022 |
||||||
Net income | $ |
2,640 |
|
$ |
676 |
|
||
Acquisition & integration costs |
|
- |
|
|
54 |
|
||
Amortization of intangible assets |
|
446 |
|
|
619 |
|
||
Barber- |
|
767 |
|
|
- |
|
||
Debt amendment costs |
|
- |
|
|
153 |
|
||
Normalized tax rate(1) |
|
(279 |
) |
|
(173 |
) |
||
Adjusted net income | $ |
3,574 |
|
$ |
1,329 |
|
||
GAAP diluted net income per share | $ |
0.25 |
|
$ |
0.06 |
|
||
Adjusted diluted earnings per share | $ |
0.33 |
|
$ |
0.12 |
|
||
Diluted weighted average common shares outstanding |
|
10,719 |
|
|
10,630 |
|
(1) Applies a normalized tax rate to non-GAAP adjustments, which are pre-tax, based upon the full year expected effective tax rate. |
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 (loss) and adjusted diluted earnings (loss) per share are defined as net income (loss) and diluted earnings (loss) per share as reported, adjusted for certain items and at a normalized tax rate. Adjusted net income (loss) and adjusted diluted earnings (loss) per 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 diluted earnings (loss) per 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 (loss) and diluted earnings (loss) per share to the historical periods' net income (loss) and diluted earnings (loss) per share. Graham also believes that adjusted earnings (loss) per share, which adds back intangible amortization expense related to acquisitions, provides a better representation of the cash earnings of the Company.
View source version on businesswire.com: https://www.businesswire.com/news/home/20230807071224/en/
Christopher J. Thome
Vice President - Finance and CFO
(585) 343-2216
Deborah K. Pawlowski
Kei Advisors LLC
(716) 843-3908
dpawlowski@keiadvisors.com
Source: Graham Corporation