Graham Corporation · NYSE:GHM
Graham — East Coast IDEAS Conference (June 2022)
29 slides from Graham's conference presentation, Jun 22, 2022
Slide 1: East Coast IDEAS Conference
Graham Corporation East Coast IDEAS Conference June 22, 2022 Daniel J. Thoren, President and Chief Executive Officer Christopher J. Thome, Vice President - Finance and Chief Financial Officer www.GrahamCorp.com
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: Build Better Companies to Deliver Superior Performance
Critical Equipment Supplier for Defense, Space, Energy & Process Industries Our Mission: Build Better Companies to Deliver Superior Performance How We Do It: Our People Our Culture Our Structure Our Process $98 million Market capitalization 10.6 million Shares outstanding Fiscal YE: $9.24 Recent pri
Slide 4: Corporate Strategies and Initiatives
Corporate Strategies and Initiatives Build better companies through regular strategic evaluation, business practices and smart investments Leverage board and industry connections for accelerating corporate entity structure and processes Advance strategic market offerings to full life cycle system le
Slide 5: A Different Company Today → Expect More Positive Change
A Different Company Today → Expect More Positive Change Great promise bringing our heat transfer and vacuum technology business together with our new fluid and power business gained through the Platform and strategic Barber-Nichols acquisition direction to deliver value • Reduced dependence on highl
Slide 6: Deepening Presence in Defense and Space Industry
Deepening Presence in Defense and Space Industry • Highly specialized propulsion and ejection systems for a variety of undersea defense applications • Customized, highly engineered surface condensers for Naval Nuclear Propulsion Program • Serving the private space exploration market; Leader in speci
Slide 7: Strong Visibility: Current Defense Programs and Pipeline
Strong Visibility: Current Defense Programs and Pipeline CVN Carrier SSN Virginia Class Subs SSBN Columbia Class Subs Content Condenser, Air Ejectors, PPFW HEXs*, Condenser and PPFW HEXs*, SGCD HEX*, ATP*, Pulsation Dampener, ALT/Regulator for various heat exchangers ALT/Regulator for Torpedoes Torp
Slide 8: Large Energy & Petrochemical Installed Base and New Energy Opportunity
Large Energy & Petrochemical Installed Base and New Energy Opportunity • Leveraging installed base with improved lead management process; Domestic aftermarket budgets returning after industry and pandemic downturn • Expanding international presence into more price sensitive markets • Implemented Per
Slide 9: Q4 FY22: Sequential Improvements
Q4 FY22: Sequential Improvements ($ in millions, except per share data) Sales Adjusted EBITDA and Margin (1) $1.0 $39.7 $0.4 4.0% 1.0% $28.8 (9.0%) $25.7 1.0% 6.7% ($2.6) Q4 FY21 Q3 FY22 Q4 FY22 Q4 21 Q3 22 Q4 22 Gross Margin Sales increased $14.0 million, or 55% over Q4 FY21 Diluted EPS & Adjusted
Slide 10: FY2022: Strategic Diversification into Defense
FY2022: Strategic Diversification into Defense ($ in millions, except per share data) Sales Adjusted EBITDA and Margin (1) $5.1 $122.8 $97.5 5.2% (4.1%) ($5.0) FY 2021 FY 2022 FY 2021 FY 2022 Sales increased 26% driven by defense industry Gross Margin Diluted EPS & Adjusted Diluted EPS (1) + $47.9 m
Slide 11: New Lending Agreement in Place
New Lending Agreement in Place ($ in millions) Cash flow from operations were $12.3 million in March 31, December 31, CAPITALIZATION 2022 2021 fourth quarter FY22 Paid down $10.4 million of debt in Q4 Cash and cash equivalents $ 14.7 $ 14.0 Capital expenditures of $2.3 million for the FY22 Total deb
Slide 12: Market Diversity Solidifies Long-Term Outlook
Market Diversity Solidifies Long-Term Outlook ($ in millions) Orders FY 2022 Orders : $143.9 million Space $68.0 7% Other 14% Defense 44% Chem/ Petrochem $45.6 15% Refining $31.4 20% $23.7 $20.9 $12.4 $2.8 $13.4 $2.4 Orders – Sequential Ebb and Flow $5.4 $22.4 $20.9 ▪ 4Q22 defense orders down sequen
Slide 13: Strong Defense Backlog
Strong Defense Backlog ($ in millions) Total Backlog (1) FY 2022 Backlog : By Industry Space 4% Chem/Petrochem 5% $272.6 $256.5 Other 5% $235.9 $233.2 Refining 10% Defense $210.1 $137.6 $194.8 76% $188.5 $181.3 $104.1 Reducing Cyclicality with Increasing Defense $62.5 Backlog $47.4 $51.9 $61.7 $33.5
Slide 14: Graham Fiscal 2023 Guidance
Graham Fiscal 2023 Guidance(1) Revenue: $135 million to $150 million Gross margin: 16% to 17% SG&A: 15% to 16% of sales Adjusted EBITDA(2): $6.5 million to $9.5 million, adjusted EBITDA margin(2) of approximately 5% to 6% (1) FY2023 guidance as of June 8, 2022 (2) Adjusted EBITDA and Adjusted EBITDA
Slide 15: Executing Four-Step Strategy
Executing Four-Step Strategy 1 2 3 4 Stabilize Improve Grow Mature Identify areas for process Roadmap to improve U.S. Navy, aftermarket and Full lifecycle product and system improvements operations with better international E/C markets strategy information flow and Strengthen structure to Leverage v
Slide 16: Strategy focused on continued development and growth
Strategy focused on continued development and growth 1 2 3 4 Nurture customer Validate Develop Invest and partnerships in customized disruptive execute to win developing target solutions in new products for production and markets applications existing markets service programs Over the long-term, goa
Slide 17: Growth Index
Visual: Growth Businesses with Strategies for Expanding Margins Graham Positioning Higher “New” BN Energy Space Growth Index BN DoD Operational Graham BN improvements Graham Navy Rebuilds Aftermarket Energy + Petchem. Global Energy Global Upcycle GDP Lower competition Lower Differentiation + Higher
Slide 18: Long-term Goals: Expect High Single Digit Growth and Expanded Margins
Long-term Goals: Expect High Single Digit Growth and Expanded Margins Growth Drivers: Barber-Nichols opportunities, building legacy Navy business and steady commercial business Expect to deliver low double digit to mid-teens adjusted EBITDA margins¹ ~$200 $135-$150 $122.8 10%-15% $90.6 $97.5 5.6% 5.
Slide 19: Transforming to Drive Value for All Stakeholders
Transforming to Drive Value for All Stakeholders New platform for growth: BN provides growing, solid margin business with highly engineered turbomachinery solutions for more diverse markets that provides platform for scalability Capitalize on investment in U.S. Navy business with improved execution:
Slide 20: For More Information
Graham Corporation For More Information: Christopher J. Thome Deborah K. Pawlowski Vice President – Finance and CFO Kei Advisors LLC Phone: (585) 343-2216 Phone: (716) 843-3908 dpawlowski@keiadvisors.com www.GrahamCorp.com
Slide 21: Supplemental Information
=G6HM Supplemental Information
Slide 22: Adjusted EBITDA and Adjusted Diluted EPS Reconciliation
Adjusted EBITDA and Adjusted Diluted EPS Reconciliation (Unaudited, $ in thousands) Three Months Ended Year Ended March 31, March 31, 2022 2021 2022 2021 Net (loss) income $ (1,425) $ 388 $ (8,773) $ 2,374 Acquisition related inventory step-up expense 27 - 95 - Acquisition & integration costs 189 -
Slide 23: Adjusted Net Income and Adjusted Diluted EPS Reconciliations
Adjusted Net Income and Adjusted Diluted EPS Reconciliations (Unaudited, $ in thousands) Three Months Ended Year Ended March 31, March 31, 2022 2021 2022 2021 Net (loss) income $ (1,425) $ 388 $ (8,773) $ 2,374 Acquisition related inventory step-up expense 27 - 95 - Acquisition & integration costs 1
Slide 24: Margins benefit from Improvements in Defense at Batavia
Corrective Actions Taken/Improvements Margins benefit from Improvements in Defense at Batavia Batavia Navy Operations Labor Plan vs. Actual Actions Taken (in thousands) ▪ Redirected internal resources, outsourced more contract welders and added skilled welders from training program 50 ▪ Project mana
Slide 25: Expected Energy / Petrochem Market Trends
Expected Energy / Petrochem Market Trends • Oil demand could peak in 2029, depends on scenario • India refinery capacity grows at 4% CAGR and doubles petrochemical capacity by 2025 • China E&C growth slowing • Petrochemical market setting up for next big buildout (5 year lead time) • Asian & Indian
Slide 26: Space & Defense Industry Markets Expected to Continue Growth
Space & Defense Industry Markets Expected to Continue Growth Space Thermal Management Systems - Defense 26
Slide 27: New Energy Markets Expected to Grow Significantly
New Energy Markets Expected to Grow Significantly Hydroge Clean Energy n Technologies 27
Slide 28: Competition
Competition North American Market Competitors International Market Competitors Naval Nuclear Propulsion DC Fabricators; Joseph Oat; PCC; Edwards, Ltd.; Gardner Denver, Inc.; Program/Defense Triumph Aerospace; Xylem Refining vacuum distillation GEA Wiegand GmbH; Korting Hannover AG Croll Reynolds Com
Slide 29: Representative List of Customers
Representative List of Customers Aerojet Rocketdyne Cummins Jacobs Engineering Group Oak Ridge National 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