Graham Corporation · NYSE:GHM
Graham — 12th Annual Midwest IDEAS Conference 2021
29 slides from Graham's conference presentation, Aug 26, 2021
Slide 1: 12th Annual Midwest IDEAS Conference
12TH ANNUAL MIDWEST IDEAS CONFERENCE NYSE: GHM • August 25 & 26 2021 Daniel J. Thoren, President and Chief Operating Officer Jeffrey F. Glajch, Vice President & Chief Financial Officer © 2021 Graham Corp.
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation 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
Slide 3: Critical Equipment Supplier for Defense, Energy, Chem/Petrochem and Aerospace/Space
Critical Equipment Supplier for Defense, Energy, Chem/Petrochem and Aerospace/Space How we do it Transforming and Engaged people NYSE: Pivoting to Expanding to Continuous improvement GHM Growth Defense Unique capabilities and Space Smart investments Employee-driven culture Acquisition Accelerates Gr
Slide 4: Acquisition Creates Growth Momentum
Acquisition Creates Growth Momentum Acquisition of Barber-Nichols (BN) expands reach into more stable, higher growth markets FY21 Sales Refining $97.5 million 26% Defense 45% Defense Chem / 25% Petrochem 16% FY16 Sales Refining 41% $90.0 million Other 10% Aerospace / Other Space 6% 7% U Defense 7% C
Slide 5: BN: Compelling Strategic Rationale
BN: Compelling Strategic Rationale Transformative acquisition accelerates diversification strategy and expands addressable market Evolves business to increase defense industry profile Provides scalable platform in new industries: aerospace/space, cryogenics, advanced energy Improves revenue visibili
Slide 6: Building Opportunities on Two Primary Platforms
Building Opportunities on Two Primary Platforms Defense and Space Energy and Chemical/Petrochemical • Strong visibility into future naval programs – • Expanding geographically and into more price ships and submarines sensitive markets • Engaged in Space development programs • Expect petrochem to dec
Slide 7: Deepening Presence in Defense Industry
Deepening Presence in Defense Industry Long history with the U.S. Navy ~$65M FY22 Est. Sales >$500M Market Opportunity(1) • Highly specialized propulsion and ejection systems for a variety of undersea defense applications • Customized, highly engineered surface condensers for Naval Nuclear Propulsio
Slide 8: Current Defense Programs and Pipeline
Current Defense Programs and Pipeline CVN Carrier SSN Virginia Class Subs SSBN Columbia Class Subs Content Condenser, Air Ejectors, PPFW Condenser and PPFW HEXs*, SGCD HEX*, ATP*, HEXs*, Pulsation Dampener, various heat exchangers ALT/Regulator for Torpedoes ALT/Regulator for Torpedoes Value $40 to
Slide 9: New Frontier: Space
New Frontier: Space Serving the private space exploration market NASA is long time BN customer • Relationships at Marshall, Johnson, and Glenn centers Critical space flight hardware • Leader in specialized turbomachinery for cryogenic rocket engine fuels • High-end turbomachinery and fluid transfer
Slide 10: Large Energy and Petrochemical Installed Base
Large Energy and Petrochemical Installed Base End markets investing in existing facilities before new capacity Refining $41.7M Q1FY22 TTM Sales $150M Market Opportunity(1) An ejector system lowers the Chemical / Petrochemical pressure in the distillation column to allow crude oil to boil at a lower
Slide 11: New Market: Advanced Energy Systems with Cryogenics
New Market: Advanced Energy Systems with Cryogenics Cryogenic fluid systems for hydrogen production, distribution and fueling systems Full systems and equipment to support organic binary and supercritical CO2 power generation systems Among world’s largest helium pumps moving liquid helium coolant th
Slide 12: Differentiation with Comprehensive Customer Support Model
Differentiation with Comprehensive Customer Support Model Provide unique value before and throughout project life cycle Consultative • Detailed engineering and equipment scope analysis Selling Platform • Solutions engineering and prototype developments and Product Development • Deliver in-depth solu
Slide 13: Expect Growth in FY22
Expect Growth in FY22 ($ in millions, except per share data) Sales Adjusted EBITDA and Margin(2) BN Contribution $130-$140(1) $97.5 $7.0-$9.0(1) $91.8 $90.6 $7.1 $5.1 $3.0 7.7% 3.3% 5.2% FY19 FY20 FY21 FY22E FY19 FY20 FY21 FY22E Operating Profit (Loss) and Margin Diluted EPS • Expanded defense indus
Slide 14: Q1 FY22 Results – Period of Transition
Q1 FY22 Results – Period of Transition ($ in millions, except per share data) Sales Adjusted EBITDA and Margin(1) $20.2 $16.7 (10.7%) (14.2%) ($1.8) ($2.9) Q1 FY21 Q1 FY22 Q1 FY21 Q1 FY22 • Sales increased 21% over easy comparator period; reflects low Operating Loss and Margin GAAP and Adjusted Dilu
Slide 15: Used Large Cash Reserves to Invest in Growth
Used Large Cash Reserves to Invest in Growth ($ in millions) CAPITALIZATION • Accretive acquisition expected to improve return on assets - Put cash to work to grow the business June 30, March 31, 2021 2021 - Invested $41.1 million of cash for acquisition Cash and cash equivalents • Borrowed $20 mill
Slide 16: Continue to Look at Acquisitions to Complement Growth
Continue to Look at Acquisitions to Complement Growth Extend core competencies, reduce volatility, improve revenue and earnings Primary focus on building defense exposure Strong management team with customer and quality focus Targeting $20 million to $60 million in revenue Cash return exceeds equity
Slide 17: Backlog Growth Driven by Defense
Backlog Growth Driven by Defense ($ in millions) Orders Q1 FY22 TTM Orders $61.8 Other 7% $131.1 million $52.3 $35.0 Refining $52.3 26% $12.6 Defense $20.9 56% $11.5 $13.4 $2.3 $22.4 $5.4 $18.3 $11.5 $9.5 $8.0 Chem/Petrochem Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22 11% Quarterly Net Orders (excl. Def
Slide 18: Transforming to Drive Value
Transforming to Drive Value Leveraging transformational acquisition to accelerate More efficient balance sheet growth in defense industry with capacity for additional acquisitions and financial flexibility to Preparing for refining invest in organic growth and petrochem upcycle expansion Strong oper
Slide 19: For More Information
FOR MORE INFORMATION: Jeffrey F. Glajch Deborah K. Pawlowski Vice President – Finance and CFO Kei Advisors LLC Phone: (585) 343-2216 Phone: (716) 843-3908 jglajch@graham-mfg.com dpawlowski@keiadvisors.com © 2021 Graham Corp.
Slide 20: Supplemental Information
SUPPLEMENTAL INFORMATION © 2021 Graham Corp.
Slide 21: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation (Unaudited, $ in thousands) Three Months Ended June 30, 2021 2020 Net (loss) $ (3,126) $ (1,818) Acquisition related inventory step-up expense - - Acquisition related costs 169 - Net interest expense (income) 22 (89) Income taxes (745) (372) Depreciation & amortization
Slide 22: Adjusted Net Income Reconciliation
Adjusted Net Income Reconciliation (Unaudited, $ in thousands) Three Months Ended June 30, 2021 2020 Net (loss) $ (3,126) $ (1,818) Acquisition related inventory step-up expense - - Acquisition related costs 169 - Amortization of intangible assets 225 - Normalize tax rate to 19%(1) (75) - Adjusted N
Slide 23: Barber-Nichols (BN) and Transaction Overview
Barber-Nichols (BN) and Transaction Overview • HQ: Arvada, Colorado • 2020 revenue: $56 million • Established: 1966 • Demonstrated growth • Employees: 155 • Operating margin: low double digit Item Terms Purchase Price $72.0 million purchase price: split 87% cash / 13% stock • $61.1M in cash (funded
Slide 24: BN: Highly Engineered Suite of Products
BN: Highly Engineered Suite of Products Thermal Management Solutions • Electric motor • Robust and • High speed • Permanent • Axial and radial • Ground and Pumps Rocket Engine Turbopumps Compressors & Fans Motors, Generators & Controllers Turbines & Power Systems driven economical electric motor mag
Slide 25: North American Competition
North American Competition Market Competitors Naval Nuclear Propulsion Program/Defense DC Fabricators; Joseph Oat; PCC; Triumph Aerospace; Xylem Refining vacuum distillation Croll Reynolds Company, Inc.; Gardner Denver, Inc.; GEA Wiegand GmbH Chemicals/Petrochemicals Croll Reynolds Company, Inc.; Ga
Slide 26: International Competition
International Competition Market Competitors Edwards, Ltd.; Gardner Denver, Inc.; GEA Wiegand GmbH; Korting Refining vacuum distillation Hannover AG Croll Reynolds Company, Inc.; Edwards, Ltd.; Gardner Denver, Inc.; GEA Chemicals/Petrochemicals Wiegand GmbH; Korting Hannover AG; Schutte Koerting Che
Slide 27: Representative List of Customers
Representative List of Customers Aerojet Rocketdyne Cummins Jacobs Engineering Oak Ridge National Group Inc. Laboratory Air Liquide DuPont Kairos Power Raytheon Technologies Applied Research Dow Chemical Koch Fertilizer ENID LLC Roush Laboratory Aramco General Atomics Lockheed Martin SAIC Bechtel Pl
Slide 28: Executive Compensation
Executive Compensation Shareholder alignment Base Salary • Reviewed annually by our compensation committee and determined based on company performance, individual performance, job responsibilities, and internal pay equity • Provides compensation that is not “at-risk” to compensate executive officers
Slide 29: Sales of Divested Business
Sales of Divested Business ($ in thousands) FY 2018 FY 2019 FY 2020 Consolidated sales as reported $ 77,534 $ 91,831 $ 90,604 Commercial nuclear utility sales included above $ 9,476 $ 8,336 $ 1,276 29 © 2021 Graham Corp.